Driving Restaurant Traffic Without Discounting

The average American spends a little less than $7 dining away from home every single day. Competition for those dollars is intense, and the pressure to compete drives all sorts of interesting restaurant innovation. Bright, shiny new restaurant concepts pop up like dandelions in spring. But, depending on who you ask, roughly a quarter of all new restaurants die in the first four years. Despite the urban myth that opening a restaurant is a risky proposition, the failure rate is more or less aligned with that of all new start-up business ventures.  The survivors live to fight another day, and fight they do.  You don’t have to be a restaurateur to spot the running corner-to-corner battles in virtually every major metro area across the land.  When the novelty of new wears off, the pressure to sustain comp sales growth intensifies, and this is when the hard work really begins.

What do you do when a restaurant’s performance begins to slip? The list of options is long, but some are more difficult to implement than others. Re-tooling the menu, tightening up operations, and updating facilities can yield great results. Those can also be costly and time-consuming options, and time and money are often in short supply when restaurant traffic starts heading south. The pressure to turn the tide makes the expediency of discounting look awfully appealing as a means for driving restaurant traffic.

When discounting is just one component of a thoughtful marketing strategy, it can be invaluable. Discounting can be a great tool when used strategically and on a limited basis for driving restaurant trial or specific daypart traffic, for example. But too often, desperate restaurateurs take a carpet-bombing approach, flooding the market with offers such as buy-one-get-one (BOGO) deals in a furious attempt to drive immediate restaurant traffic. The approach may put dinersin seats, but the universal after-effect is lost margin and a fickle customer base. Deal seekers always show up for the deal and split when it’s gone. Worse, if the practice is sustained, loyal customers will learn to expect a deal and re-evaluate the value proposition. That math simply doesn’t work in the long run.

There are far better ways to signal value and move new customers through the door. One of the best is also one of the more obvious. Sampling is a tried and true technique, but it’s rarely executed well. Those restaurateurs that do use sampling generally play small. They offer bite-sized samples to current customers while ignoring the exemplary execution of the tactic by industry leader, Chick-fil-A.

Restaurateurs outside the QSR category should not dismiss the success of the chain’s practice of giving away its original chicken sandwich for select occasions. The move always generates extraordinary publicity for the brand and does not diminish the value of the product. Instead, new and old customers alike experience the giveaway as an act of goodwill that also serves important marketing purposes for the chain. A critical benefit of giving away the whole sandwich is that customers experience the best expression of the product. Further, unlike discounts, aggressive sampling creates no residual expectation that the product will be offered for free or at a lower price on the next visit. Unlike nearly every other QSR brand, Chick-fil-A does not discount its product, and all advertising is focused exclusively on the brand.

The following are seven guidelines for using discounts and enhancing value:

1. Make discounts purpose-driven with clearly understood objectives and defined promotional parameters.
2. Avoid discounting core menu products.
3. Make sure there is no ambiguity in your organization about the types of customers who are attracted by discounts.
4. Use sampling instead of discounting to drive trial.
5. Build value by enhancing intrinsic qualities of an overall offering.
6. Promote value through add-ons designed to sell at lower prices and still preserve margin.
7. Design products that incorporate appropriate customer price expectations that also deliver reasonable margin.

Interested in reading more about how to create a value strategy that preserves margin and builds your brand?  Download our white paper on value engineering for restaurants.

– Mike Sullivan is president of The Loomis Agency, one of the country’s leadingChallenger Brand agencies