Wendy’s New Year Coupons FTW!

I’m about to violate one of the self-imposed rules of this blog and talk about some business principles for a minute, only because the business move I saw yesterday was so awesome I just had to share it.

Anyone who knows me knows I love great marketing. I also love Wendy’s Restaurants. I’m a big fan of their business processes, their food, and their late founder Dave Thomas. I became an even bigger fan yesterday, when I went through one of their drive-thrus for lunch and received the following coupon:

This stood out to me because it’s the first time I’ve ever been handed a coupon by a Wendy’s employee during a transaction. But once I read and understood the promotion, I uttered out-loud to myself: “That… is… AWESOME!”

Notice that it’s a “New Year” promotion, so it’s only good for the month of January. That happens to be the month when all the diet product commercials flood the TV channels, when gyms see record signups, and when sales at fast food restaurants decline due – all due to New Year’s fitness resolutions. But this year, it appears Wendy’s isn’t taking it sitting down.

I know of only four ways to increase revenues in any business model:

1. Acquire a new customer for your goods or services
2. Increase the prices of goods and services you sell to a customer
3. Increase the amount of goods or services you sell to a customer per transaction (sometimes called “up-selling”)
4. Increase the frequency with which customers buy your goods and services (sometimes called “increasing frequency of use”)

Of course, with option #2, price elasticity is the primary determinant of whether a price increase will actually result in a net increase in revenue. Often, a promotional decrease in price will actually convince customers to engage in methods 3 and 4 to the point that it more than offsets the amount of the discount (which is kind of the whole point of a promotional discount in the first place). But we’ll leave that discussion for another day.

Because Wendy’s is handing these coupons to customers after the transaction, it’s clear they’re not doing method #1. And these coupons aren’t technically changing any prices, (although one might argue that a free product is a net discount), so they’re not doing method #2. What they are focusing on is a little bit of #3, and a whole lot of #4.

The top section of this double coupon is aimed at the person who didn’t make a New Year’s resolution to avoid fast food altogether, but maybe just to cut back. Wendy’s says “Don’t cut back, Fatty! Come back again before the month is out and we’ll give you a free ice cream treat with your combo… and if you’re lucky, we’ll even give you another coupon to do it again before the month is over!” Wow. That’s just mean, Wendy’s. And I love it. Bust through those resolutions and increase frequency of use.

The bottom coupon is aimed squarely at the person who is really trying hard to keep their New Year’s fitness resolution. Sure, they’ll buy food at a fast food chain, but they’ll assuage their guilt by only ordering a salad. They’ll probably even choose a Diet Coke as their free drink when they use this coupon. But they’ll have to buy a large salad to cash in on this deal, when maybe they would have only purchased a small one (for cheaper). That’s clearly method #3. But the real kicker is that when they tear off that bottom coupon, that top one is still staring them in the face – reminding them how wonderful a Combo #2 tastes, especially with those new “natural” fries, sprinkled lightly with sea salt, and that free Frosty! Way better than the rabbit food they just ordered. And, if they hand over the entire coupon at the first window instead of tearing it, they’ll get a new coupon handed to them again at the second window to remind them once again. That may be enough to help them convince themselves that by buying the salad this time, they’ve earned the combo next time, and they better come back soon because it’s only good until the end of the month (that’s called “creating urgency” in marketing jargon). Man, that’s just cold blooded, Wendy’s. And again, I love it.

So apparently, the hot and juicy red-head who goes by “Wendy” isn’t going to let 2011 New Year’s resolutions get in the way of her making a buck. And why should she? My guess is that this coupon campaign will be successful at both up-selling and increasing frequency of use of Wendy’s customers. And as if that wasn’t enough, by simply putting Coca-Cola’s logo on the coupon, I guarantee you that Coke agreed to pay some co-op marketing dollars to offset the cost of this promotion.

I’m starting to truly understand now why Wendy’s was the favorite restaurant of my grad-school marketing professor and two-time Fulbright Scholar, Dr. Gary McKinnon. It wasn’t just because it was within walking distance of the Business School, or because they never freeze their burger patties, or because they have the fastest drive-thru windows, or even because they are the preferred drunken treat of David Hasselhoff. It’s because even though Wendy may be hot and juicy, she’s a stone cold marketing killer.

I love you, Wendy.

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