Promotions have a way of changing a business’ destiny. The same is true in the restaurant industry. As restaurant promotions can take many forms and serve many functions, I will cover the basic elements that are in all promotions to help you evaluate if the promotional ideas you have will work or you should go back to the drawing board. This can be used later on after the promotion started to improve it.
With restaurants, the effectiveness of promotions may be divided up into three groups. Roughly, half of restaurants don’t have promotions or have promotions of little effect. A small few don’t need them or could barely benefit. Some don’t have lots of opportunities, but by in large, restaurants in this group could be doing much more than they currently are. The next group makes up about 40 %. Their promotions resemble other common, though effective, promotions and don’t do much for their brand. Discounts during Happy Hour is one hallmark example. The last 10 % come up with inventive promotions that create a true advantage over the competition, by often using less expensive (but more creative) approaches. The top 10% is the group that sometimes experiences ROIs that allow explosive growth. By knowing the elements of promotions, this article is to help you move your restaurant into this 10%.
Creating Value for Customers
Many restaurant owners see the value (the motivation to increase business and attract customers) they create for their promotions in solely monetary terms: what are customers going to save and what is it going to cost the restaurant. The overemphasis on the numbers arises from the process of whether the promotion makes financial sense. Like all major business decisions, promotions should undergo such scrutiny (coming up with conservative and ideal predictions). But it leads owners to believe that what determined the promotions success was the arithmetic rather than based on the decision making of customers.
This is a mistake and does not take into consideration the differing customer motivations. Surely, a massive discount can get customer’s attention but the same effect can normally be accomplished by doing something interesting, fun or creative with a much smaller discount. Along with not endangering your brand’s value (as huge discounts do), it gives customers an easy way to convince their friends to come along too.
So now that we have widened our definition of value, let’s consider the interplay of different sources of value.
As only the most loyal of customers behave irrespecitve of price, most promotions should be anchored in some discount. But, as much as possible, that should be somewhat to the side, unless it is a promotion that is similar to your competitors. Generally, I would discourage those types of promotions. You don’t want to have your customers or potential customers comparing lunch specials or get into a price war. A tried and true technique to get around this problem is reinventing an old promotion. In some way, your Happy Hour should be a twist on the original concept, and have a name that suggests it is a happy hour but also different (going along with your restaurant’s concept). As a general rule, it is good to go through every weekly promotion you have, and try to make the promotion your own.
Similar to a discount is the freebie. In my opinion, this is a superior strategy than 25% off the entire meal deal because rather than customers getting the impression that your regular prices are inflated, they think of it as a reward. Rarely will a customer make a leap that a free glass of wine means that your restaurant’s wine is worth nothing (except if it is truly poor wine). Contrastingly, with an across the broad discount, there is a greater focus on margins, and customer become self-conscious of the business element.
Of course, there are many shades of gray. Freebies should only in rare circumstance give away your main dish or drink. Bars ought to be careful in having 2 for 1 beer deals, especially if this deal applies to their more popular beers. In that vein, frequently a dessert is correct item for a restaurant, reinforcing the reward theme. Freebies ultimately though shouldn’t be periodic as they eventually come with an experctation. So an offer that works for a limited period is, like a frebie with an entree if ordered during President’s Week, would be more appropriate. The reward approach is epitomized by wing night where one may get a plate of hot wings for every pitcher of beer.
Demographics affect the other two main sources of value, which I dub social and pleasure. Social means that customers are drawn to the promotion to show off to their friends or romantic relationships. They want to be cool or kind or smart in other people’s eyes. With pleasure, customers would come all alone. It is fun, interesting or exciting. Frequently these two are intertwined, but it matters a lot the customers you are targeting.
Branding and Mindshare (Recognition)
Generic promotions produce generic results. Even if a “typical” promotion works fantastically in the beginning, it is not likely to last for two reasons. First, the typical promotions are easily forgot (they get little mindshare) and they can be copied by your competitors as they are not unique to your brand.
That being said, I think there is a place for them, and you should selectively employ them (and if possible modify those promotions to your brand). I subscribe to the theory of business (and risk-taking) that many moderate risks is a lot weaker than an equal blend of relatively daring moves and actions that produce reliable but modest results. This mix is designed so that you can experiment to see what works without being too worried about losing everything. A profile of moderate risks makes it hard to abandon them when they are underperforming (and frequently it will only get progressively worse). Of course, let’s not only think of risks in the purely financial sense, but of perceived success from your customers.
For the risky moves, they have to be unique to your restaurant and unique in themselves. Here is the area to take the greatest risks because it is free. I don’t mean in necessarily putting your brand at stake, or in the control of someone else. Instead buitld a strong association between a promotion and your customer’s day to day thoughts and environment. For example, a bar outside a ball park could offer a special if the home team losses. A fan who went to the game will definitely think about the loss a lot and if you build an association between you and that loss and present them with solance and relief from the letdown, you have just entered a customer’s psyche and been a medium between their love of their team. Of course, you may want to give them a punch card so they come around when they win also and receive a like discount (no one wants to be a place of repetitive disappointment).
Promotions should be mediums to not only encourage one time business and bring in new customers (which tend more to be based on value and incentitive), but on becoming part of the customer’s world and rountine. That normally requires you providing an exclusive experience or distinctly better.
Reach and Delivery
We should end with your delivery of the promotion to customers. This is not word of mouth whether in person or through Facebook/Twitter. This is when someone comes in contact with the promotion through the introduction directly by the restaurant.
Before we go into the different way, the message must be clear and be attractively and thoughtfully presented. Imagining how the format (such as ads) relates to the actual text and images helps.
There are basically three ways to communicate promotions. The oldest is signage and by most restaurants, it cannot be ignored. This can come through emphasis on the menu, signs in the restaurant, in the window or on the sidewalk. It works on those that are undecided about what they want or curious. These people tend to act pretty quickly. Even undiscounted specials can have promotional value, if given some kind of marketing stability. Every restaurant except the most ritsy should evaulate tactful but visible signage.
The second is the most unpredictable and expensive. That is through mass forms of advertisement. Whether it’s an ad in a newspaper, TV (works very rarely) or on billboard, a restaurant owner must consider if they are actually paying money to bulster their ego or that the advertisement will produce real world results. Any advertisement of this type needs to have a mechanism to measure its effectiveness.
Lastly, the internet provides a whole new range of possible avenues to customers. Websites, Facebook Pages and Twitter all need to make available your promotions without annoying your customers. It’s a balance but other than the constant plugging of weekly promotions, most restaurants don’t go over the top. Making the information readily available is very very important, so skillful tactics like Search Engine Optimization, Local Search and Social Media Optimization can definitely contribute. Other social media and search engines offer free and paid ways to adverise. OpenTable, Foursquare and Google Adwords (and more and more Facebook) are the first that come to mind. There is slightly more tools to evaulate the effectiveness of these ad schemes. Keep in mind you don’t want to pay to advertise to customers who are too far away or uninterested in your restaurant’s concept, so you make sure you can localize who you advertise to.
A delivery method may cost some money (not as much as offering value normally) but in 98 percent of the cases, essential. Good promotional ideas need to be communicated effectively if they are to help your restaurant.
Promotions are at the heart of marketing a restaurant and this is only a small introduction. It is both an art and a science, and a full appraisal (including coming up with creative ideas, evaulating them and forcasting success) will be forthcoming in our future book.