Darden Researcher Shows Fast Food Chains Can Help Consumers Save on Calories Without Losing Profits
CHARLOTTESVILLE, Va., Nov. 29. 2010 /PRNewswire-USNewswire/ — When ordering a hamburger from a fast food restaurant, the smiling face behind the register used to ask, “Would you like fries with that?” With the advent of combo meals, this question is no longer necessary. Meal #3 already comes with a drink, fries and more calories than a customer might have chosen if they had ordered a la carte. In her new research, “Consumption Effects of Bundling: Consumer Perceptions, Firm Actions, and Public Policy Implications,” appearing in the fall issue of the Journal of Public Policy & Marketing, Kathryn Sharpe, professor at the University of Virginia Darden School of Business, shows how fast food chains can reduce consumers’ caloric intake while maintaining profits.
Sharpe and co-researcher, Professor Richard Staelin of Duke University, found that consumers place a perceived value on combo meals, even if it costs the same as choosing items a la carte.
“We were very much surprised that people chose the combo meal option even when there was no price discount,” Sharpe says. “When a bundled meal is offered, these menu items are made more salient to the consumer and consequently it is more appealing and easier to select a #3 rather than choosing each item individually,” Staelin adds. The researchers also suggest that consumers may be subscribing to the underlying belief that a combo meal is considered a representative or appropriate meal size for the “average” consumer; this belief coupled with human beings’ tendency to converge to the average could be amplifying this effect.
Sharpe and Staelin also learned that combo meals encourage consumers to “super-size” their orders, adding as much as 100 extra calories to their meal. As health care leaders caution the public about problems associated with over-weight and obesity issues in America, part of the message is that consumers need to reduce their food portion sizes.
“Based on our research, it appears that they would be just as happy with including smaller portion sizes as part of the combo meal,” says Sharpe. “However, consumers are currently given subtle signals that smaller sizes are not appropriate. Realigning the meals to appropriate levels across the industry would make them just as satisfied.”
To study this behavior, Sharpe and Staelin recruited 215 adults over the age of 21 who indicated that they ate at a fast food restaurant at least once a month. Fifty-four percent were female with an average age of 41.8 years. They were selected from a demographically diverse sample of the U.S. population. When presented with bundled and a la carte options from fast food menus, the researchers saw significant increases in the proportion of people who bought both a drink and fries when a combo meal is offered. Furthermore, consumers tended to purchase smaller portion sizes when they bought a la carte. For example, a consumer may purchase a 12-ounce drink when buying a la carte, but a 21-ounce drink (approximately a 100 calorie difference) when the combo meal was purchased.
The same effect occurred with fries. Amongst those who decided not to purchase fries in the a la carte only setting, 15 percent chose the combo meal options with the fries, a 380 calorie increase. Furthermore, 26 percent of customers who chose a small fry when ordering from an a la carte only menu ultimately chose a combo meal that included medium fries, a 150 calorie increase. Again, this often occurred when there was not a price discount. When they looked at consumers who chose larger size drinks (either the 32-ounce or 44-ounce drink) or large fries from an a la carte only menu they found these consumers were also more likely to choose the featured bundle option. Although this resulted in a decrease in consumption, the net effect across the population was that overall soft drink and fry consumption increased.
Another goal of the study was to examine the impact of proposed policies on consumer and firm behavior. Ultimately, the pair found that providing nutritional information and taxing certain menu items do not significantly curb consumers’ desire for fast food items. However, there is one proposal that will help consumers shrink their portions without shrinking restaurants’ profits.
“Borrowing from the automobile industry, we investigated instituting a CAFE like standard with the goal of reducing caloric consumption,” Staelin said. “Instead of imposing a tax we let the firms take whatever actions they find best to meet the proposed reduction of the average calories sold for drinks and fries per entree sold.”
This choice includes having restaurants introduce a smaller drink size into the combo meal. As part of an industry-wide effort, profits would not be adversely impacted and average caloric consumption would go down by 7 percent, since this substitution greatly increases the purchase of the smaller drink size.
“Each fast food firm continues to one-up each other as greater and greater sizes are introduced into the market place,” Sharpe added. “If the entire industry adopted size standards firms could compete more on price and quality, rather than quantity, ultimately benefitting the customer.”
SOURCE University of Virginia Darden School of Business