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The Denny’s Debacle

by Doug on February 4, 2009

Yesterday Denny’s had a huge special where they gave everyone in America a free Grand Slam breakfast. I thought I might stop in and have one. The offer began at 6am.  I arrived about 6:40. I expected a line, especially considering how hard it was to find a parking spot. It was a tow truck driver’s dream come true! What I found was a line of people that at times during the day was a 3 hour wait.

Yesterday evening I took my girlfriend out to IHOP. As I chatted with the staff I found that IHOP had been incredibly busy until the afternoon. It seems that a lot of people weren’t willing to wait hours for their free food at Denny’s but came and paid for food at IHOP instead. They were waiting in line at IHOP for almost an hour according to the staff.

How is this a failure? Denny’s traded millions of dollars for short term buzz. Next month will Denny’s be any more on your mind than Waffle House or IHOP? Doubtful. Most people already have exposure to Denny’s because they are a fairly well known national chain. Who benefited from their ad? IHOP certainly experienced a boost in business and they weren’t giving anything away for free and perhaps other businesses profited as well. Denny’s will return to their previous status as just another unremarkable chain restuarant before long minus a few million dollars.

Grand SlamAccording to Denny’s they wanted to help those feeling the pinch of the harsh economy. Most of the folks who were in line weren’t spending $6 on breakfast any day of the week because they were jobless or didn’t have the income to spend on it. The free promotion drew the people who could afford the time to invest waiting on a free breakfast, but not the people who could convert into long term paying customers.

If Denny’s sells 12 million Grand Slam breakfasts a year and they gave out, as planned, 2 million yesterday why not just discount those 12 million meals with the $12 million from the 2 million free meals instead? Denny’s could have spent less money and created better connections with their customers by giving coupons for the free breakfasts out in stages. Then people would be more likely to connect a positive experience with Denny’s in their minds. Releasing the coupons in stages would maintain the buzz and result in the same level of exposure if not more. People would have been exposed to a better experience with the service at Denny’s since they would probably not have to wait in line so long, and they may have brought more friends or family who wanted something besides a Grand Slam and would be more likely to spend money. Personally, I think that Denny’s could have saved money and offered a promotion lasting a whole year with a promotion such as:  buy any one meal and get a Grand Slam free.

Tons of free press coverage that only lasts a couple of days at the cost of an over $3 million  Super Bowl ad and $12 million in free breakfasts. Was the short-term buzz worth it?

Picture via @pwbeninate.

Update: @thinkhammer is taking me out for a free Grand Slam Breakfast to applaud my blogging. :D Also Geoff Waserman has a great post echoing some of the things I’ve said and adding the idea of using a charity to boost the companies image.

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  • Another intelligent and thoughtful piece. Great points! Great post!
  • Doug, I'm with you on Denny's quality - maybe I'm a breakfast snob, but I don't really enjoy eating there, IHOP or Waffle House. Give me Stax Original, Soby's on the Side, the Travelers Restaurant or the Fireside Pancake House. :-)

    My impression about the people who DO eat at these places regularly is that they pick one out of habit. The brilliance of this giveaway food scheme is not that their food is better, but that they're giving people a chance to start a new habit. And they're starting it off with a good memory (free food!). Love to see what happens from here. I have no interest in Denny's taking over the world (:-), but to me, good return business for them would prove that creativity really does work.

    Thanks for welcoming those of us with different opinions. I love a good conversation.
  • @will
    Perhaps but some research shows that it takes a month to build a new habit or break an old habit effectively, so I don't think it will have the effect of building anything new. People need more than a one time push to change behavior.
    @mediaCheck
    Thanks for being a loyal reader!
  • Have to disagree. A USAToday article valued/estimated Denny's total media exposure from the giveaway at about $50 million - a huge ROI - which combined with an opportunity to connect or reconnect with hundreds of thousands of consumers ... was a brilliant marketing strategy, in my humble opinion. I'm an iHOP guy who nearly forgot my local Dennys existed. I'm reminded now, and willing to give them a shot at my dining dollars. That being said, they have a tough job ahead to steal me away from iHOP :-)
  • @Jeff the $12-15 million or whatever Denny's spent turning into $50 million worth of press is great but the ROI doesn't happen until they see results, a steady, long term uptick in traffic. I have a feeling that after a month goes by and we're all talking about something else that Denny's will have to do something to get our attention again. $15 million spent isn't worth anything if you don't make at least $15,000,001 from doing it. I think there are a lot of strategies that they could have spent $15 million on that would have won them more long term customers. Back to what they said their goal was "showing the value to people in this harsh economy" I think that's where the real flaw is. They're not going to generate new customers from the people who don't have jobs by offering a one time freebie. They need to convince people who are already spending money on breakfast that Denny's is where it's at. As Freddy pointed out Denny's hasn't done anything new with the food, it's the same breakfast they've had for years. There is a reason that you forgot about Denny's :)
  • In Denny's defense, they took the opportunity to hand out coupon booklets to all the "customers" yesterday. That may create some future business...
  • Hey Doug:

    I totally agree with you that this wasn't very strategic. Perhaps Denny's had improved its food significantly, and wanted to do some giveaways (also known as sampling) to have people discover the tasty new Denny's.

    But I doubt it. A scrambled egg is a scrambled egg.

    Perhaps Denny's wanted to stick it to its competitors. Sometimes, a giant corporation with deep pockets will lower its prices significantly to drive competitors out of the market. That's called "predatory pricing," and is technically illegal, unless it's for a limited time and is careful framed. However, as you mentioned, this promo actually sent customers to the competition.

    Another problem with a free meal is that the waitstaff isn't too happy about it. What's a 15% tip on zero dollars? I hope Denny's gave a bonus to its waiters that day.

    At the least, Denny's should have focused its target. I would have said, "In gratitude for their service to this country, Denny's is offering free breakfasts to active-duty service men and women and their families." (Lots of military guys watch the Super Bowl.) Then the Denny's brand would have earned a patriotic halo, plus potential patronage from veterans and patriotic non-military people.

    I wouldn't worry about the total cost -- for a large corporation, $12 million is just a fraction of the overall marketing budget, and Denny's did score more awareness than many campaigns of equal or even greater value. What it does with all that awareness now is the big question.

    Freddy
  • I've heard of several people who didn't tip.

    The cost wasn't so much my thought but could they have created a better awareness with $12 million? I think their stated purpose of showing "value" missed the mark. Awareness yes, but we were all pretty aware of Denny's before. If they could turn the awareness into loyalty then I'd be impressed!
  • Tom Boehm
    Doug,

    I agree with the mess that they caused. I stopped by, as well and didn't have the time to wait before work. However, one good things was that I was able to get a rain check. So now, my wife and I will go eat our free breakfast tomorrow morning when no one is there. The best of both worlds!
  • The rain checks were a great idea and apparently each store had 1500 on hand to give out. I still think the buzz is very short term though. Let me know how quiet they are!

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