Clipping Coupons from the Marketing Mix
Arby’s sales grew solidly across its company-owned stores in the first quarter, an encouraging turnaround from the flat growth of a year ago. So why is its parent company discontinuing the couponing campaign that it cites as a major factor in the upbeat results? The answer could lie in two drawbacks of couponing as a marketing tool.
Parent company Triarc Cos. earlier this month reported a profit of $2.7 million for the quarter after losing $3.2 million during the first quarter of last year. More encouragingly, same-store sales at Triarc’s approximately 235 company-owned restaurants rose by 9%.
For one thing, couponing wasn’t the sole factor in the rising sales: The company also cited a new marketing campaign in the first quarter — Arby’s last year fired its longtime ad agency, Doner of Souhfield, MI, in favor of New York’s Merkley + Partners — and the expansion of its three-year-old Market Fresh product line to include salads and wraps in April 2004. For another, while sales rose, so did advertising and selling expenses, by 10%, or $400,000, in the quarter, mainly due to the coupons.
The fact is, couponing is a quick way to inject sales growth, but it’s also a risky strategy.
“Most companies in the food service industry are trying to get away from couponing,” says Hal Sieling, managing partner of Carlsbad, CA-based Hal Sieling & Associates. “Frequently too much couponing can be hard on the bottom line.” What’s more, customers can become too reliant on them and then take their business elsewhere when the coupons start flowing.
A number of fast-food restaurants gained sales momentum through aggressive couponing. “All of a sudden they stopped, and sales went into the tank,” Sieling notes.
But Sieling adds that couponing makes sense when a company is introducing a product, opening a new location, or even moving.
Arby’s “fired” its Tom Arnold-voiced oven mitt character and replaced it in February with a red hat-shaped logo that trails a man heading home after work. “Apparently I’m thinking Arby’s,” he tells his wife. The company is spending $50 million in radio and TV ads on the Merkley campaign, according to published reports.
Sieling says he was not surprised that the Market Fresh line of salads and wraps were doing well for Arby’s because other food companies had found it had become important to customers. “Freshness in restaurants is becoming more and more important all the time. … It’s now a key attribute consumers are looking for when going to a place.”
Triarc is in the midst of merger talks with RTM Restaurant Group, its largest franchisee, and declined to comment.
