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The $5 Freefall

May 29, 2018

If you have read my blog for any period of time, you know I often ask you to read the tea leaves by looking at what changing demographics are doing to other industries. Lately, I have been picking on the fast food industry. Today’s blog will continue this trend.

In a recently posted, “Business Insider,” piece titled, “Subway Closes Down Stores and Spirals Downward,” we read some interesting facts that we can apply to Outdoor Hospitality venues.

Once of the main quotes that jumped out at me is from a marketing guru who stated,

“They can’t just toss a bunch of stuff on random bread products and expect it to impress an increasingly discerning public.”¬†

As I travel around the country, one thing is for sure, the world of camping and RV’ing is becoming increasingly discerning. With high end resorts now covering the nation, RV owners have more choices than ever before, and they are wanting resorts that offer the same amenities found at high end hotels. It is not not enough to slap some sites on a piece of land and call it a day.

You may be tempted to say, “That is all well and good, but we are ok appealing to the budget camper.” Again, let’s take a lesson from Subway,

Their $5 Foot Long was the mainstay of their appeal. When they tried to get away from this and create better margins for the franchise owners, they found they had become the bargain basement of sandwich shops and the fans they attracted were not going to ride the higher price wave with them. They marketed themselves as the low end guy, and that is now their identity. As quoted in the article,

“Once you keep pushing a low price point in the minds of the consumer, it’s hard to sell sandwiches for what they’re really worth,” Stuart Frankel¬†told Restaurant Business.”

The result, franchise owners are pushing back against reintroducing the lower price point, and consumers have it set in their minds that Subway is not worth more money. The result, stores closing en masse.

The better alternative is to always offer a fair product at a fair price. Perceived value is everything. You don’t have to be the lowest priced guy on the block to build and maintain a customer base. Most often, it is the brands that offer a quality stay at a fair market price that creates loyalty from guests who have the income to pay for what they want in a resort. The byproduct is a quality guest who understands you get what you pay for.