Customers will always find a way to take advantage of whatever discount loophole restaurants leave open.
The latest example of this comes courtesy of McDonald’s, which in late June started selling a $5 value meal, featuring a four-piece Chicken McNuggets, small fries, small drink and a choice of a McChicken or a McDouble.
Meanwhile, the Chicago-based fast-food giant continues to run a 20% discount offer on its app in many local markets, something the company has had for months.
Naturally, consumers discovered that they could combine those deals, meaning that $5 value meal becomes a $4 value meal.
@McFranchisee I can’t imagine this store is making much, if any, money on this, but I like the value. Also surprised the app lets me use the 20% off with the $5 Meal Deal, but I like that too! pic.twitter.com/cZrTupew9J
— Steven Allen (@steveallen2373) July 7, 2024
The discount hack isn’t available everywhere. In the Minneapolis market, for instance, the 20% deal is only available on orders of $10 or more. In South Carolina, one must spend $5 for that 20% off deal—though that means two budget-conscious consumers can get two of those $5 meals for $8.
McDonald’s knew about the potential double discount before it started offering its $5 value meal. But the company did not want to turn off the app offer, for much the same reason it offers the discount there in the first place: McDonald’s is eager to get more people to use its mobile app. That 20% off deal is the company’s top offer. Turning it off might turn people off from the app.
Some franchisees, however, said that more people are discovering the double discount than was anticipated before the $5 value meal was introduced. This is particularly true in those markets heavy with college students or young adults that are savvy mobile app users.
The double discount helped prompt at least some markets to put limits on that 20% offer, requiring customers to buy more so they don’t just order one value meal for $4.
McDonald’s USA, however, said that it is not seeing more people double up on the discounts than it anticipated. Nor is its use increasing.
Regardless, the company says that double-discount use isn’t necessarily a bad thing: Customers that do so frequently make larger orders, boosting average checks in the process.
Value is also important, especially right now. And there is at least some early evidence that the company is generating traffic growth with its $5 value meal: Visits to the chain’s restaurants increased in the first week the offer was provided, according to the foot traffic data firm Placer.ai.
Discounting is one of the trickiest aspects of fast-food restaurant marketing. Big chains like McDonald’s fundamentally need a lot of customers for their business model to work effectively.
But the chains’ franchisees need to earn profits. And discounting too much can encourage customers to buy only cheap food items that are less profitable, causing operators to lose money.
“We don’t want to set a new standard, where the price point would be too low, or the expectation would be too low,” Eric Lefebvre, CEO of the Canadian restaurant chain collector MTY Food Group, told analysts this week, according to a transcript on the financial services site AlphaSense.
Yet even when companies don’t intend to price offers too low, they can leave openings such as the one McDonald’s did. And in this day and age, where social media provides a big bullhorn on consumer word-of-mouth efforts, such openings can be dangerous.
Maybe the most notable recent example of this comes courtesy of Red Lobster, which priced its now-infamous Endless Shrimp deal at a ridiculous $20 and made the deal permanent. Not only did the chain’s existing customers discover the deal, thanks to aggressive in-store marketing, but social media spread the word. The offer sped the chain’s descent into restructuring hell.
At the same time, customers who discover those double discounts do visit the chain. In some respects, it’s almost as if they’ve discovered something. The younger consumers may appreciate that over the long-term.
No matter what, however, it’s worth keeping this possibility in mind as more fast-food chains keep their app discounts while they join the very public value war: If customers can combine these discounts, they’ll do so. Be prepared for that.