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Permanent discounting could damage restaurant brands

07 December 2010 by

Discounting has become a permanent fixture of the eating-out market but operators need to consider its impact on brand perception among consumers, industry experts have warned.

At a briefing hosted by food service analyst Horizons this week, delegates were told that although discounting could help to get diners through the doors during traditionally quiet times such as January, it had to be managed carefully. While meal deals and discount vouchers have played an important role in keeping the restaurant sector buoyant over the past 18 months, experts warned that operators must be aware of the potentially negative impact discounting could have on their long-term business.

"Consumers have developed a voucher-scheme mentality when it comes to eating out. It's a treadmill that many operators will find impossible to get off without redefining their target audience in line with lower prices," said Peter Backman, managing director at Horizons.

This was echoed by Glyn Heald, partner at business coaching firm Shirlaws, who warned that discounting could devalue a brand. "Food service businesses are based around four things - marketing, service, product and price. If the business lowers its price, they are altering customer perception of their position in the market," he said.

Heald added that operators intending to maintain a lower price point must ensure that they adjusted their business model to maintain margins and altered service levels and their cost base.

"If they stop discounting restaurants will have to work extremely hard to ensure customers get something extra for the higher price they are being asked to pay," he warned. "Customers very quickly get used to paying a lower price for a particular level of service, so if operators effectively raise the price by stopping the discounts, customers could end up feeling cheated."

How discounting has changed the face of casual dining >>

Importance of discount vouchers to restaurants may have been overplayed >>

Eating-out report warns of long-term effect of recession >>

By Kerstin Kühn

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