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LTOs – Here today and gone tomorrow…but do they leave ROI behind?

LTOs – Here today and gone tomorrow...but do they leave ROI behind?
(Image credit: Pixabay)

Limited-time offers (LTOs) can provide instant excitement in terms of menu offerings. For restaurant operators and foodservice manufacturers these offers are designed to be short-lived, and they can be effective tools for attracting new buyers, increasing visits among existing buyers and lifting overall check size.  For consumers, LTOs offer something new and special — often at a great price — as well as the fun of a sense of urgency. There is no question that LTOs are an important part of the restaurant industry’s marketing initiatives, but measuring the performance of an LTO can sometimes be challenging.

Determining performance

A lot of time and money goes into LTO promotions, and foodservice manufacturers and restaurant operators want to know how they performed beyond sales and dive deeper into whether the promotions attracted new buyers, affected frequency or promoted repeat purchases. The typical questions about LTO performance include:

  • How many LTO units sold during the promotion? (on a per restaurant per day basis)?
  • What share of the operator’s buyers tried the LTO?
  • Did the offer appeal to new/regained buyers or more frequent buyers?
  • Did the LTO drive a change in visit frequency?
  • Did the LTO impact check size?
  • Did the LTO impact # of items purchased?
  • Was there a transaction increase per restaurant during the LTO period?

Unfortunately, the answer to these questions can remain hidden in the bulk of a chain’s own point-of-sale (POS) information. There are a number of different ways in which to approach answering these questions. For example, we used our receipt-harvesting service, CheckoutTracking, which mines longitudinal data from actual customer receipts, to see how the fried green tomato LTO of a 800+ unit fast casual chain affected sales and traffic. Specifically, we aimed to answer the chain’s four key questions:

  • Did new buyers visit during the offer period?
  • Did transactions increase during the offer period?
  • Did the offer bring in more transactions among new and lapsed buyers?
  • Did the offer lift the check? 

There are a variety of approaches that can be used to answer these questions.

Fried green tomatoes LTO gets mixed results

While more customers visited the fast casual chain on a monthly basis compared to the previous year, the fried green tomato* promotion didn’t appear to drive any additional increase in buyers or transactions. Furthermore, the share of new and lapsed customers who purchased the offer was the same as non-LTO customers, so the promotion did not bring new buyers into the restaurant.

The good news, however, came when we compared the actual sales receipts. As it happened, customers spent $6 more during a visit when they purchased the $3 fried green tomatoes promotion than when they visited the chain in the same period but did not purchase the LTO product.

 Our recommendation to the chain was to understand their definition of success. While this LTO didn’t bring in new buyers or drive frequency, it did have an impact on overall check averages and contributed to the chain’s sales increase. If the chain’s goal is to bring in new customers through an LTO, it needs to reconsider the nature of the offer. What types of items might appeal to the target they are trying to attract and would those items be impactful enough to bring them in the door? What level of media support are they willing to give the item to gain awareness of the new offer?

Although LTO promotions are here today and then gone tomorrow, LTOs will continue to be a powerful tactic to capture customers’ and potential customers’ attention and — hopefully — their visits, dollars and loyalty.   

*The actual product promoted is masked to protect the chain’s identity.

Bonnie Riggs is a restaurant industry analyst with The NPD Group. SmartBrief was a sponsor of The NPD Group’s 2017 Foodservice Summit.


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