Efforts to save money have been prominent in the news this week, with reports of consumers switching from restaurants to groceries and news that Amazon has extended its Prime benefit to Amazon Fresh stores.
Restaurants and other businesses can respond to these trends with strategies that keep their own customers coming back and buying more, he said Paytronix chairman Andrew Robbin.
Robbins spoke to Karen Webster, CEO of PYMNTS, about this and other news in the latest issue of This Week in Payments.
First, however, was other business news: the 15th anniversary of the iPhone, which went on sale on June 29, 2007. That App Store, and the one that followed a year later, launched the innovation that brought together the physical and digital worlds we take for granted today.
Robbins said that throughout the history of the iPhone, Apple has trained consumers to expect more technology for the same price with each new generation of the product.
“I think there’s been massive tech deflationary pressures, where for $600 or whatever, you can get a different camera, more processing power, something cooler — and people everywhere expect that,” Robbins said.
Apple has also consistently focused on the consumer, he added.
“The Apple II was all about the consumer, the iPod for listening to music wasn’t about business, it’s all about your personal enjoyment, and that’s why they were really at the forefront of the phone,” said Robbins.
Restaurant customers trade down, buy groceries
Also this week, General Mills announced that consumers are shopping for more groceries than eating out. During the company’s quarterly conference call, CEO Jeff Harmening said consumers are shifting from dining out to eating at home to save money.
Continue reading: Inflation is shifting consumer spending to groceries, not restaurants, says General Mills
Robbins said Paytronix has data that supports many of the things in that report. Paytronix has seen restaurants raise prices — even though they’re no longer making money due to supply chain and labor costs.
It was also noted that while people still want to eat out, they are trading down. For example, the person who normally buys a $12 lunch might go somewhere that offers a $9 lunch and then add a quick service restaurant (QSR) or a place that offers a coupon for a $6 offers lunch.
People can also trade down by buying prepared foods from the grocery store.
“If you’re in the low-to-mid range of restaurant spending, you’re going to see a drop in trade where higher-value people are coming to you, but you’re going to lose some food,” Robbins said. “So you’ll be fine, net-net, but you’ll see people shift in the trade-down process.”
Company Try the loyalty program, subscriptions
Last week, Amazon also announced it was extending its Prime benefit to Amazon Fresh stores, offering 20% off select items.
See also: Amazon follows the trend towards food loyalty and extends Prime benefits to Fresh
Noting that this is related to subscriptions, Robbins added that subscriptions can be great for both consumers and businesses. In Amazon’s case, Prime can save customers a lot of money, and the company can predict what they’ll spend.
“I’m sure that every Prime member [Amazon] can forecast a lot of additional spending — and spend into the future, not just look back in history — so making sure they stay Prime members is hugely important,” Robbins said.
Robbins said Paytronix has seen restaurants make their loyalty programs work hard — like Prime — and make them the focus of their communications strategy and digital marketing efforts.
“It can be a very simple message to consumers that you care as a brand, they’re spending more with you, and you’re trying to give them patronage back,” Robbins said.
Some are also experimenting with subscriptions, like Panera Bread, which has offered a subscription for coffee and expanded it to include fountain drinks.
Restaurants have found that customers with a subscription tend to buy more and visit more often – “I have the subscription, why don’t I stop?” For example, while they’re at Panera for a drink, they might also buy something to eat.
“I think pricing can be a bit more difficult than a purely digital thing like Prime Video, but the math is there and consumers like to save money – and now is a good time to save money,” Robbins said.
NEW PYMNTS DATA: HOW UTILITIES AND CONSUMER FINANCE BUSINESSES CAN IMPROVE THE BILLPAYING EXPERIENCE
Around: More than half of utility and consumer finance companies are able to process all monthly bill payments digitally. The kicker? Only 12% of them do this. The Digital Payments Edge, a collaboration between PYMNTS and ACI Worldwide, surveyed 207 billing and collections professionals at these companies to learn why full digitalization remains elusive.