What Can Product Managers Do When Burgers Cost Too Much?

by drjim on September 10, 2018

How much would you be willing to pay for a burger?

How much would you be willing to pay for a burger?
Image Credit: Jonathan Harford

Think about it for just a moment: just exactly what goes into making a good hamburger? We’re basically talking about three sets of ingredients: a burger (of course), a bun, and a collection of toppings. Just exactly how much should any of that cost? One upon a time you could go out to a restaurant and get a burger fairly cheaply. However, in the past few years a number of restaurants who all claim to be serving a “better burger” have popped up. Their burger is pretty much what any of us have expected, but they use artisan buns and a collection of nontraditional toppings. Along with making the plain burger fancier, have they also made a burger cost too much?

The Problem With A “Better Burger”

Just exactly when are people eating these fancy burgers? The product managers who study such things tell us that lunch is the most popular meal for burgers. This poses a bit of a problem. Lunch time traffic to quick-serve restaurants who serve burgers fell by 5% last year. The reason that this is interesting is because it’s the biggest decline in lunch time traffic that has occurred since this type of traffic has been measured. Is it time for the burger product managers to change their product development definition?

The “better burger” places are pricing their creations at around US$13 for a burger. What product managers are starting to discover is that this price point might not be sustainable. It might be too much to expect people to show up over and over again and spend $13 to get a burger. The average check for a lunch burger has risen by 22% since 2007. The cost of this meal went up by $5.83 last year alone.

The market for burger eaters has always been intense. Over at Wendy’s they are now offering four meals that include burgers which are priced at $4.00. The higher prices for eat-out burgers may be driving more and more customers to start to create their own burgers at home instead of making the trip to the store. Clearly customers have a number of different options when they decide to have a burger. Once upon a time customers only had a few choices when it came to burgers: McDonalds, Burger King, or a local sit-down restaurant. However, now they have a lot of different options and they have a lot of different price points.

How Product Managers Are Going To Fix The Burger Problem

First off we need to understand just how large the burger market is. Back in the early 2000’s a host of new burger joints started showing up: Shake Shack, Smashburger Master, BurgerFi International. These quick-serve restaurants specialized in making bigger burgers that came with specialized ingredients. The number of burger restaurants went through the roof almost quadrupling since 2005. There are now over 2,700 burger restaurants in the U.S. The reason that there are so many of these restaurants is because the fast food / fast-casual burger market is valued at $82B per year. Competing in this market would be something that would look good on anyone’s product manager resume.

In a highly competitive market like this, product managers have been forced to come up with ways to make their burger stand out from the rest of the pack. They have gotten very creative: they’ve used high quality beef for the burgers and fancy toppings which have all contributed to the cost of the burger increasing. As the cost of paying workers has been climbing, the cost of eating out has been climbing even as the cost of eating at home has been dropping. This is a key reason why the high-end burger chains have been seeing less foot traffic.

In order to keep their profits high, the product managers have had to start to get creative in what they offer to their customers. What they have discovered is that if they boost the quality and quantity of the toppings that they offer to their customers, they can boost the average diner’s check by 10%. Premium offerings such as guacamole and fried eggs are part of this. They have expanded the ingredients that customers can put on their burgers to now include chili, bacon, and Portabella mushrooms. The result of this has been that traditional burger restaurants such as McDonalds and Burger King are no longer trying to compete with the high-end burger joints and instead have started to focus on the low end of the market.

What All Of This Means For You

You would think that the burger market would be a calm market with very little competition – I mean, a burger is a burger, right? It turns out that that thinking is incorrect. In the past few years a number of new entrants into the burger restaurant market have introduced a new form of the hamburger: a premium burger with high end ingredients. As expected, the cost of these burgers has also increased and now the big question is just exactly how much are people going to be willing to pay for a high-end burger?

The product managers at this new breed of burger joints are facing a significant problem that their product manager job description doesn’t tell them how to solve: foot traffic in the restaurants has fallen by 5% last year. What seems to be happening is that people are starting to push back against the high prices that are being charged for the new gourmet burgers. The traditional burger restaurants have started to offer bargain burgers in order to retain their core group of customers. The overall burger market is still huge coming in at $85B per year. The tactic that product managers are taking in order keep customers coming in is to offer them more and more fancy toppings including guacamole and fried eggs.

The high-end burger product managers have discovered a new market: people really do like their burgers and they are willing to pay more for a premium burger. However, there also appears to be a limit to just how much people are going to be willing to pay for a burger. Creating new toppings that may not always be available to their customers is a great way to distinguish their product from the competition and keep customers coming back in. Now we’ll just have to see if people are going to be willing to keep paying top dollar for the toppings that they can’t get anywhere else.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

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What We’ll Be Talking About Next Time

There are many different types of product manager jobs. One of the more, shall we say delicate of these jobs, is that of being a product manager for a major tobacco company. It is your job to get people to consume more of your product – that means smoke more. It turns out that you currently have real problem on your hands, those young millennial kids are not smoking enough of what you are making.

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