BrainTrust Query: Taco Bell – What Does Value Mean?
Commentary by Jonathan Marek, senior vice president, Applied Predictive
Technologies
Through a special arrangement, presented here for discussion is
a summary of a current article from Applied Predictive Technologies’ Food
For Thought blog.
In a recent interview with Adweek, Taco Bell CMO
David Ovens made the distinction between "price value", "abundant
value" and "quality
value." At the time, it just sounded confusing, but with the Cantina
Taco launch I’m really warming to his distinction and to their value
strategy overall.
In the article, Taco Bell’s value positioning was
broken out this way:
- Price Value is what I (and probably most people) associate
with Taco Bell. For example, 79-, 89-, 99-cent price points. Taco Bell owns
cheap.
- Abundant Value is a hefty item at a fair price. Triple steak
burrito is an example Mr. Ovens used.
- Quality Value is a change in perception about Taco Bell.
Cantina Tacos, designed to replicate authentic street tacos, fit the mold
perfectly. Each taco (premium fire-grilled chicken, premium cut carne asada
steak or carnitas shredded pork) costs $1.49.
This framework provides a mindset for product development, as there will be
an internal need to fill the pipeline in each category. It also provides structure
to communicate to customers, e.g., Abundant Value = ads like this.
Finally,
it provides a great background for testing, as it sets up a range of risks
and potential benefits. Margin risk can be mitigated by Price Value testing.
New product risk can be mitigated by Quality Value testing. For example, the
early reviews on food sites are that the Cantina Tacos are very good … but
will people buy them? Will it work in California, land of the taco truck? In
Texas, land of the flour tortilla? In the Midwest, where corn means tortilla
shells?
In addition to great insights into what specific products are working,
testing can help find themes among the most successful offerings by value category.
Certainly Quality Value works for others in QSR. Will QV work for Taco Bell?
If so, what media message and vehicles are required to support QV?
The value
strategy is a good one, with real promise. With testing, Taco Bell can figure
out exactly how to turn that promise into results.
Discussion Questions: What are the strengths and weaknesses of Taco Bell’s
value segmentation? How
applicable is such a model to other retail channels and products?
The writer asks, “Will they buy it?” Does he mean the product or the strategy?
Taco Bell has spent a great deal of money and product development to support price value. “Now for you folks who would prefer to eat something that tastes better and made of better ingredients, we’ll have to charge you a little more.”
Of course it’s all in the marketing message. Maybe the upgrade is for the adults, over 25.
It will be interesting to see the long-term positioning. Introducing one or three new products doesn’t really upset the taco cart. But if there is a full pipeline of products with higher price tags, it could get confusing for the customer. Too much emphasis on the new products may turn off loyal customers who think Taco Bell is turning its back on their needs.
This segmentation strikes me as a tad too nuanced. Consumers don’t discriminate between three levels of value. My brand/value perception forms at the point I enter the menu and that perception becomes the only filter I use to evaluate the brand. There’s a lot of danger in self-defined versions of “good, better, best” value divisions.
I think this is a good idea by Taco Bell to start, in my opinion, cleaning up their image. I am the only one in my family and one of a few where I work that actually go to T-Bell. I have always liked their food-for-cheap line and have been liking their direction towards better, and this new line will hopefully, finally, get them around the corner and become a great place to eat cheap to quality foods, not just the “dog food” my daughter refers to it as.
I have to wonder what the difference between “price value” and “abundant value” and “quality value” is. Perhaps it is the amount of salt is in each and how much that generates fun from the food.
Taco Bell built its current business on a value model–lots of food at cheap prices. With most fast food chains offering $1 value menus, and with margins shrinking, Taco Bell is now offering “premium” items at higher prices. Will consumers pay $1.49 for a premium taco, when they can buy a regular taco for much less? Still, at $1.49, the Cantina Taco is still cheaper than other fast food offerings.
Retailers have been playing with similar concepts for years. Some are identified as being providers of value, while others are seen as premium brands. It’s hard to change from the value perception to premium. Target tried and it hurt their business. Wal-Mart tried with clothing and consumers weren’t buying it. All both stores succeeded in doing is muddling their brand images. Both have spent heavily since then trying to recapture the essence of their original brands.
What an interesting and, I expect, successful way to parse out what different customers are looking for and how they define value in FF. This is not a new concept. Merchants in apparel have always referred to this as a “good, better, best” approach to developing an assortment. In this way they broaden the draw.
In the case of Taco Bell, managing their menu offering this way can potentially add new customers who (like me) associate the TB name strictly with “cheap,” which is not what I’m looking for in food.
I like Taco Bell’s definitions and distinctions for Price Value (low price points,) Abundant Value (hefty item at fair price) and Quality Value (premium products at a fair price.) These definitions go way beyond just fast food and they make for a nice way to look at various value models in lots of different types of products in other categories, too.
I think Taco Bell has already established itself as a provider of price value, and to a lesser extent as a provider of abundant value. The key will be to become known as a provider of quality value. Even using the lower standard of quality applied to fast food, Taco Bell has never branded itself as a provider of high quality in the way that Wendy’s has, for example. They will need to honestly upgrade their food quality and not just pour money into marketing to really change their image in this area, however.
Taco Bell has a good idea. The problem is it is Taco Bell delivering the good idea. They have to put a lot of faith, money and marketing in this to draw the public in. The upside to this is Taco Bell has a parent company with some deep pockets and can afford to invest heavily IF they believe what they are promoting.
“Value” no longer has real meaning in the food/grocery channel. The term has been footballed for so long, that it’s become irrelevant. Basically, you can take Taco Bell’s definitions, remove the now-useless/neutered word “value,” and still know what they’re up to. I’ve come to hate hearing “value” now almost as much as I hate hearing “at the end of the day.” The terms “price” and “quality” have been around forever and still have vestiges of meaning left, so at least 2/3rds of what Taco Bell is doing here is not new at all.
Warren Buffett is credited with saying, “Price is what you pay, value is what you get.” That statement really flies in the face of what Taco Bell is segmenting, doesn’t it?
But I see where they’re going, especially from a marketing p.o.v. It obviously seems like it’d be best for internal use, as in what they’re trying to ‘nail’ with any given promotion. I get that. But if this is exposed to consumers, who are thinking that value in all three segments at once is what they’d really want (what they get), it seems like a dangerous strategy to socialize. After all, by making them pick a segmented value, you’re automatically de-valuing the other two.
So, let’s just keep this brilliance on the bulletin boards of TB marketing in Irvine and out of public consumption. Who would need to know that their ‘price value’ is nothing more than that? Right, no one.
“…the distinction between “price value”, “abundant value” and “quality value.” At the time, it just sounded confusing.”
And it still does; or more to the point, it all seems unnecessary: value is the best price for a given level of quality/service. Period. TB’s (main) problem–if we should call it that–is that everybody associates it with “cheap,” i.e. the lowest price available, which makes it difficult to sell higher price point items. Their other problem, speaking personally, is that as soon as they develop something I like, they drop it…I’m still waiting for the Club Burrito to come back.
This strategy has solid merit to put to the “test.” Taco Bell has a large following–# 4 among fast food restaurants of choice, just behind the burger giants as the feeder that consumers choose most often. Putting the test up against a ‘net promoter score’ would provide deeper insights.
The Taco Bell consumer who is a ‘promoter’ (rates them 9 or 10 in likelihood to recommend to a friend or colleague) indexes at 180 in terms of number of trips they make per month compared to the average trips to fast food restaurants. Even the ‘detractors’ (rate their likelihood to recommend 0 to 6) make their Taco Bell experience happen at a 140 index vs. the general population.
Price/value is certainly a primary driver for many of their customers–particularly the 18-24 segment. However, the Bell has a loyal following of 35 – 44 year olds who rate quality highly as a reason to shop there most often, while price drops down. That group is more affluent (higher than the general population), and a great opportunity to boost ticket and frequency of visit.
It’s fine to own the value space at .79 and .99 cents. The menu can take the diversification, and provide a choice for both existing ‘promoters’ and for groups who may be in a ‘passive’ or ‘detractor’ position today. Good move for a retailer who effectively and consistently ‘tests’ and then jumps all-in.