I’ve sifted through enough data detailing how hard the past five years have been for hospitality: trading restrictions, soaring inflation, and 16,000 sites lost since March 2020. But if there is one very slim silver lining to the black cloud over the industry, it’s that— for a moment— the days of discounting were also left behind.
Prior to the pandemic, vouchers, timed deals, BOGOFs, and more were the scourge of the Casual Dining sector. Granted, when your two main levers are product and price, it’s no surprise that in a segment so oversupplied and with such brand homogeneity, operators relied on price drops for a quick revenue hit. But discounting is easy dopamine, and repeated discounting diminishes the revenue-high while increasing the dependence, until you have trained your customers to avoid your brand unless they can dine for less than the menu price.
For all the pains of the pandemic, at least the pent-up consumer demand and the hunger of business fostered an atmosphere in which consumers were more than happy to pay full price. But as the ensuing cost-of-living crisis crept in, the door was left open for discounting too.
Consumers have always wanted ‘a good deal’. 37% named it as a defining feature of value for money in 2021, and this has stayed broadly static through to last year, at 39%. But in seeking to provide a good deal, operators may be misguided. To consumers, a good deal is not dependent on price alone. In fact, 40% of consumers describe value for money as ‘something that is good quality’; more than double the 15% who describe it as ‘a cheap option’. But operators who are—sympathetically— squeezed on margins risk falling back on discounting once again, and consumers are responding in turn: From 2021 to 2024, the number of consumers seeking ‘something on offer/discounted’ rose from 13% of the population to 20%. As someone who relies on insights to drive the industry it feels unnatural to say, but on this point, perhaps you shouldn’t follow the trend.
From our latest Business Leaders survey, no operators who said they engage in discounting and deals as a pricing strategy were ‘very optimistic’ about the coming 12 months. Compare this to those who refuse to engage with discounting, of which 15% had high hopes for 2025 (sure, 15% isn’t great, but times are tough…). And those who have already given in to discounting will find it hard to retract the offer. Of leaders who hold firm in their pricing, only 18% expect to see promotions as a key driver of consumer choice in 2025, compared to the 41% who dabble in discounting. The 23pp gulf is a stark reminder that what you offer your customers in the present sets the expectation for the future.
It is the hardest choice to make when your business is on the edge, but the only way to avoid the spiral of discounting is to hold firm, invest in the quality and differentiation that your consumers truly demand, and tell BOGOF to bog off.
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