In 2015, Applebee’s made a strategic decision to target the “the next generation of consumers.” Known for its casual dining, all-American cuisine with ribs, chicken and steak as mainstays, new unique items began to appear on the menu from sriracha shrimp to kobe-style meatballs and churro s-mores. And then added ingredients like quinoa and sweet potato made their debut. Television ads positioned the restaurant’s bar as a hip place at happy hour or after 10:00 pm. Executives also hinted at testing craft beer and by 2016 wood-fire grills were added to 2,000 locations.
By the Spring of 2017, Applebee’s began closing 130 locations and sales were down considerably.
What Happened?
A blogger described it best, “Applebee’s wasn’t a hip cool place to bring a date or meet friends after work. It was where you took your grandmother to lunch after church on Sunday.” Applebee’s core market included consumers between the ages of 35-54 years old. With the decision to shift towards a younger demographic, the chain lost sight of its roots and tried to become something it’s not – trendy, more sophisticated.
But Applebee’s has not been the only casual dining chain that has struggled the past few years, TGI Fridays and Ruby Tuesday have faced sales slumps and dozens of restaurant closures as well. Many blame millennials but the reality is that competition is fierce as consumers have so many more choices these days. With the rise of mobile apps, quick delivery and meal-box services, getting or making meals at home has never been easier or more convenient.
How New Leadership Turned the Tide
Having previously served as Applebee’s chief marketing officer from 2001 to 2006, John Cywinski rejoined the company in March of 2017 and was tasked with making a big turn-around. His first order of business was to win back Applebee’s middle-American, family-oriented and slightly older demographic that had balked at the menu changes and higher prices. “If you can’t pronounce a menu item, it’s not making its way to Applebee’s menu,” Cywkinsi said, pointing to foods like quinoa and pomegranate that were cut. “Our guests love bacon and cheese.”
Cywkinsi focused efforts on targeting “routine traditionalists as well as those very important value seekers” and embraced broad stream menu flavors. A new campaign was launched that reintroduced the “Eatin’ Good in The Neighborhood” theme with television ads that featured Celine Dion singing as a female customer enjoyed all-you-can eat riblets, and a country music song by Frankie Ballard played in the background to an image of a mouth-watering whiskey bacon burger.
Applebee’s customers are seeking affordable and approachable food, “a pretty good meal at a pretty good price,” Cywinski stated. In addition to all-you-can-eat, the 2 for $20 value proposition was reintroduced with a beverage underlay.
Drinks specials with $1 to $3 cocktails such as the Dollarita began to gain traction especially with Millennials who were treated the same as their Gen X and Baby Boomer customers. The good news is that Applebee’s return to its roots is winning. In fact, same-store sales at Applebee’s rose 7.7 percent for the third quarter of 2018 and this rounded out four consecutive quarters of growth, 43 consecutive weeks of positive comp sales that have been outperforming every segment of the restaurant industry.
While the vast majority of Applebee’s off-premise business is to-go, they plan to have delivery offered in nearly 1,000 restaurants by year-end in addition to their emerging catering business.
What Marketers can Learn from this Example
They key lesson is to know your customer and when shifting to appeal to a new demographic, it’s important to ensure you don’t jump off the deep end and lose your current base in the process. When Applebee’s lost sight of their middle-American customer base and low-cost value proposition, they very quickly lost market share. In addition, don’t assume that every Millennial is buying into trendy and as this generation begins to age and are having kids, the simple values can still appeal just as they do with key segments of Gen X and Boomers.
Applebee’s is winning again because it’s catering to a broad spectrum of age groups while maintaining its brand identity as the real, all-American neighborhood restaurant.
