Thursday, May 10, 2012

The price of choice

Wendy's, a company that had been on a roll, recently passing Burger King for the #2 spot in Hamburgerdom, has hit a bump in the road. It seems that sales are a little sluggish growing only one percent in the first quarter, while McDonald's posted gains of almost nine percent.

What went wrong?

Like a lot of marketers they made the mistake of thinking that if some choice was good, more would be better.

Specifically, they created a new burger for their menu called the W, a mid-priced offering created to get carnivores to trade up from a 99¢ value menu burger to something a little more substantial, thus increasing sales and profits.

What it did was the exact opposite.

Not seeing a difference between the W and their regular offerings, people traded down. So while unit sales remained essentially unchanged, dollar sales decreased.

Offering options to your customers isn't necessarily a bad thing. But it is if they can't differentiate between those choices. And don't count on advertising to make it clear to them.

If the products aren't obviously different at the point of sale, price wins.

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