I bought fast food for a group of people last night. The menu pricing was significantly higher than ordering through the app, which also allowed me to attach a digital coupon.
The pricing within the app is what I would expect to pay, or what I believe is “fair” or “reasonable” for chicken nuggets, French fries, and cheeseburgers.
On the other hand, I have cut my fast food consumption by at least half over the last few years because the published menu prices have skyrocketed.
What possible benefit would a fast food restaurant derive from publishing high prices to the casual customer and drastically reducing them within the app?
They have to be realizing a net loss of customers with this model, right?
In: Economics
Information. The apps gather a huge amount of data that the owner will then use to market products to you and/or sell that data to another party.
Gets people using the app, don’t underestimate the value of the data you can collect from apps like that. They get TONS of demographic info. Who eats fast food, how often. what do they order. What is selling to kids. Who eats mostly when they’re at home, as opposed to eating “on the road”. Do people favor their home location. SO much data, and it’s so valuable
Welcome to the world of Big Data.
Fastfood apps are perfectly designed to track and analyze your dining and spending habits and target you directly to build loyalty and keep you coming back to their store(s).
-once the app is on your phone they can send you a push notification every day at 449pm because you sometimes order from them at 5pm
-depending on the app, you may have granted them access to your contacts, so guess who is gonna get an email or text message
It goes on and on, installing the app gives them more intel on you than you might ever imagine. Giving you a 10% discount is peanuts compared to the value of that information.
To expand on the data comment – it’s super useful for their own internal purposes. They can log things like how many people look at product X but order something else, search the menu for something they don’t have/is out of season, etc.
In addition…
1. If you’re at the store you’re already at the store and you’ve decided “I’m having [restaurant]” today. Similar to how having a loyalty card for a particular gas station means you’re more likely to go to that station which offsets any costs associated with rewards programs, having an app on your phone to get special deals and prices makes it more likely you’ll go there versus elsewhere.
2. It makes it easy for apps to advertise directly to you for basically free. Think notifications for deal alerts or just nagging you to buy their food. Some percentage of that turns into sales.
Does anyone from a corporate product management type role have stories about how the data collected from these apps is used?
Curious about what use of such data looks like on the ground.
More people on app ordering means less customer service needed taking orders, letting them potentially cut another worker.
Selling less items for more profit can give you the same margins (20 orders * $0.10 vs 5 orders * $0.40). You also potentially have less inventory, inventory management, and labor costs when selling at above absolutely bottom margin.
Apps are a good way of feeding direct notifications to your customers, getting direct marketing feedback on which types of sales and promotions directly drive purchases, and again removing a few minutes of customer service needed to take the order. They also are much less costly and cumbersome to roll out national campaigns, rather than running a bunch of commercials/ads AND doing full print campaigns for in store signage.
>They have to be realizing a net loss of customers with this model, right?
If they were, they wouldn’t be doing it. These are multi-billion dollar companies, not a bunch of monkeys just randomly coming up with ideas.
They want you to use the app. The app gives them valuable data on consumer behavior, and it also gives them an avenue for extremely strategic and targeted advertising via the app’s notifications.
They might lose some customers that choose not to use the app, but it’s probably not all that significant. The reality is, people are always going to want fast food. If someone is on lunch break at work and they didn’t pack something and don’t have an employee cafeteria, they’re probably going to get fast food. If someone is traveling and needs to eat something fast, cheap, or just familiar, they’re probably getting fast food. And then there’s all of the people that are just plain addicted to fast food and are too lazy to cook.
Even if they don’t use the app, they’re going to pay the inflated prices because they pretty much have to.
Subsidized prices to encourage user participation on the app. Think of it like a rewards/membership card for a grocery store.
The apps exist for information scraping. The deals are just bait to get you to use the apps so they can learn to brainwash you better.
Shareholder value. For consider that day traders tend to be morons who don’t know crap about a particular business. They are dazzled by buzzwords in press releases. They love “synergies” with anything that’s online, “smart”, app-driven, integrated with social media, etc.; anything that sounds new and fresh and exciting. So if everyone else is pivoting to apps and AI, and your business is dragging its feet on jumping on this latest trend, then the shareholders get nervous and your stock price drops. Better to chase the fads. Customer losses can be blamed on other things.
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