Coupons in the QSR space: Pros and cons

In the restaurant industry, attracting new customers and lapsed customers is paramount. This is why so many use discounts, promos and coupons to draw customers in with bargains. But are coupons genuinely effective in the QSR space?

You’re about to find out. In this blog post, we’ll be diving into coupons as a marketing strategy, which franchises are using them, and some of the benefits and disadvantages to using coupons as a QSR.

Photo by Erik Mclean on Unsplash

Which QSR franchises are currently using coupons?

If you’re thinking to yourself, “Coupons are old school. Who clips them anymore?” You’re slightly right—and you’ll want to keep reading. Most coupons today are distributed digitally through branded apps.

McDonald’s

The McDonald’s app allows customers to access digital coupons and get discounts. McDonald’s started a free fry campaign to incentivize their customers to download their app. 

The free fry campaign involved McDonald’s customers getting free fries with any purchase over $1, but only if they had the app. This fueled a surge in downloads, which allowed McDonald’s to keep offering deals and drawing customers in via coupons on their app. 

Part of McDonald’s business strategy to compete with Starbucks, which has long been offering in-app loyalty cards and discounts and receiving a third of their orders via the mobile app, is increasing app users and usage.

McDonald’s use of discounts has helped them outperform competitors by up to 70 basis points during difficult quarters, getting customers to order more when they come in.

Photo by William Enrico Jr Quijano on Unsplash

Starbucks

Photo by Douglas Bagg on Unsplash

Starbucks wanted a better way to attract younger people, which drove them to offer coupons and loyalty cards in their mobile app. Starbucks has the most regularly used loyalty rewards app, demonstrating that coupons can be used effectively.

Starbucks incentivizes their customers to use their app by offering free in-store refills to those who have the app. Through their app, they also offer:

• Birthday rewards
• A star system that gives you two stars per dollar you spend
• ‘Challenges’ every month that grant you extra stars (like ordering any macchiato drink)
• Member offers and discounts

The Starbucks app goes above and beyond to make its users feel like they are playing a game; the more you visit Starbucks, the more points you get. Starbucks members usually spend more than other customers, representing 39% of the chain’s sales.

What are the benefits of using coupons as a QSR?

Coupons fulfill an ‘ever-growing need for savings, caused by global economic turmoil.’ Now that we have looked at some of the successful uses of coupons within top QSRs, let’s talk about the benefits of using coupons.

Coupons make launching new menus easier

If you have an app for your restaurant, send your customers alerts to let them know when you launch a new menu item. Offering promotional discounts will make consumers more inclined to try something new (and maybe again in the future).

Coupons incentivize sales

As we saw with the monthly challenges used by the Starbucks app, you can use coupons to make dining at your restaurant feel more interactive. As the coupon experts at DealA explain, “When customers have a coupon with an expiration date, they feel a sense of urgency to use it before it runs out, or run the risk of experiencing ‘anticipatory regret.’ Coupons with expiry dates can not only increase customer conversions but also help secure a customer purchase.”

Coupons can be used to boost sales on slower days

If your QSR has identifiable slow days, use coupons to bring in more custom on those days. Say sales figures are higher on weekends and slower on Tuesdays or Thursdays, you may want to introduce offers limited to those days. The same applies to slow parts of the day, such as lunch or breakfast.

Photo by Marcel Heil on Unsplash

What are the disadvantages of using coupons as a QSR?

There are some disadvantages to using coupons, and understanding the shortcomings of coupons can help you use them more effectively.

Preparation is necessary

If you’re offering a massive deal in your restaurant, you need to be sure that you have the staff and stock to cover a surge in customers. If you don’t adequately prepare for a coupon event, new customers could have a poor impression of your brand (and never return).

Customers may not spend more

A good portion of customers that use coupons only use them to get a cheap meal or free item. They may not spend more than necessary to redeem the coupon and may not respond to upselling. (In fact, they may have ordered the same thing with or without the coupon, so at that point, you’re just handing out a discount.)

Summary

Coupons work—but they may not always be profitable for your restaurant. Luckily, if you want to give coupons a go, you don’t have to indefinitely commit to them. If you feel like it may generate more customers for you, test into it. Run a promo or two and measure the results. If it works, try more. If it doesn’t work, make adjustments before fully calling it quits. After all, U.S. consumers love a good coupon.