IdeaStudio's "Thought For Food" Restaurant Marketing Blog

The Frugal Diner: Here to stay?

Could the worst of the bust be behind us?

It’s hard to say. As of today, the Dow is up almost 20 percent from its abysmal low of March 9. Despite the daily dire pronouncements from CNN that we could still be on the brink of economic catastrophe, fears of the Later Greater Depression seem to be receding.

On the other hand, a Nation’s Restaurant News article today announced that consumer spending had taken a significant dive in early March, down more than 10 percent compared to January and February and more than 32 percent compared to the same period a year ago.

But that was early March, and as stated above, the Dow has moved convincingly northward since then.

Whether now or months from now, we can be sure that the market will recover and consumer confidence will rebound. When this happens, the death grip that even the comfortably flush have maintained on their wallets will ease.

To which restaurateurs from all corners reply, “Yes, but by how much?”

As Americans climb out of the consumer confidence basement (feeling a little like Auntie Em venturing out of the root cellar after an F5) … then what? Will optimism swiftly return and have consumers spending again like there’s no tomorrow? Or will caution prevail and keep consumers saving like there’s definitely a tomorrow … and it’s going to be absolutely terrible?

Most economists agree that the economy will show signs of recovery in the second half of 2009. Almost all also agree that increases in consumer spending will be more gradual than in past recessions, when spending has come roaring back based on pent-up demand. This time, it was consumer demand — specifically for credit and real estate loans — that created the bubble that burst so suddenly and dramatically.

So the likely answer is that consumer spending will resume … but with the housing market still gasping for air, working Americans desperate to bolster their diminished 401k plans and a pervasive sense of national animosity toward conspicuous consumption, spending won’t begin to reach previous levels for years, not months.

As markets and jobs stabilize, consumers will slowly but surely begin to trade up again in their choice of restaurants, just as they traded down when things were looking grim. But with a bit more hesitation this time. A key component of this trade-up will be the attraction of greater perceived value at more expensive establishments.

The best way to encourage this perception is to continue to promote the value-oriented menus, pris fixe dinners, two-for-one specials and combos that helped keep restaurateurs from losing loyal customers from defecting during the downturn.

The message, of course, must be freshened up from the “we’re helping you in hard times” mantra that consumers have heard throughout the recession. A new, optimistic message will be in order.

Additionally, restaurateurs will need to consider freshening the offers themselves to come across as being responsive to a changed outlook; diners will be looking for something new, a break from the value-menu staples that got them through their budget crisis. As long as that break doesn’t look too dramatic. And this presents an excellent opportunity to begin to walk margins back to a more comfortable place. “Walk” being the operative word.

Your new message, new look, new offerings and new specials will signal to your customers that you’ve weathered the downturn with them and are looking forward, just as they are, to better times to come.

Even if they don’t come quite as quickly as any of us would like.