The fast-food sector boomed during the pandemic. In recent years, however, the market has been declining. The many providers are locked in tough competition. Local and international players fight bitter price wars across different categories. New platforms such as Uber are pushing into the market and want a slice of the pie too. Pricing for fast food is therefore becoming more important. As in most other industries, prices are usually set based on costs and competition. A customer-centric analysis based on willingness to pay is mostly missing — and as a result, many companies lose profit potential.
In collaboration with CustomersX®, customer-centric pricing was established for a fast-food company. Price positioning, the price model, price promotions and offer management were all aligned to the customer. Two price surveys were conducted, among customers and non-customers. In the first round, existing customers were surveyed in order to increase customer value systematically. In the second round, non-customers were also included to determine the market potential for future growth. With the results, the company was able to increase its appeal and profitability significantly.
Customer Value-based Decision Making
Customer-centric Transformation
Co-Creation
Customer Management
Contents:
1. How does fast food work?
2. What are the key success factors for pricing in the fast-food sector?
3. What are the main pricing strategies?
4. What potential does customer-centric pricing hold?
How does fast food work?
Based on our DTC approach, we developed a project approach to establish customer-centric pricing in the company.
As a first step
The existing offering, the price positioning, the price model, the price promotions, the IT landscape, the existing competencies, customer data and the relevant competitors were analysed. It emerged that many dimensions had grown historically. No customer surveys had been conducted to date, so there was great uncertainty about where to set priorities. Until then, the focus had been heavily on product quality and delivery quality, where the internal impression was that there might still be great room for improvement. A customer-value analysis found that customer value was being increased for only a small part of the customer base. It was also unclear how the company is perceived in the market in terms of price positioning. It's worth noting that production costs and delivery costs have to be integrated optimally into pricing for fast food.
As a second step
A comprehensive customer survey was carried out. Given the large number of uncertainties, three parallel customer surveys were run. Here, CustomersX's extensive experience in customer surveys and customer-data management pays off. This made it possible to analyse a large part of the assortment and develop a sustainable strategy for systematically increasing customer value. The methods Conjoint, Van Westendorp and Gabor–Granger were combined so that the survey wasn't too demanding for participants while still yielding numerous customer insights. The results made clear that the price positioning was ideal. They also showed that a more complex price model is advantageous. In offer pricing and price promotions, weaknesses could be identified.
As a third step
Building on the initial findings about how to increase customer value across the customer base, non-customers were also surveyed. For this survey, an individual set of methods was again assembled. The central challenge was defining a representative sample, so that the results would also be robust from a business perspective. In principle, pricing for fast food has four basic strategy options: (1) innovation with new offerings, (2) best-in-class with existing offerings, (3) customer acquisition and (4) customer retention. The results showed that the combination of 1 and 4 would lead to the highest profit growth over the next three years. Our pricing consulting is built on customer centricity. The second-stage results showed that the customer-acquisition potential was lower than the opportunities for increasing customer value. Companies are often unaware of this — they make great efforts in marketing and sales to win new customers while devoting too few resources to increasing the value of existing ones.
As a final step
The results were summarised and recommendations were made for price positioning, the price model, price promotions, offer management, customer-data management and the IT infrastructure. A training session was also held so that, in future, the client has the competencies to make pricing decisions in a customer-centric way. Pricing for fast food is highly dynamic, which is why building and expanding pricing competencies is so important. Regarding customer data and the IT infrastructure, it became clear that individualised targeting is necessary to create impact with price promotions while losing as little profitability as possible. Instead of showering all customers with discounts using a watering can, the goal is to apply discounts to customers who show high potential for an increase in customer value.
In Bezug auf die Kundendaten und die IT-Infrastruktur wurde deutlich, dass eine individualisierter Ansprache notwendig ist, um gerade bei Preisaktionen Wirkung mit einem geringen Verlust der Profitabilität zu erzeugen. Anstelle mit der Giesskanne alle Kunden mit Rabatten zu „beglücken“, ist es das Ziel, Rabatte für Kunden anzuwenden, die ein hohes Potential für eine Kundenwertsteigerung aufweisen.
Summary
Overall, the ROI of the consulting project was high — because clear priorities could be set and numerous insights were gained for optimising the price model, offer management and price promotions. Fundamentally, we can only repeat the recommendation to invest more in pricing competencies and pricing design, as this is the biggest lever for increasing profit.
*We take confidentiality towards our clients seriously. The name has been changed; the results are real.
