Instead of relying heavily on short-term promotions, the company is focusing on building brand equity — the value of a brand determined by consumer perception — to ensure long-term success, The Wall Street Journal (WSJ) reported Thursday (Sept. 21).
Olive Garden, one of Darden’s flagship brands, has seen positive results from this strategy, according to the report. Despite experiencing around 80% of its pre-pandemic traffic, the restaurant is considered a “healthier business” after reducing promotional activities and couponing. Darden has been actively working on reducing promotions and investing more in brand equity since 2020.
During a Thursday earnings call, Darden President and CEO Rick Cardenas emphasized the significance of elevating brand equity and stated that the company is willing to accept lower traffic if it means safeguarding its long-term success, the report said. In the quarter that ended Aug. 27, Darden reported an 11.6% increase in sales across its brands, with same-restaurant sales up by 5%.
While Darden still offers promotions such as the Never-Ending Pasta Bowl, the company’s focus is on providing value to its guests in a manner that drives profitable sales growth, per the report. Darden allocated $20 million for national TV advertising, primarily featuring Olive Garden commercials, between June 1 and Aug. 27. The largest portion of this expenditure was dedicated to a commercial called “For the Love of Cheese,” which showcased various menu items.
The decision to prioritize brand equity aligns with the understanding that excessive reliance on discounts and promotions can diminish a brand’s value in the eyes of consumers, according to the report. Marketers have recognized the need to strike a balance between offering discounts and maintaining a strong brand image. While reasonable discounting can be beneficial, investing in brand equity is crucial for commanding higher prices and improving overall efficiency.
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Cardenas said during the call that Darden is now focused on driving frequency with its “core guests” rather than using discounts to draw in customers who are “a little bit less core to our business,” PYMNTS reported Thursday.
“We believe that the best [thing for the] long-term health of our business is to keep our strategy overall of pricing below inflation, running [a] better restaurant and not getting into huge deep discounting to buy guests,” Cardenas said.
