Consumers still willing to pay for higher quality despite cutting back on restaurant spend

Posted by Daniel Palmer on 16th October 2008

Many American consumers are willing to spend more on “higher quality” menu items despite spending less on dining out.

In a new study, ‘The Consumer Pricing Strategy Report’, foodservice consultants Technomic discovered more than six out of ten consumers (61 per cent) indicated they would spend more for a higher quality sandwich if it contained premium meat; 41 per cent if it were made with premium cheese; and 34 per cent if it contained premium bread.

The report focuses on consumer and operator responses as the US restaurant industry has been hit by a “perfect storm” of price pressures.

Consumers appear to acknowledge the cost pressure on restaurants, with 75 per cent attributing rising menu prices to the higher cost of ingredients – compared to just one in four who suggest restaurants are raising prices just because they want to make more money.

While most realise that rising prices are inevitable, the majority, 56 per cent, of consumers would prefer that restaurants increase prices slowly over time to meet a specific price, rather than raising prices all at once, or by substantially increasing pricing on certain items.

Of those cutting back on food spend, the vast majority of consumers (91 per cent) report they are dining out less frequently. However, one-third (32 per cent) are purchasing less expensive food when eating out, and one-fifth (19 per cent) are ordering smaller amounts and portions. Overall, consumers are cutting back more at full-service than at limited-service restaurants, with lower income consumers the most likely to have reduced the number of times they are dining out in response to economic worries.

“Consumers are spending less on dining out and feel they have to allocate restaurant spending more wisely,” Darren Tristano, Executive Vice President of Technomic, noted. “Restaurant operators must offer a strong value equation to compete successfully for those dollars. Knowing when, how and how much to raise prices requires research into consumer intentions and behaviors as well as a close examination of industry practices.”