Higher prices, tighter portions and apps – how fast-food chains are changing value deals – CNBC | Hot Mobile Press

Fast-food chains are increasing the value of their burgers, pizzas, and tacos as inflation squeezes budgets — but expect higher prices, tighter portions, and more offers that entice people to sign up for rewards programs as companies rethink their value strategies .

Earlier this year, citing rising costs, Domino’s Pizza increased the price of its mix and match delivery offering from $5.99 to $6.99 and made its $7.99 national carry-out offering available for digital orders only. Burger King has removed the Whopper from its value menu and slashed its 10-piece nuggets to eight pieces. According to Yelp, customers are first mentioning “shrinkflation” in their restaurant reviews, most often at places that serve affordable offerings like hot dogs, hamburgers, and pizzas.

“We’ve seen companies streamline their value menus across the board,” said Michael Schaefer, global head of food and beverages at market researcher Euromonitor International. “We’re seeing fewer items overall, limited price increases, smaller items.”

The changes mark the latest chapter in the ongoing evolution of the traditional value deals that have become a hallmark of many fast food chains. In the years since McDonald’s dropped its popular dollar menu and Subway hit the brakes on its $5 footlong campaign, experts say the industry has sought to reduce its reliance on such promotions, which eat into profit margins.

And as companies face rising ingredient and labor costs, the urge to rethink value strategies gains renewed urgency.

Even if they quietly increase prices or change menu items, experts say fast-food companies are increasingly focusing on value strategies on mobile apps and rewards programs that would allow them to offer personalized offers while making more money from each customer.

At McDonald’s, for example, customers receive a free order of large fries and 1,500 bonus points for downloading the app and signing up for the rewards program.

In an earnings call last month, McDonald’s executives said the program gets customers to come more often and noted another benefit it could bring — the ability to eventually offer more personalized offerings.

In contrast, national promotions give discounts even to people who would have paid more, said Chris Kempczinski, McDonald’s CEO.

“There’s a lot of waste in there,” he said.

Chains offering rewards programs include Chipotle, Chik-fil-A, Dunkin’ Donuts, Papa Johns, Wendy’s, and Burger King, where members can earn “crowns” on purchases redeemable for menu items.

Personalized offers can be a win-win by giving customers discounts on the items they actually want while giving businesses the ability to maintain profit margins, said Francois Acerra, director of research and consumer analytics at Revenue Management Solutions, a Restaurant data analysis company.

“Brands can say, ‘Oh, that’s inflation,’ but I think brands have been trying to move away from these lower price points for quite some time,” Acerra said. “Brands are willing to deliver value to consumers as long as they can leverage guest purchase history to maximize customer lifetime value over the long term.”

Apps help companies do this. Given how often people look at their phone, an app on a person’s home screen is “like that billboard that keeps popping up,” said Adam Blacker, director of content and communications at Apptopia, a data analytics firm.

“The speed at which we look at it, the meaning it holds in you, just seeing that logo on a daily basis can have an impact,” he said.

Apps can also provide information about what and when customers are ordering and what promotions they are responding to, helping businesses refine push notification strategies for offers.

Still, rewards programs remain a relatively new and evolving area for many companies. Meanwhile, companies are offering more targeted offers by giving flexibility to local operators.

McDonald’s executives said the chain will run nationwide promotions, such as Papa John executives also noted the leeway their restaurants have to adjust business.

“A rebate in San Francisco is different than a rebate in Atlanta and Ohio,” CEO Rob Lynch said during the company’s conference call.

But even as they become more targeted in the coming years, experts say fast-food chains will still need to make eye-catching offers to attract specific customers.

“They may look a little different than in years past, but there will always be a place for high-visibility, well-priced, traffic-driving items and higher-margin add-ons,” said Schaefer of Euromonitor.

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