Kim Russell is an award-winning marketing leader with extensive experience in the Quick Service Restaurant (QSR) sector. She talks about the competitive landscape of QSRs, her transition from agency to client-side marketing, and the unique challenges faced by brands in this industry.
Kim shares insights on consumer behaviour, the importance of authenticity, and the role of technology in enhancing customer experience. She discusses pricing strategies amid rising costs, the significance of day-part marketing, and the potential of retail media in QSRs.
Kim also reflects on her personal achievements, including launching a successful loyalty program with Katy Perry, highlighting the emotional connection consumers have with food brands.
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It was a highlight. It was a pinch me kind of moment, but it was pinch me for a lot of reasons. It was a big undertaking that I had to bring the executive team, the franchisees, all of the staff on the journey”.
Transcription:
Darren:
Hi, I’m Darren Woolley, founder and CEO of TrinityP3 Marketing Management Consultancy, and welcome to Managing Marketing, a weekly podcast where we discuss the issues and opportunities facing marketing, media, and advertising with industry thought leaders and practitioners.
If you’re enjoying the Managing Marketing Podcast, please either like, review, or share this episode to help spread the words and wisdom from our guests each week.
The local QSR market is one of the most competitive in the world. It’s saturated in burgers and pizza, fragmented in chicken, and ripe for growth in Mexican breakfast and late night options. While global giants dominate in scale, local challengers are winning with product authenticity, cultural relevance, and digital-first convenience.
Regulation and consumer behavior are challenging how brands market and operate. So, the focus is no longer just on food and price, it’s about owning data, proximity media, operational excellence, and authenticity.
To help us navigate the quick service restaurant landscape, please welcome one of Australia’s most accomplished marketing leaders with more than two decades driving growth for some of the country’s best-known brands in retail, telco, banking, finance, tech, media, and of course, QSR. Please welcome Kim Russell.
Welcome, Kim.
Kim:
Thank you, Darren. Lovely to be here.
Darren:
You have an interesting career in that I noticed you started in agencies, but fairly quickly jumped across to telco which is always interesting for me, going from agency side to marketer side. In fact, I think Telstra was one of the clients of the agency you were working at, at the time, wasn’t it?
Kim:
It was indeed and that’s how I landed there in all honesty, Darren. So, I was loaned over to Telstra on a secondment that was supposed to last eight weeks. And very quickly, it was about two weeks in, Bill Obermeier, who was the CMO at the time, asked me to stay, and I thought I’d ride it out for a few more weeks, make sure I was sort of happy in my new home.
And by another two or so weeks, I was having a conversation with our MD at Ogilvy about a transition over to Telstra. But it ended up, as you say, being quite a wonderful transition in that I was working so closely with the Ogilvy agency and all of my colleagues, so that’s how I ended up over there.
Darren:
Sorry, I’m going to pause it just so you can get that done.
Kim:
Yeah, you’re alright.
Darren:
Fascinating. The interesting thing is going into what I’d call services marketing because most people forget a lot of careers in marketing have often in the past started in consumer-packaged goods or FMCG, but you started really in that services category where it’s quite different because the relationship is direct with the consumer, rather than both retailer and consumer, isn’t it?
Kim:
Yes, indeed, and it was quite varied actually. So, certainly, had that service aspect, and then there was quite a focus on product innovation at that time. So, we launched the first Apple iPhone, for instance, and did the first streaming of a live event through to mobile phones as a package service for the Beijing Olympics. So, there was a lot of tech innovation being incorporated into telco at the time.
So, it was a fascinating space to work in, and I really enjoyed it. I felt like it was a great transition into the client side in that it utilized all of my agency skills and people relationship skills to sort of manage and lead a team at quite a young age, but still I guess cut my teeth in all of the aspects of a client side role which was broader in many senses than an agency role ever is.
Darren:
And then you went from telco into quick service restaurants, or as they’re often derogatory turned fast-food.
Kim:
I did, indeed.
Darren:
I think it’s interesting that people seem to think that fast-food somehow is a put down, but it’s so popular and so pervasive in society, isn’t it?
Kim:
Oh, it sure is, and it’s what consumers demand. Whether it’s through delivery aggregators or drive through or whatever, people do want their food fast, and they will often pay more just for the time back, and it’s a treat and indulgence in that way.
Darren:
What are the differences though, from a marketing perspective of going from a technology-driven services business to one that’s very much about the product being food, but also increasingly the experience of that food?
Kim:
Definitely. I think there was quite a lot of differences actually going in from Telstra to a QSR. I think the biggest difference was the interaction and the relationship that you have with customers.
So, in telco or even in my time in banking, you might sign someone up to a mortgage or a phone plan that’s a multi-year relationship, whereas in QSR, it’s multiple times a day. You’ve got breakfast, lunch, dinner, coffee, late night, and now with delivery aggregators as well, with Menulog and Uber Eats, et cetera, it’s a 24/7 proposition. So, there’s just no downtime and the competition sort of never sleeps. So, you’re constantly earning that right to be relevant in a very competitive and cluttered space.
And I think that pace and the frequency and the intimacy of that relationship shapes the consumer mindset and the relationship you have with them, and they can be quite unforgiving actually. So, one bad meal, they’re gone, and they’re posting all about that bad experience on social media. But equally, they can be really fiercely loyal and almost tribal.
And I had many experiences where people love your brand in QSR in a way that you don’t see elsewhere. So, no one ever sent me in a Telstra tattoo, but I certainly saw many actually in my time at Nando’s, which was a big shift in terms of the consumer relationship.
And at my time there, there was Ed Sheeran creating a song about Nando’s. I was able to convince Katy Perry to come and launch our loyalty program in Australia, and constantly had the likes of Hamish & Andy and other celebrities giving us free plugs because they loved the product. And I think that kind of passion from your consumers is incredibly powerful when you harness it.
And I think another big difference that I found going from Telstra into the QSR space was the role that you play across all, I call it the five Ps, certainly in QSR of marketing, because in telco, I guess when we launched the iPhone, the team wasn’t involved in creating the product as such, and the same goes for tourism in Australia. We’re not creating the destinations or Westpac, or many other industries. Whereas in QSR, you’re really across everything.
So, in terms of product, you’re constantly innovating, you’re doing product tastings, you’re having supplier meetings, you’re analyzing trends from overseas, and that’s a constant focus for you to stay ahead, if you will, of the competition, and finding the sweet spot on pricing and really trying to sort of look at, okay, I’m launching this product, what are the opportunities here?
And with place even looking at the different locations. So, saying, okay, a food court is going to market itself quite differently and is in quite a competitive landscape, whereas a standalone restaurant has some different opportunities in terms of proximity, marketing, and so on.
And then there is of course, the promotion, which is the common ground between, I guess, the two, like a Telstra and the QSRs. However, the budgets are quite different. So, at Telstra, I had an $80 million budget, and when I landed at Nando’s, it was an $8 million budget. So, there was quite a enough difference.
Darren:
Significantly scaled down. But it makes you work much harder, doesn’t it?
Kim:
Well, it does. And so, you’re not outspending anyone, you have to really outsmart the competition, if I’m honest, and it makes you far more creative. We had to really think differently about marketing when I landed in there.
So, we did some pretty bold things. We hijacked the big mango from Bowen for a source launch, we showed up in MasterChef and Fashion Week and places that were unexpected for a QSR or fast-food.
We fed lots of sports teams and the like and famous sports teams to sort of build loyalty out that way, and built a lot of buzz around celebrities and social and so on. So, it was much more about earning attention rather than buying it because of that smaller budget.
Darren:
It’s interesting, I just want to pick up on something you said about that emotional connection and passion that comes from that. Because in a lot of cultures, food is such an intrinsic part of bonding, whether it’s bonding with friends and family. In Chinese culture, it’s hospitality, friendship is shown by feeding people.
And so, I think that’s almost innate human experience. Even though we know we are living increasingly in a world where people are isolated, many people living on their own, there is still that comfort that comes from sitting down and enjoying a meal or enjoying food that is often — we talk about it being comfort food, and I think a lot of the fast-foods do that.
The interesting thing and one of the things that you highlighted to me before we started this conversation is the diversity now. I remember as a kid a long time ago, last century, but growing up when your choices were fish and chips, maybe pizza, Cantonese takeaway, there was a very limited range of fast-foods, or quick service restaurants.
So, they would never consider themselves restaurants because it was usually a hole in the wall and food was handed out to you. But now, we’ve got so many. Apart from the classics like McDonald’s, KFC, Subways, Hungry Jack’s, Dominoes and Pizza Hut, Red Rooster, as you said, Porto’s, Nando’s, Guzman and Gomez and Barrows — there’s this ever growing group of options that must be competing for that loyal connection.
Kim:
Absolutely. In QSR land, they often call it share of stomach, which is a pretty funny term, but it’s like you are fighting it out across. But I think you’re right, and what it does is it makes you lean into that. And I think the brands that do it well are the likes of GYG that really lean into that authenticity of the Mexican experience.
They really do focus on their guest experience, and even their open kitchens and the way that they present the product is very authentic and open and transparent. And I think that equally, the provenance of whether it’s El Jannah with the Lebanese or whether it’s authentic Japanese, people really lean into and love experiencing all of those different food types, and we are sort of lucky with the growing level of options in Australia compared to, say, 20 years ago.
Darren:
Yeah, absolutely. And look, there are a lot of global players in that, but it doesn’t mean that Australia is not performing above expectation in that when you see innovation, either the global players use Australia as almost a test market or an innovation market, or there are local players that are coming up, that are quickly expanding like GYG into international markets. So, it’s an interesting role that Australia plays.
I’ve always thought the Australian market is the ideal test market, foremost anything because it replicates multiculturalism, it’s got very well-developed media channels, distribution can be an issue because of the size of the land and the local population. But in QSR, Australia has become, in many ways, the innovation market for the world, McCafé being the most famous.
Kim:
Absolutely. I think Australia, for all of the reasons that you’ve said is such a great testing ground. And because Australia is quite broad and diverse, often people will do a small test in somewhere like South Australia, for instance, and then roll something out in Australia, and then to the world.
And I think McCafé is a great example and was a great innovation for McDonald’s, and there’s been many, many success stories of either Australian founded brands that are now doing well internationally like GYG, which I think is on an enormous trajectory right now, and obviously, is evidenced by their recent IPO and so on.
I think they’ve really shown Australia what’s possible with a locally founded brand and doing things well. They’re very obsessed with their product and their people, and I think that that’s really been the difference for them, and part of the reason that they’ve been able to grow so quickly.
Darren:
Yeah, absolutely. And I know whenever you hear the founders talking, it’s very much about building a culture and delivering the experience through the people. So, picking up on that, but it’s not all positive sailing, because there are some real challenges. One is obviously consumers and the other is sort of secondary to that is regulation.
So, what are the sort of consumer trends or signals that are happening and how are they being reflected in regulation?
Kim:
Well, I think there’s a lot actually to unpack there. I think consumers are really demanding now that brands do the right thing, and they’re making their choice with their wallets, and that is leading regulation.
So, whether that’s around environmentally friendly packaging, whether that’s around displaying kilojoules, whether that’s about not so aggressively marketing to children so there is a lot of rules now around for QSRs, around not being able to market within proximity of schools, and not overtly to children in any way. So, there is a lot of, I guess consumer expectations that are then filtering into regulation that have huge impact on QSRs in Australia.
And sometimes, those laws are even different by state. So, you’re dealing with that as well. And for the most part, I guess the QSRs are really working to the strictest rules so that they can roll it out across Australia. Otherwise, you’ve got lots of different packaging options or marketing strategies happening all in the one country, which can be quite difficult to manage.
Darren:
Yeah, yeah, because the scale, we’re talking about McDonald’s the largest I think (are they) with a just over a thousand stores on a subway, 1,200 stores. So, yeah, that’s quite a lot of sites across seven states and territories or eight states and territories that you need to manage, don’t you?
Kim:
Absolutely. And it just adds complexity if you’ve got then different rules for different states. So, I think wherever, in my experience across a broad range of QSRs, quite often if a rule comes in in one state, they’ll try and roll that out for all of them.
But certainly, things like kilojoules have just become a permanent fixture on the menu, and it’s grown from just being on physical menus to even down to the delivery aggregators and displaying, Kilojoules across the board wherever you’re seeing a menu.
Darren:
Yeah, absolutely. I think also, the one thing as a marketer in this category is the instant feedback because it’s also retail, isn’t it? It’s not just food marketing, it’s retail marketing. And whether you’re dealing with franchise or company-owned stores or whatever the model is, they would be very quick to give feedback if they see a decrease in revenue even on a day part basis, I imagine. It gets down to that level of number of transactions.
Kim:
Yes, it sure does. It is so visible. I’ve never worked in a category where the marketing initiatives are so visible instantly. You do a launch and its successful, failure is judged immediately by a number of different stakeholders, obviously by the consumers and their ability or propensity to try things, but also there is a constant feedback loop.
And I think people are more important in the QSR world than almost anywhere else in terms of the marketing considerations, and there are so many different groups. So, when you think about, say a corporate environment like a Menulog or a Telstra or Westpac, your main stakeholders are the typical ones you’d expect, like the board, the executive team, your staff, agencies and your customers.
Whereas in QSR, you’ve got all of that, but you’ve often got founders who are super passionate and opinionated and involved. You’ve got operations which you need to work absolutely hand in hand with, you’ve got all of the real estate team and the consideration of where the next doors are going and store openings, et cetera. And all of this sort of carries more weight because where you open and how well you execute can actually make or break the success.
And then there’s the franchisees who many of whom have invested their life savings. They might be husband and wife teams, they’re working six or seven days a week, and they are super passionate, they are very vocal, and their livelihood depends on the competence that you demonstrate as a marketer.
And they have no problem picking up the phone to you at any given time and giving you feedback (good or bad) on any launch, which was new to me going from a Telstra into the likes of Nando’s, you know that constant dialogue and feedback, and I guess the intensity of those franchisee meetings was something that I really had to level up for in many respects.
Darren:
And also, complicated by the fact that those franchises could be as you pointed out earlier in a food court, in a shopping mall, they could be in a standalone location, it could be a standalone location that is surrounded by competitors. You’ll often see them clustered, particularly on highways with four or five competitors all in the same half-kilometer stretch.
So, all of those things have an impact on the marketing. It’s amazing because most of the people that I’ve spoken with that have worked in this situation say, it’s amazing how everyone’s so critical of the advertising rather than necessarily considering all of the other variables that go to success or failure.
Kim:
It’s so true. I think everyone loves to have an opinion on marketing, and that’s been my constant experience, be it tourism Australia or Telstra or anywhere else. But I think back to your point about the locations, yes, you really need to as a QSR marketer, consider different strategies actually, whether it be a food court where you highly competitive and very high sort of peaks around sort of particularly lunch trade, where you’re really honing in on high value offerings, and fighting it out with absolutely everyone in the proximity there.
Whereas, if you are a standalone where consumers might be more looking for a drive-through or something like that, they’re making the decision within a five-kilometer radius. So, having a piece of outdoor with directional signage, which you see McDonald’s do very, very well and others on the path to purchase if you will is super important there.
And equally, you’ll have other sites that have really a destination where you might sit down with your family, and again, you’re going to market those quite differently and drive traffic there in different ways.
Darren:
Well, because they’re totally different experiences, and therefore, the decision-making process for the consumer is going to be very different. With all this complexity, one of the things that amazes me is how much of the limited time only offer features as part of the promotions for QSR. It’s developing a new product or new offer, putting it into market for say, four to six weeks.
Now, logistically, that seems like a nightmare, actually formulating a new product, rolling that over hundreds of stores or a thousand stores or more, and getting everyone up to speed on that, and then advertising it literally for six weeks. What’s the thinking behind this?
Kim:
The thinking behind it when you’re the likes of McDonald’s, for instance, who do this on a very quick rotation as you referred to is new news. So, they have their staples, and they have their sort of products that are very sharp price points such as your $1 hash browns or your soft serve cones or whatever it might be.
But they’re constantly trying to bring customers in who do dine with them frequently with a new product and new news to try them for another occasion. And so, the thinking is very much about driving frequency, and getting people in more often, and that’s why they do it.
Now, what I’ve seen, because I’ve worked across a whole bunch of different QSRs, is that a lot of the Australian based ones are actually either pulling back on that strategy or putting in an MPD for longer. So, they might run a new product for 12 weeks as opposed to those six weeks turn arounds.
Because as you rightly pointed out, there is a lot of training involved in training your staff on a new product and presenting that well. And the success or failure of the product actually sits in the hands of real people.
In this instance, it’s not like selling an iPhone in a box, it’s like you’re launching a new burger or whatever the case might be, and they need to know how to assemble that, they need to know how to prepare it, and to present it in a way, the chips have got to be hot, the burgers has got to be exactly as it as it is on the photograph.
And so, I think that there’s a lot more complexity and reliance on people in the product than many other industries. And when you’re training staff to create new products all the time, that can be great or it can honestly go horribly wrong at times because the wait times for consumers are something that they’re quite unforgiving about.
And if you’re new at something and you’re slower at it, as many of us would be in the first instance, that’s something that creates not only a backlog, but a lot of frustration and can actually lose customers.
Darren:
Yeah, absolutely. Because even the formulation of those products takes a significant amount of time, doesn’t it? And there’s a lot of consideration beyond taste appeal or appetite appeal to actually sourcing new ingredients, being able to put those together at point of sale in the restaurants, is all a major logistical exercise, isn’t it?
It’s not just, “Oh, let’s do this.” They have to work through how, for instance, you can’t suddenly wheel in a new piece of equipment into the restaurant just to make one product for limited amount of time.
Kim:
That’s exactly right. There’s equipment considerations, there’s also supply considerations in terms of being able to actually get enough supply of a particular new product nationally. So, you think about even chickens, a lot of the major QSRs cannot actually do free range chicken, even though they would like to because there’s just not the level of supply available on a regular basis.
And so, there are so many product considerations behind the scenes that go into sourcing, pricing, and being able to actually price at a point that’s going to appeal to a consumer, and then there’s wastage, making sure that you are using all the parts of the different whether it is a chicken or whatever, to try and really optimize your P&L.
And then there’s of course, the preparation of the product itself for making sure that it is exceptional and that you’re going to bring customers back. So, there’s a lot to it and there’s quite often a very long pipeline between the idea and something launching, and even for products.
So, for instance, Australians became obsessed with fried chicken in the last few years to the point where even the likes of Red Rooster and GYG for instance went out with a fried chicken product because consumers were demanding it.
But to get a unique product, to get a product that presented well, to get a product that would work within the constraints of the current kitchens, et cetera, took a lot of time for some of those brands to actually perfect, and then be able to launch.
Darren:
And there’s also more innovation, and I want to move on because this is an area I think with your technology telco background, seeing the rise of technology, particularly apps, online purchasing — I know if I picked up my iPhone now, I’d probably find six or seven apps for different QSR restaurants. What’s driving it?
I mean, beyond loyalty and getting to know me better as a customer, why has this become such a big thing? Because even at point of sale, it’s much more, the kiosks are taking over and things like that, there’s a lot less interaction. Is that trying to get staff freed up to be just delivering food rather than taking orders, or what do you think is the thinking behind that?
Kim:
Well, early on, so for instance, for Fernando’s and then for craveable brands, I sort of launched the first app-based loyalty programs in Australia. The thinking behind it at that time was largely around marketing efficiency.
So, as I alluded to earlier, going from an $80 million budget to an $8 million budget, you had to look at ways where you could market directly, you could market more efficiently, and you could drive a frequency of purchase. And what all the stats were saying at the time was, if a customer had an app on their phone, they were likely to transact with you about 30% more.
So, there was a real solid business case and reason to try and one, get your customer to download your app, it was like a mini ad, if you will on the phone; own that customer relationship, be able to then push messages to them at whether it be around new news, around a new product or whether it be a time of day or pick up when they’re in proximity, and send them an offer. All of these created a much more efficient way of marketing.
Now, as I guess all of the different QSRs then went ahead and launched the apps in Australia, it’s not necessarily then unique, it was around trying to create better rewards, better experiences for customers to keep them coming back to then be rewarded with things that where money can’t buy and so on.
And I think now, it’s evolved again because you’ve got the delivery aggregators who have really risen in the last number of years, and are a way in for many of the QSRs actually, and certainly, very handy for QSRs in terms of getting new people to try and acquire customers to the brand.
But there is a danger because you don’t own the delivery experience, and therefore, you can’t fully control how the product shows up at the other end for the consumer. And also, there is a significant price premium for the customer, but also, as a brand, you’re paying more because you are losing your margin to pay the aggregator.
And so, what I’m seeing QSRs do now is really try and bring customers back into their own app and their own space to be able to create that relationship and that consistent dialogue to keep them on their own platforms and transacting with them directly.
And then, yes, that does play into the kiosk as well, because as you went to the environment, you’re interacting with that kiosk. The kiosk is quite clever at being able to prompt upsells. So, you do find on anything that’s electronic, be it digital menu boards or certainly, kiosks as you would’ve experienced yourself, Darren, they’re always prompting.
So, would you like this? Do you want to add that? And actually, throughout that purchase process, whether it be online or in a kiosk, they’re actually seeing their ticket average increase significantly because you are like, “Oh yeah, I’ll add dessert, I hadn’t thought of that or I’ll add that extra side,” or whatever the case might be. So, it is actually paying out in dividends for them.
Darren:
And I think they’re also getting to know behavior, and we will get to the point if it hasn’t already, where they start to see opportunities for triggering additional purchase or return visits, or whatever it is that’s basically going to drive top line growth, so it’s really interesting for me.
To your point though about quite a few of them now offering their own delivery service, and they’re charging a small amount for that, so they’re still subsidizing it, but they’re controlling that much more because you were also leading marketing at DoorDash, weren’t you?
Kim:
At Menulog.
Darren:
Oh, Menulog, sorry.
Kim:
Yeah, at Menulog. The other one.
Darren:
It’s not Uber Eats. So, Uber Eats, DoorDash, Menulog, right?
Kim:
Yes. So, at Menulog, yeah, go on.
Darren:
No, no, no. So, what were you going to say?
Kim:
At Menulog, it was interesting actually because to your point about data and picking up on consumer behavior, a lot of the driving of sales was actually around either we had a significant database — Menulog’s database right now is 2.4 million people, so it’s sizable and you can activate that database quite quickly.
One of the things that we would do is actually go out and if someone had interacted or ordered on a Friday night, we would send them a Friday night offer, try and pick up on behavior that they had already demonstrated in the past.
It was incredible to see how things like rain impacted people’s ability and need for a service like Menulog. When it rained outside, we were happy in the marketing team because suddenly the sales peaked without having to spend a cent because of just the sheer fact that people wanted to get a delivery and stay in.
So, yeah, back on your point about QSRs launching their own delivery service, you’re right, there’s two reasons for that. I think, one, to control the quality of the food in terms of how it shows up to the consumer, but I also think to sort of control the whole customer experience within their own ecosystem.
And because of that, then they’re obviously able to drive repeat purchase, they can even charge a small premium as you say, for delivery. And where I see this going is that for people that order regularly, much like Uber Eats is launched, they’ll actually have their own subscription service where you can get unlimited delivery on one of the QSRs just by signing up to a similar platform. And in doing so, it’s another whole revenue driver for them that doesn’t exist now.
Darren:
It is interesting that consumers will compromise potentially quality for convenience, for ease. And also, the other thing is (and you made this point earlier) it’s opened it up to make it truly 24/7 because you see those delivery bikes getting around the suburbs at two or three in the morning, and you’re thinking, “Who is eating?” But then if I’m up, someone else is probably awake and thinking, “Gee, I wouldn’t mind whatever,” and even better to have it delivered to your home.
Kim:
Absolutely. And you are seeing, I mean, there’s obviously shift workers and things like that, there’s people that have had a late night out, but there’s also people breakfast has become a bigger category for the aggregators actually than ever before. Getting coffees and muffins and things delivered for a meeting even in the corporate environment, it has been growing as has even having groceries delivered by the aggregators.
So, they’re going and Uber Eats has done that very well in their recent campaigns where they’re like, you can get this, not this. But the amount of things that you can order through aggregators now is quite incredible and they’ve been clever in growing out the diversity beyond just the food and beverage and QSRs to a much broader range of opportunities in terms of what they deliver.
Darren:
Now, the other big issue I’ve noticed, particularly in the last 12 months with the cost-of-living crisis, underlying inflation is that a lot of the QSRs are increasing their prices. And I’ve often wondered how you go about working out what price elasticity is, because in many ways QSR, fast food was seen as a cheaper option, even though it wasn’t. There was always a premium attached to it because someone’s actually preparing the food.
But I guess too, what was the traditional restaurant, they were definitely … you could feed a family for $30 or whatever, but now, we’re looking at $50 and more. It must be a consideration around how you at one level, maintain the value proposition; at the other, keep pricing ahead of the underlying costs in wages, in raw materials, and the like.
Kim:
Absolutely, because prices are certainly rising in terms of the cost of putting all of these products together, and I guess there’s two different product propositions here. You’ll see QSRs still doing the bundle deals or family meals particularly, and they’ll dial those up in certain suburbs and certain store formats, and then they’ll dial them down in others.
The other thing that you’ll see them doing now, because of all of the costs of prices going up, is they’ll market a single item at a sharp price point. So, they might do a burger for a 9.95, but they’ll make the money on the upsell when you actually arrive at store and add the drink, add the sides, et cetera. So, they’re being quite clever about how they’re marketing that single item still at a sharp price point to bring people in.
Darren:
Do you think there’s a trend perhaps to embracing dynamic pricing? Because there are peaks and troughs throughout the day, you’ve got employees that are working there and you want to keep them, you maximum utilization. Is that something that could be happening soon if it’s not already happening? Because certainly, Uber are very good at dynamic pricing, I’m wondering whether the QSRs are considering that.
Kim:
Yes. So, the QSRs are doing that already, and they’re doing it in a couple of ways, and it’s not unlike what the airlines or the supermarkets or Uber are doing. And that is, they’re pricing differently by different suburbs. So, they might have an A, B, and C set of stores, for instance, where they feel like certain suburbs can take a slight premium.
The other thing that they’re doing, as you rightly said, is day parts. So, they’re saying, okay, well, for late nights we are going to put the price up or on public holidays, we’re going to put the price up. And so, you will see that there is certainly dynamic pricing going on right now. And I think how they are measuring that in terms of price elasticity is they’ve got a live read on it with millions of transactions every day and every week. So, they can really test out then, if the price goes up, how much demand goes down.
And the other way that they’re doing it dynamically right now is on the aggregators themselves. So, in terms of how they’re actually pricing, they will add a premium because they have to pay the aggregators a fee, and because the consumer has to pay for delivery, but they’re also experimenting with that, if you will, by different suburbs or states to say, okay, if we put a price up here on this and get a little bit more margin, is that going to increase or decrease demand?
And in many cases, in that environment on the aggregators, consumers are happy to pay more, as you say, for that convenience. So, you’re not seeing a lot of decrease in orders for the slight increase in price there.
Darren:
It’s interesting when you talk about day parts, because the day part management is really interesting; you know breakfast, lunch, dinner, coffees late night. I imagine for every QSR and perhaps even a changing on a location by location basis, they’re going to have peaks and troughs, and they must almost need to be local area marketing to help boost the low areas in those day parts. How important is day part marketing to QSR success?
Kim:
It’s very important, and I think the traditional battleground for all QSRs is definitely lunch and dinner, and that’s where you’re going to get the variation of value plays versus new news, versus whatever, and that’s always going to be the case. But the areas and opportunities for growth sit outside of that.
So, breakfast for instance is most of the population eat breakfast, it’s ripe for the picking. McDonald’s have done it very well, you’ve seen GYG start to really play in that space successfully with who would’ve thought a breakfast burrito.
I think that the secret here is around things that can be picked up through a drive through, handheld so people can eat it in the car, and this is absolutely white space right now in terms of breakfast, after school is being done particularly well by the likes of Hungary Jack’s, et cetera, who market quite heavily in the suburbs around that afterschool snack.
That’s another area of opportunity where you sort of smoothing out the peaks and troughs, as you say, in terms of different day parts. And then there’s other opportunities around things like late night meals that you’re seeing the likes of a Porto start to play in in their night mode campaign that they’ve recently launched and will be interesting to watch, in that there is a big cohort of people, particularly around certain locations in the cities, around the hotels, et cetera, where people do pour out of those hotels and feel like an a Porto or whatever it might be, before heading home.
And so, playing out to all of those different occasions and day parts with different products is really important too, because the same person that might want a fried chicken on a Friday night might want to salad on a Monday at lunchtime. So, it’s looking at all of those different need states, if you will, and making sure that you’ve got products that line up with those.
Darren:
The other area that’s interesting is we’ve seen so many consumer facing businesses embrace retail media, and it made sense. First of all, it was the Coles and the Woolies, and then most recently, Commonwealth Bank are even building their own retail media network. What role does that play in QSRs?
Because the only advertising I’ve seen a retail media that’s not promoting their own products and services is the community board in the local McDonald’s or KFC that has the local school fate on it. And it’s not quite retail media, it seems to be more ESG than retail media. So, is this happening, and are we going to see more of it, do you think?
Kim:
So, yes, it is happening in the U.S. So, McDonald’s have done a great job of integrating third-party advertisements into their retail network and retail assets across particularly menus and the like in the U.S., and they have carved out a completely unique and incremental revenue stream. I do see this as a big opportunity for QSRs in Australia, and almost no one is doing it now. And so, I think that this is something that really needs to be considered.
You’ve got attention and audience in the retail stores themselves, but certainly, on all of the different menu boards on the kiosks, on their phone ordering and apps, et cetera. And so, this is something I expect that we’ll see more of in the next few years. And it is a way that these QSRs can offset some of the price rises and things, and still keep certain prices for their staples sharp.
Darren:
I have to say I was a bit dubious when CommBank said that they were going to do retail media. I’m thinking there I am at their ATM, I put my card in, it goes, be it diamonds, Rolls Royce, what are they going to try to … take out another mortgage now to buy this product? I’m not sure quite how that would work.
But I think certainly and particularly, things like wait times because although they’re fast, quick service, there is still a wait time because there’s been an increasing move to freshly prepared rather than pre-prepared. So, I think all of these create opportunities particularly in store, but as you say, on brands and on apps and all sorts of things.
The other big thing that QSR is known for, particularly in this country, is entry point employment for school age and young adults. And what was the joke? If you do a bachelor of arts, you’ll be qualified to serve fries at McDonald’s, was the sort of joke that used to go around. But a lot of people, the most famous stories, Charlie Bell, who, unfortunately passed away, but started out frying fries at McDonald’s and ended up global CEO of the company.
So, employer brands as employer brands, how important is that still? Because while you do see sort of young people working there, it’s actually become more of a mainstream employer as well.
Kim:
Absolutely. The people are the product ultimately in QSR because as I alluded to earlier, if they’re not delivering the right product or the product in a way that is acceptable to a consumer, you live or die right there.
So, an employer brand, it’s sort of two parts to it. You’ve got the brand itself. If you’re a great brand and a brand that the young ones love and advocates for, then it’s going to be easier to hire people in. Equally, one in 10 kids start out and people in the country start out their first job in a QSR. And so, you are creating this sort of workforce, this breeding ground, this training ground for the workforce of the future, and there’s a big opportunity to sort of shape these people.
And so, yes, the employer brand is really important, but these people in these kids also have families who live in proximity of the restaurants. So, they’re also customers. And if you look at them in that way, then yeah, it’s incredibly important.
I’ve even hired people into my marketing team that have come out of the stores being standout employees, big advocates of the brand, and ended up building not unlike Charlie, a whole career through stepping out of the store and into the marketing team for those specific brands.
Darren:
It is because of the discipline, I think that is inherent in QSR, and the focus on customer service. It is a great training ground, but it’s good to also see that it can be the start of a long-term career rather than just a place that sort of churns through young people. Of course, many people do it as an interim step while they’re at school or university, but it’s good to know.
Kim, I’d love for you to reflect on a personal level, some of the sort of personal rewards or personal achievements in the category that you’ve delivered, and yeah, what was the sort of the driver to do that? What’s the biggest thing?
Kim:
Probably for me, launching the PERi-Perks loyalty program in Australia with Katy Perry on the steps of the Opera House, performing to an exclusive cohort of Nando’s fanatics was a highlight. It was a pinch me kind of moment, but it was pinch me for a lot of reasons. It was a big undertaking that I had to bring the executive team, the franchisees, all of the staff on the journey in terms of, we had to firstly have a new POS system put in.
So, the franchisees had to invest in that and believe in the ability of this loyalty program to drive efficiency in marketing, and drive increased sales to even invest in it with their own and dipping into their own pockets, building out the tech, building out a sort of consumer workflow and so on, and all of the different aspects of that at a time where the only reference was overseas. And it wasn’t necessarily proven out in Australia, was something that I was very proud to sort of take to market.
We also integrated with our social media, we did geotargeting, so there was a lot of things that were really new news at the time. It was an incredibly successful program for Nando’s. It increased their revenue astronomically, but it also enabled us to have an even closer relationship with our customers.
Because we had the one-on-one dialogue, because we had the personal relationship with our customers, we could reward them with incredible opportunities. I actually partnered with Universal Music, and we would put on these intimate gigs with really famous of the moment music artists with 200 people whether it be Lady Gaga or so many others that you could only get there by being a Nando’s customer and being selected, and having my team actually phone up and tell the people who had entered that they were the people that were going to fly them down for this incredible experience.
It just created fanatics. It created people that were so loyal and sticky to your brand. And as that grew and that momentum was created, what it also created was a really loyal tribe. So, even on social media, if we had someone give us a hard time about something being expensive, which was a perception at the time, there would be a whole bunch of customers who would actually jump on board and defend the brand before my team even had the opportunity.
So, yeah, that was what I’m proud of. And I do remember sitting in the executive presenting this idea and the operations COO at the time said, “Do you really think you can get Katy Perry to launch this program in Australia?” And I said, “Yes, James, I, I really, really do.” And he said, “Well, good on you. Good luck.” So, it was a bit of a pinch me moment when it all happened.
Darren:
Fantastic. It’s a great story and such a big idea. I love Australian brands or Australian businesses that burst outside of what often is seen as natural constraints due to geography. Think big, think global, and you get huge results.
Look, time has absolutely got away from us, Kim, it’s been so much fun talking to you. And I can just hear your enthusiasm, that’s not just about QSR, but it’s about customer focused businesses, and really taking on the marketing challenge where you’re getting that feedback from so many different sources, but particularly from customers, whether that’s directly and how often they’re spending their money.
So, absolutely kudos to you for having that passion for the business. Thank you for sharing it with us today on Managing Marketing.
Kim:
Thank you, Darren. It’s been a pleasure.
Darren:
Look, just one question before you go, and that is because my personal go-to fast food or QSR comfort food is KFC Wicked Wings, which one’s yours?