What can tomato ketchup teach you about customer loyalty?

Although I live in Yorkshire, I’m a regular visitor to London, both for business and pleasure. One of my favourite eating places in London is an Italian pizza cafĂ© close to the university where I did my Masters degree in Marketing and Innovation many years ago.

This particular restaurant has very reasonable prices (and delicious pizzas) but one thing that really annoys me about the place is that they charge 40 pence for a little plastic pot of condiments.

Now I realise that 40 pence is virtually nothing compared to the overall price of my trips to London (hotels alone can cost several hundred pounds per night). But it’s the principle that annoys me. Why should I pay 40 pence just for a tiny pot of tomato sauce, when I can buy an entire bottle of ketchup back home for under one pound? When you are already paying for a meal, surely they can give you a little bit of tomato ketchup for free?!

But it seems that 40 pence is actually a bargain, compared to a fish and chip restaurant in Cornwall that charges substantially more!

A celebrity chef's fish and chip restaurant in Padstow has come under fire on social media after raising the cost of its condiments to £2. Rick Stein's restaurant group, which owns several  restaurants in Cornwall and across the UK, now charges £2 for condiments and dips, including mayonnaise, tartar sauce, gravy, curry sauce and aioli sauce.

A portion of fish and chips costs £16.95 in the restaurant, with another £2 on top for condiments. A spokeswoman for Stein's company blamed "skyrocketing costs" including food, energy and wage bills for the higher prices seen by diners.

The restaurant group said it had held prices down since 2020, but had put them up recently due to soaring prices. A spokeswoman said: "Our homemade condiments using Rick Stein's special recipes are prepared in Padstow by our team of chefs. Food inflation, energy costs, along with rising wages, has driven up the cost of production significantly. We have reluctantly had to pass on some of the costs to our customers."


What have customers said?

On the TripAdvisor website there are some good reviews of the restaurant, but other reviews are not so complimentary:

One review said: "So disappointed with the meal. The haddock was amazing, let down by serving frozen chips and having to pay £2 for the tiniest pot of mushy peas believable." Another reviewer on Tripadvisor said that their meal was "very disappointing".

"When we paid the bill we discovered that the tiny pot of mushy peas was £2 extra, as was the tartar sauce, as was the curry sauce. Unfortunately, I don't think we will be returning!"

One customer said: "On top of the £16 for cod and chips, you were expected to pay an additional £2 for condiments such as tartar sauce or mayo. We are regular visitors to Padstow and will not be eating here again."


What has caused the rise in food prices?

Food prices have become higher recently, while production costs have been rising, due to higher energy bills and restricted supplies of grain from Ukraine after Russia's invasion. Crop failures and reduced harvests linked to climate change also mean that some supplies may be restricted, pushing prices up even more.

Food price rises have had a serious impact on people in the UK, according to the Office for National Statistics (ONS). Nearly half of adults have reported buying less food due to higher prices, and one in 20 people said they had recently run out of food and been unable to afford more.

In July, inflation for sauces and condiments stood at 28.4% according to official figures, down from 34% in June and 35.1% in May.


What can the 'ketchup surcharge' teach us about customer loyalty?

This is an interesting question from a customer loyalty perspective. You would think that the type of person who can afford almost £20 for fish and chips in the restaurant of a celebrity chef, would not be bothered about paying another £2 for sauces. But as I said right at the start, it’s the principle that matters. Customers don’t like to feel ripped-off. They like to feel that they are getting good value for money, even if they are relatively wealthy and can afford to pay the extra.

One of the most important elements of creating customer loyalty is getting your customers to the top of the so-called ‘Ladder of Loyalty’ (Payne, A, 2000) and turning them into ‘fans’ of your company. But much of this is about psychology rather than reality.

If Rick Stein had given away free condiments, but put up the price of his fish and chips by £2 (from £16.95 to £18.95) then most customers would not have complained. In fact, it might have even boosted sales because of the Veblem curve effect (see end of article for explanation of the Veblem effect).

But even wealthy customers like to feel that they are being treated fairly regarding the price they are charged. So adding an extra sneaky £2 to the bill for a small portion of tomato sauce is a really bad customer retention strategy. This is especially the case when the restaurant is already charging premium prices. To achieve customer loyalty you need to make the customer think they are getting good value, even if they’re not!

FOOTNOTE: A ‘Veblen’ good is a type of luxury good for which the demand increases as the price increases, which is in contradiction of the normal law of demand. It results in an upward-sloping demand curve. The higher prices of Veblen goods can make them more desirable as a status symbol. So, in the example of this article, an expensive restaurant owned by a celebrity chef might experience an increase in customers as a result of higher prices.

© 2023 Darren Bugg

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