The VIth Sense – Sonic Reaction Is True to Its Brand

A few weeks ago, Sonic Drive-ins introduced a value menu.  I follow what Sonic does to a certain extent because they're  headquartered in my hometown. So, I sometimes note analyst's  opinions on the company as well. Wall Street doesn't appear  to like the new value menu very much. They are worried that when  the economy improves, customers will not migrate back to the regular  menu. Add to that lower average ticket amounts and higher food costs  normally associated with value pricing and the forecast by most  of the financial pundits is grey. As a result, Sonic's stock  price took a hit, despite projections of flat profits.

Our take is different. What the financial analysts  failed to realize is that Sonic is already somewhat of a value brand,  even though they're not always pushing value. The value menu  is a natural extension and won't erode the brand at all. Although  research is mixed on the subject, some studies show that the additional  traffic that value menus bring in, more than makes up for potential  dollars lost. Further, per-person sales averages aren't always  hit too badly as consumers tend to buy two $1 items instead of one  $2 item. We're pretty sure that Sonic intends to make a profit  on every sale, so food costs are probably acceptable.

We would never recommend radical tactics to shore up short-term  profits at the expense of the brand long-term. However, timely adjustments  that are still in line with brand attributes are always a good idea  (Hyundai will let you return your car if you lose your job!). You  must continue to align your brand with the mindset of the consumer.  Sonic understands their brand well and continues to make one smart  marketing move after another. We admire them.

Back to Blog