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QSR Podcast

Can Innovation with a Side of Value Help QSRs Survive a Recession?

QSR Podcast: Can Innovation with a Side of Value Help QSRs Survive A Recession?

As restrictions on restaurants lift, there’s a looming challenge on the horizon: a recession. For insights on how QSRs can navigate a protracted downturn, we sat down with Dan Lubetsky, Publicis Sapient's Travel and Hospitality Senior Director of Customer Experience and Innovation. In this podcast, he unlocks data-centric strategies to drive engagement and why value offerings are key to boosting loyalty and building resiliency through the recession. 

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Shelley (00:00): All right now, we are back in moving from one hot topic to another now. We turn to the much discussed possibility that we might be heading into even tougher economic times in coming days, meaning value based dining will become even more important to consumers. That's suggests an even stronger role for QSRs that not only offer that value pricing, but also have adapted their delivery and takeout check to fit market demand into the future. But there's still room for improvement for many brands. And at a time when only those QSRs that have their digital houses in order will survive, it pays to be ahead of the curve. Fortunately, we have a pro in house to cover the essentials of that subject today, in Publicis Sapient's travel and hospitality practices, senior director of customer experience and innovation, Dan Lubetsky. Welcome, Dan.

Dan Lubetsky (01:05): Hi, Shelley. Glad to be here.

Shelley (01:07): Delighted to have you. Now, just a little bit of brief background on you for our audience. You have 14 years of experience in digital strategy and consulting, analytics, CRM and integrated marketing and media with expertise in really pinpointing the best ways brands can boost their digital selves. If you can first today, just give the restaurant leaders listening an idea of what digital's role really is, or at least can be during a recession and how that differs from its role in more economically stable times.

Dan Lubetsky (01:47): Definitely. One of the interesting things is there are some predictions that we were going to be entering a recession before the pandemic. This both was in general economic analysis, as well as in the restaurant vertical specifically. Then we've seen the impact of COVID-19, the economic challenges people face, jobs being lost and a lot of pivoting within the broader restaurant, informal eating out QSR category. And we've also seen this tremendous shift towards digital transformation and all of these are hitting right around the same time.

Dan Lubetsky (02:28): So the role of digital is crucial. It's been a crucial journey to transform. It's even more important while going through the pandemic. And during a recession, digital tools are going to be critical in captivating engaged audiences in new ways as there are routine shifts. So I think the combination has led to some interesting insights. Specifically, NPD group has shared that digital restaurant ordering, adults 65 and older, increased over 400% year over year in June. That isn't a recession specific insight. But as we look at new audiences that may have not been as engaged in digital channels before, now having a broader set of capabilities while more people are at home, potential day parks being impacted as you lose the normal work routines, we look at different ways in which you may order and fulfill the respective menu items during the day and the impact of changing health considerations as during recessions there's insights that you're not as concerned about your overall health and eating habits, we're going to see this influx of how digital can capture engaged audiences in new ways.

Shelley (03:47): All right, now let's hone in on maybe a little further if we may, and have you tell us some ways QSRs can really drive value for customers during an economic downturn?

Dan Lubetsky (04:01): Most definitely. During a recession, it's pretty clear that there's a lot of value and price sensitivity. It's important to consider every dollar you spend. And as you may shift from having more spend in the restaurant space when you're eating out or in fine dining, that may shift moving back to more informal eating out for fast casual. Even into QSR as well. As you look at the ways in which digital it can be kind of most apparent and kind of pinpoint to driving high value with customers is through a couple factors that really come to life in a digital channel that are that much harder in a physical space. So the combination of being able to drive different price motivators that are personalized to a customer's experience, profile, past ordering, leveraging data and AI to really harness these recommendations, you can drive that right deal or promotion for the customer in the moment.

Dan Lubetsky (05:09): You can leverage that through a variety of digital channels, whether the customer has the mobile app of a given restaurant chain, or is kind of shopping or engaging with content on the web, or maybe seeing an ad through a social channel. As we look at the influx of that social engagement, having that right offer at the moment is even more important.

Dan Lubetsky (05:35): Some of the other factors I think are on bundling. What specific products may go better together as we see changes in eating habits, as we see changes in family dynamics and as we see the kind of importance once again for that dollar going as far as it can, how can you bundle your products and package them up in a really friendly way that drives that engagement? That also leads us into family packages. If you're now not just buying a meal for yourself, maybe at lunchtime in a past routine going to work, but now it's lunchtime for the family, how can a restaurant group be there to support the ever changing dynamics we have, in a kind of less traditional mode of operation and during a time when you need to take care of a kind of hungry bunch?

Dan Lubetsky (06:27): Another example of that would be bulk orders and not just maybe your family, but now you're ordering for a group. You want to find a way to have entertainment, but you're going to manage your budget, manage your wallet. How can you have ordering for more? And all of these factors are elements that through the use of digital tools that can connect to the restaurant's operations and can you know be synced from the menu and the overall offering. The best way to display that and to engage the customers right at your fingertips. And so digital kind of brings all of this up to the forefront.

Dan Lubetsky (07:02): And I've wrapped that with a growing trend in loyalty. How important may it be to both be getting an offer or deal when there are clear rules and opportunities on price motivators, but also driving longer term value for the customer as they're building into a loyalty program, knowing that they have an ability to continue to buy and reap rewards with the restaurant group and the restaurants and QSRs are actually gaining insights about the customers to better support them during a time of need.

Shelley (07:34): Wonderful. So really driving home loyalty through loyalty through the loyalty apps and programs that you've got. So If you can, let's now focus just on the US and explore what you see as the businesses that are best poised to succeed in a recession.

Dan Lubetsky (07:57): I think there have been a lot of great digital transformation efforts across the space over the last several months while we're dealing with all of these changes. Some of the brands who are really poised to continue, if not see an increase are some of the kind of constant growth through those spring into summer in pizza chains. Domino's has been doing an incredible job in ensuring that it is easy to order food from them, as few touches, as few clicks as possible. Any way you want your food delivered, they're innovating and bringing it to the forefront. They're leveraging a digital platform to basically scale. And this was spoken about in their Q2 earnings call. I think they're poised to really drive value into a recession. And we've recently seen them even looking at a couple product innovations, which they haven't really brought into market a long time. I think it was quoted eight years since they had brand new product shared, one of which, driving on a trend in sort of the taco Tuesday excitement and actually having a kind of taco based pizza.

Dan Lubetsky (09:19): And so the being able to like innovate from the core while being able to drive physically or metaphorically, the food to wherever you are as conveniently as possible is critical. So they are poised to do very well. I think we're seeing other brands who've been really, really pushing digital agenda forward with Chipotle too, doubling down on contact lists, mobile order ahead using the Chipotlanes, really actually scaling out new methods to fulfill orders and get the food delivered to you. They're of course, like many on third party delivery channels as well. And I think kind of encapsulating that where they're driving a lot of this through the use of data, is another tremendous example.

Dan Lubetsky (10:04): Dunkin Donuts similarly, I think is in a great spot. How they have scaled in that in a highly convenient high volume coffee market and bakery is similar approach in terms of the overall digital platform and bringing out kind of new value through loyalty and driving the contactless capabilities. So pretty similar pattern in terms of the on the go, ease of picking up or getting your food delivered and use of digital to both spark the ordering and then reap the longer term value through loyalty.

Dan Lubetsky (10:42): Lastly, I think when we look at just sheer volume and overall foundation you know McDonald's is in a great position as well. You know they, and several others in 2008, we're able to basically succeed as much as possible or be resilient if you will, during the last recession. And I think being able to leverage customer insights, manage the menu and deliver to customer's needs with digital being one of the most critical ways to do that, we're going to see them continuing to support their very large customer base too.

Shelley (11:24): Fascinating. Now let's not forget, though most of us would probably like to, that all this is taking place in the midst of this pandemic. So then based on what we've seen from the COVID-19 crisis, what other considerations do you think QSR leaders should be thinking about right now and into the future?

Dan Lubetsky (11:46): While we're going through COVID-19, did want to do a little comparison to 2008 because the world has changed. In 2008, we saw QSRs prove their resilience per the last question. And some of the top restaurant chains saw while the growth slipped, they were still growing. It was reported that in 2008, there was a growth slip to 3.4% in 2008, compared to the 5% in 2007. Being able to look at 2008 versus now, we have a different set of capabilities that the restaurants direct ability to engage with customers. We have this influx of customer data and new channels. We have the transformation agenda. And so while this impact of COVID has led to some insights we'll get into, I think it's also been an accelerant for why digital is so important. As we look at some of these key factors today, we know safety, contactless and being mobile first are imperatives.

Dan Lubetsky (12:59): We're seeing that across every restaurant group from your local mom and pop, to the large QSRs that are global reaching. We're seeing the kind of weaving of digital and mobile and different uses within that. How can they inform and support customers and be a platform for supporting their own employees and crew and franchise partners as well as being utilitarian and actually facilitating the order and experience? Whether that's in serving something through the third party delivery channels or fulfilling it themselves, or being that supporting touch point as you go contactless through drive through. That category is of tremendous importance and most definitely new to today from 2008.

Dan Lubetsky (13:57): In addition, I think some of the other unique factors we're going to see are we'll probably see high traffic in the curbside and drive through. Curbside and drive through are not new, but they are growing and evermore important as you look at this shifting tide that's between the combination of economic concerns and COVID-19. So for the most part, we're seeing drive through make up something between 50 and 70% of total revenue in 2019. This means the importance of drive through is there. We look at the impact of COVID-19, we're still seeing high engagement in the drive through. Companies like McDonald's and Starbucks both reported that over 90% of sales in Q2 2020 came through the drive through.

Dan Lubetsky (14:46): So when we look across the sector, we're going to see the need to still be able to fulfill meals and drive as much traffic as possible through these you know somewhat now traditional channels. And I think the digital implication of it is going to be a bit unique as we look at innovations around ordering at the drive through, recommendation engines, personalization, menu customization, and ensure that you're still driving as much traffic through and as quickly as possible for performance while delivering that. We also may see some innovations in terms of pickup around potentially walk up pick up options, grab and go features so that we're still getting use out of the physical space, but being as contact free or contactless as possible in different settings when we're talking about you know urban versus rural, you know along a highway versus in a downtown environment.

Dan Lubetsky (15:48): I think we'll see some changes just in terms of the growth and importance of those areas and some slight innovations around those two channels. Delivery has become a critical channel for QSRs, but I specifically believe we're going to see growth through the third party services. Those who are already offering new services to customers and to different restaurants, such as DoorDash coming out with a marketplace. But in addition, from a specific value standpoint, the ability for the third party services to offer promotions, deals with their increased restaurant options. So being able to have consistent engagement with a wide variety of restaurants, local favorites, new entrants and your constant chains that you may engage with, but be able to package that with high use of first party data that they have gleaned over growing their market share, and then being able to kind of leverage that to help provide the customer with really relevant promotions and deals.

Dan Lubetsky (16:57): I think we will see additional growth there and new tests and innovations try to support customers through the recession. I think there still may be some challenges though, in the category where we may see spend being cut back on different parts of the broad restaurant vertical in areas that are potentially things like bakery or higher end coffee or these just may be areas where customers choose not to spend. Maybe they're making coffee in their own kind of methods at home instead. I think there may be different ways in which customers are saving that impact, just broad reach of those respective restaurants and a channel like delivery. But in general, I believe there'll be additional growth in the space.

Shelley (17:43): Dan Lubetsky, senior director of customer experience and innovation at digital consultancy, Publicis Sapient and its travel and hospitality practice. You have been a true wealth of information for our listeners and myself today, Dan, so thanks so much for your time. And that goes for our audience's time too, for which QSR Web is eternally grateful every show. For now then, we'll sign off and wish you a great day and great business. Bye now.