PICTURE a seashell. Today, in the Western world, they’re worth almost nothing but, in the 19th century, cowrie shells were the preferred currency of Ghezo, the King of Dahomey (now Benin in Africa), over the more traditional gold.
In other African nations, like what is now Angola, the shell of a purplish seasnail served as currency, even while most of the world had begun its fixation with coins.
Money and goods don’t have an intrinsic value. Their demand is guided by how much somebody wants something. So, while a seashell might be worth less than the sand it rests on in Europe, it could be a pillar of society in Africa. The world is a little less romantic about trade in the 21st century but commerce remains at the fickle mercy of customer wants.
Oddly enough, this most basic element of trade – value or, more specifically, pricing – has become marketers’ newest tool against disinterested shoppers.
“Customer Resistance”
McDonald’s, a burger chain with a significant presence in Manchester, including in Hyde and Denton, is fighting a battle against “customer resistance”, according to CEO Chris Kempczinski. Talking to Marketing Week, Kempczinski indicates that McDonald’s new loyalty scheme will allow the brand to keep pace with “more discriminating” customers, who suddenly want more for their money.
There’s nothing revolutionary about McDonald’s (new) future. The idea of using promotions and loyalty schemes to attract and keep customers is almost as old as the cowrie shell. Several industries frame much of their marketing efforts around special offers. Cheap holidays, for instance, trend regularly on Groupon.
In the digital realm, gaming sites use a free spins deposit bonus as an incentive for players to sign up. Brands like William Hill, Euro 2024 partner Betano, and Betway are listed on the FreeBets website, which acts as a guide for newcomers approaching the space. It’s not always easy to see the difference between one promotion and another when they’re all so similar.
Perceived Value
Again, what’s new for McDonald’s is familiar to others. The fast food outlet does offer promotions, such as its famous partnership with Hasbro’s Monopoly game, but rarely differentiates between regular and occasional shoppers. Compare this to Starbucks Rewards or the Costa Club, both loyalty campaigns from takeaway-style businesses, each favouring added value options.
There’s a balance to be struck. By definition, deals lower the perceived value of a commodity. A two-for-one promotion makes one item free. Conversely, a lack of promotions can make a business seem premium or, worse, stingy. Sportswear brand Under Armour learned this the hard way. Quarterly sales fell 14% in 2024 when it scrapped its regular discounts.
McDonald’s chief Kempczinski believes that loyalty schemes offer a route to ‘smart’ pricing because they allow personalised shopping. This concept ranges in complexity from adding a person’s name to the top of an email to lowering costs at peak hours – specifically, a customer’s own peak hours, such as when they leave work.
Apps can easily record this information at the till.
Changing Attitudes
Premier Foods, owner of Mr Kipling and Sharwood’s, has also cited “promotional pricing” as central to its brands’ recent positive performance. That quote is unhelpfully vague (the brand doesn’t elaborate even in its own press release) but it reinforces the fact that marketers are trying to connect pricing with offers strategically.
Sales and discounts are almost always short-term solutions, which is why they’re increasingly paired with loyalty programs to maintain customer interest. A single free coffee from Starbucks doesn’t create loyalty but being rewarded with points to eventually add extra treats does.
Returning to McDonald’s, its smart pricing idea has been cooking for some time. The Financial Times noted that the chain needed “clever pricing” in late 2023 but, also, that customers had grown “insensitive to price changes”. The chain could do what it wanted, in other words. McDonald’s fresh interest in product costs may be a sign of changing attitudes among shoppers.
The FT warned against leaning on value items – or deals – lest other restaurants do the same and force prices too low.
Clubcard
The question to ask is, are companies just reinventing the price tag and the yellow stickers that cause frenzies at Sainsbury’s each evening? Maybe.
Any loyalty scheme’s success hinges on how well it’s received by customers. Tesco’s mishandling of its Clubcard a few years ago, which effectively made it mandatory, proves that even what amounted to a third off at the checkout couldn’t make the scheme attractive to everyone.
As for smart pricing, it’s not entirely clear if it’s a revolution or a rehash.