Bottom dollar

A few empty tables? Don’t panic and assume discount specials will bring more customers through your door.

A few empty tables? Don’t panic and assume discount specials will bring more customers through your door.

If you’re concerned about turnover, it’s easy to start grappling for gimmicks to reel in more customers. But are discounts, 2-for-1 specials and freebie offers the way to go? By Stephanie Sword

The restaurant industry, by its very nature, is competitive. So much so that restaurateurs often feel pressure to upstage the restaurant next door, the one down the block and certainly those with similar menu offerings. Sometimes the fever to outdo one another causes owners to offer marketing techniques—such as discount coupons and 2-for-1 specials—without considering how they may impact reputation, clientele or the bottom line.

Tony Eldred of Eldred Hospitality says this style of marketing usually does more harm than good. He argues restaurateurs should think twice before using them, or better still—not at all. “If you drive around Melbourne and Sydney, many establishments have discount offers displayed in their windows, which is the kiss of death for restaurants. Discounts reek of desperation. You won’t make any money off this form of advertising, and instead are hastening your demise in the long run,” he says. “In fact, many restaurateurs are attempting to buy their customer base, with the false impression they’ll make money off this approach. They won’t.”

A draw card?

So if this style of marketing doesn’t necessarily bring in more dollars, does that mean it’s ineffective at grabbing customers, too? Well, it depends on the type of customer you’re seeking: “You simply can’t buy long-term customers with discounts,” Eldred states.

Guy Nathan of the Fresh Café, located in the Blue Mountains, agrees. “Just giving something for free doesn’t necessarily result in getting more customers. And if it does, think about the type of customer you’re gaining—will it be a loyal customer who will return even after the offer has ended, or are you simply attracting customers who will come in once and move on to the next restaurant offering two-for-one dinners?”

For Michelle Wilson-Blyth, owner of Victoria’s Replete Providore, the answer was never clear. “Most businesses are always looking for more customers, which usually means you need a bigger spend. We were once talked into paying for a three-month advertising package in the food section of a local magazine. It was our attempt to gain new customers, but I honestly can’t say if it worked or not,” she says. “My philosophy now is to focus on getting repeat business customers from our customer base, not lure new ones in with cheap deals.”

Because attracting customers is the name of the game, some owners are drawn into costly marketing tactics—often with poor results. “I hardly ever advertise now, but I once spent a lot of money to run a big advert for some type of freebie offer in a local newspaper. It was published in the dining out section, but not a single customer came in to take up the offer,” Nathan says. “Not one.”

In this case, the ineffectiveness of the offer was clear. But often, restaurateurs have difficulty gauging the type of return they’re actually getting. “I once included a voucher in a letter-drop box mailing in an effort to gauge a response. The voucher offered a free coffee with the purchase of a weekday lunch. Customers told us they received the flyer, but for whatever reason they didn’t use the voucher. It obviously created some awareness for our restaurant, but in the end it didn’t work—no-one cashed in the voucher,” says Wilson-Blyth.

“You have to try a lot harder to measure whether advertising discounts or other offers are really working at bringing in customers,” Nathan says.

Gauging the effectiveness of special offers isn’t the only problem. In the end, they tend to mean less money to your bottom line. “Regardless of what they’re advertising, seventy-five per cent of all restaurant ads are an unnecessary expenditure,” Eldred says. “I tell my clients that after three years they shouldn’t spend a bean on marketing. By then, if you’ve handled your business properly, strong word-of-mouth should be bringing customers in, not coupons. Good word-of-mouth always supersedes marketing dollars.”

‘Buzz’ beats bargains

Successful restaurateurs know word-of-mouth carries more weight than bargain deals. “Word-of-mouth is very important. It is the most effective marketing tool out there. Our reputation has been built from positive word-of-mouth and the ‘buzz’ we’ve received from winning awards. For the last three and half years we haven’t had to do any promotional offers through advertising,” says Nathan from the Fresh Café.

“People don’t spend a lot of time reading advertising copy, but they do pay attention to what others are saying. It’s word-of-mouth that leads to growth,” states Eldred.

Instead of appealing to customers through discount offers, Nathan found it more effective to focus his efforts on promoting ‘positive press’, like when he launched a new brand of coffee promoting fair trade. “It’s giving the customers a chance to support a good cause. They feel like they’re making a contribution, which means more to them than receiving a discounted cup of coffee,” Nathan says.

Positive press can go a long way to improving your bottom line, but you need to be sure you’re attracting the right kind of feedback. “It’s not good if you encourage a reviewer to visit, then receive a poor write-up. You need to be ready,” states Melissa Coulton, owner of Queensland’s The Boroughs Café Wine Bar. “Publicity is a great tool when it works, but it can’t be controlled. A poor write-up can really impact on perception.”

“Free publicity is fantastic, especially in respected journals. It helps to reinforce your business,” says Replete Providore’s Michelle Wilson-Blyth. “Direct marketing is also key for us. Spending $250 for window signs announcing accolades—like when we won an award for best chocolate brownie—goes a lot further than spending money advertising two-for-one specials.”

Words of caution

Perception and branding can make or break any restaurateur, so it’s important marketing efforts undertaken by owners do not undermine or contradict the positioning they’ve worked so hard to achieve with customers.

“Discounts or the ‘buy one get one free’ offers will simply cheapen your reputation and present the perception that your restaurant isn’t busy enough. The ‘Hello! We’re here! Check us out!’ marketing also doesn’t work. It doesn’t tell customers anything substantial about you,” says Eldred.

“Every marketing action communicates something to an audience, so a poorly constructed newspaper ad touting special deals may be just a very expensive, wasted effort sending a negative perception,” Coulton says. “Discounting also sends signals to diners about the product. Therefore, using cost cutting as a lever needs to be in line with the whole marketing strategy.”

“You need to decide what type of image you’re trying to promote with your restaurant. Don’t just jump out there offering cheap specials. Think about how it will reflect on your business,” says Nathan.

Financial black hole

With this style of marketing, restaurant owners are often put in the position of continually spending more money, advertising new offers to help replace customers lost when the last discount or two-for-one offer ended. Eldred believes their money can be better spent.

“Some restaurateurs feel spending $200 on business advice is a waste of money, yet they’re more than willing to spend thousands on marketing techniques that don’t work,” he says.

Nathan, for one, has seen first-hand how discounting can cause a restaurateur to take a hit financially. “I see other cafés offering discounts in an effort to ‘steal’ my customers away. They end up shooting themselves in the foot. One tried to undercut my coffee prices; I knew he wasn’t going to make any money that way. He ended up having to put his prices way up to recoup the loss,” Nathan says.

“A better alternative would be to value-add. For example, a free $25 bottle of wine may cost the venue, say $8, but it is still a $25 value for the customer. Compare that to 25 per cent off a $100 meal. That’s $25 less than the value-add approach, and the value-add could in fact be more highly valued by the customer as well,” explains Coulton.

What the customer wants

Eldred agrees that value-adding is an effective way to appeal to customers. “It suggests you’re giving customers something of value. It’s important to remember that advertising typically addresses the needs of the restaurant owners, not necessarily the needs of the customers—they have their own needs.”

But if you play the numbers game, are there more customers seeking discounts rather than high-quality meals? “It’s usually a small minority of customers who have a twisted view of what your standards should be.

“It’s important not to listen to the vocal minority who will always tell you that you are too expensive—it can lead to distorted perception that everybody thinks the same,” Eldred says.

“If low price is not a key motivator for the diner, it therefore follows lowering price will probably have little impact on the decision-making process and could even devalue the venue,” reasons Melissa Coulton.

Restaurateurs are not mind readers, and it’s not always easy determining a customer’s motivations. Both Nathan and Wilson-Blyth admit they’ve had customers inquire about special deals, but they don’t feel it’s representative of what the majority of customers want.

“The cafés around me offer discounts, and I’ve had some of my regular customers ask if I’ll do it,” Nathan says. “But I don’t ever try to match the discounts offered by other restaurants. I’m not willing to compromise on what I offer. The quality of my food, coffee and service speaks above all else.”

“I personally believe a retail food business is not set up to discount,” says Wilson-Blyth. “It should be about quality service, making a good impression and taking a personal approach with your customers.”

In-house marketing
mistakes

According to Tony Eldred, restaurateurs are often just as guilty of making in-house marketing no-no’s as they are external ones. He stresses it’s important to evaluate what you’re doing in both camps and offers three examples of what not to do in-house:

“You instruct your waiters to say the following: ‘Good evening. Here’s tonight’s specials…’, and they proceed to list seven menu items. The average person can’t absorb that much information in that span of time. It’s a wasted marketing opportunity, and it ties up the waiter, which results in additional labour costs.

“Here’s another common mistake: printing out menus with jargon or culinary terms not easily understood by your customers, and then wondering why those dishes are not selling. It’s much more effective to let the customers physically see the items.

“Finally, owners will construct a wine list of commercial lines, mark up the price, promote it, and wonder why customers are not buying. If you construct a list with boutique wines, customers don’t know what they normally sell for. If you offer the same stock as Dan Murphy, your customers will be the first to notice the inflated price.”  ≤

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