(Note: In the previous post I defined the growing market segment of “aspirational dining” restaurants. This is valuable background to this post and merits a read.)
What sets the “aspirational dining” market segment apart was their creation of the perception that their food cost more because it was worth more. This perception is what made people aspire to dine in their restaurants. During the salad days of the last decade these restaurants thrived on people’s desire to dine at a restaurant that would create a sense of jealousy amongst their peers. Having dinner and being seen at these restaurants was a sign of status and achievement. This all changed when the economy took a turn.
During “The Great Recession,” which we are being told we are now recovering from, fear and frugality were once again made admirable. Even those who did not see an effect on their income felt it was their responsibility to tighten the purse strings. As a result aspirational dining suffered. Posting a rave review of a fancy restaurant on your facebook status became frowned upon by your unemployed, uninsured, and unimpressed friends. We were still allowed to consume, but to do so we had to get a deal. Bargain shopping became oddly patriotic.
Faced with the growing number of open spots in their previously full reservation books these chains were faced with a dilemma. They had tremendous overhead for their corporate mega restaurants and had to fill their tables to stay ahead. For inspiration they turned to their aspirational retail counterparts with their half price pasta makers. Deals soon became the norm. Some stormed the market with coupons and discounts to entice diners. Others created multi course menus offering a deal on their lower priced/ higher markup items. Guests were offered significant discounts off their next visit. Chains that would not have considered offering discounts years earlier were signing up with marketing programs offering special values. Restaurants who previously considered the high prices a part of the atmosphere were now competing on value.
This took away the aura of aspiration and in some cases even replaced it with the slight scent of desperation. Regular guests expected even better treatment and occasional guests demanded to be treated as regulars. Failing to meet these new expectations resulted in a loss of their dining dollars. As discounts whittled away at profit margins, cost cutting procedures were implemented. The regular guests of the restaurants most immediately noticed these changes. The newly targeted value oriented diners filled the void created by the loss of the previous clientele. These guests factored in not only the quality of the restaurant, but also the discounts they were offering.
This kept the doors open, but there was a trade off. Many of the new deal driven diners who entered to see how the wealthy dined, discovered that there was no big secret to be found. Dorothy had pulled back the curtain and found the wizard was just a man. Others seeking out value meals or using coupons selected entrees that do not reflect the quality of the restaurant. Low cost items are generally low cost for a reason. When the diners looking for a value sampled them, they often left unimpressed.
People went to these restaurants for a great meal. They earned their reputations they have because most of their meals were great. When they marketed these restaurants as a “value” they drove in people who were more interested in the value than the quality of the meal. Meeting them in the middle with value oriented options that are a step in quality below the higher priced options takes the focus off of what their reputation was built upon. These guests left saying they were unimpressed by the food while not mentioning they had the cheapest pasta at a fine steakhouse.
In the short term the gamble paid off and these companies are staying afloat. Like an experimental cancer drug, the long-term effects are still unknown. When the economy recovers fully will these restaurants be able to regain their aspirational charm? Will diner’s willingness to spend more at these restaurants be able to face rapid inflation? Is it better to be the first or last to raise prices back to pre-recession levels? No one truly knows the answer to these questions. It may be that today’s “aspirational dining” segment is simply in transition to joining the ranks of upscale casual. Some will return to their former stature, but with a great deal of the mystery gone.
The key to this segment responding is restoring the perception that they serve a premium product that warrants a premium price. This has been severely damaged during the price-cutting and cost controls during the recession. The path to restoring this perception is perilous and will not occur overnight. Price increases are always met with pushback from customers, even when it is simply a return to full price. Rebuilding a reputation is often more difficult that attaining it. The restaurant companies that do so successfully will return to their aspirational status. Those who fail will be relegated to the already overcrowded upscale casual market segment.
Next week, I will take the time to post a roadmap for this segment. There is a way these restaurants can return to their prior status. There are also techniques that restaurants that aspire to be aspirational can use to achieve that goal. This recession does not mark the end of aspirational dining. It is more of a filter to separate the aspirational from the upscale casual. The keys to rebuilding will be discussed next week.
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