Guest blog by David Archer
It’s one of the biggest decisions you have to make when planning your restaurant marketing, and with today’s weak economy the pressure is greater than ever to coupon as a way to drive guest traffic. But is that the right decision? There are a few key questions you need to ask before jumping onto the coupon bandwagon.
Do I Want To Cheapen My Brand Image?
Remember the old mustard commercial where the Rolls Royce pulls up, the passenger rolls down the window and asks, “Pardon me, do you have any Grey Poupon?” That’s a classic example of a product that built a brand image of being a higher-class, premium product worth paying a little more for. When customers perceive a product as a premium product, you cheapen the value in their minds when you start couponing and reducing the price of the product. Take that to the extreme and you end up in the pizza category, where couponing reaches as high as 70% of transactions, and customers feel like suckers if they actually buy the pizza at menu price. So is your restaurant a Grey Poupon Restaurant, or are you a generic mustard restaurant?
Can I Afford To Coupon?
The sharply-dressed sales reps will come in and talk a great story with you, telling you how advertising with them is an investment and the restaurant will be full and there will be a line out the front door if you put coupons in their publication or on their website. Funny thing is if you ask them to guarantee the results or you pay nothing, they won’t be willing to take that bet because they want to make their money. But before you commit, you need to do your marketing math to see if there’s any way that you will also make money.
Example 1: Buy One Get One Free – To make the math easy, let’s say you sell your plate for $10 and have a 30% food cost, so for each plate it costs you $3 dollars. For the BOGO Coupon, you receive $10 for the “Buy One,’ and you have $3 x 2 = $6 in food costs for the two plates. So you’ve cleared $4 dollars. Those 4 dollars have to cover the advertising costs it took to print and distribute the coupons, plus rent, labor, and all your other fixed expenses. If you figure it was an incremental sale that you wouldn’t have had otherwise and all the other expenses are fixed that you already would have paid, then you probably did alright especially if you were able to add on some beverage and dessert sales.
Example 2: GROUPON 50% OFF – This new popular traffic driver comes in many different forms… Groupon, Living Social, Radio Stations’ Half Price Fridays, and now Google and others are jumping on the bandwagon. But beware, 50% Off may sound the same as Buy One Get One Free, but in these deals it’s a far different animal. For many of these, the consumer buys your Gift Certificate for half price, so a $10 Gift Card is sold to them for $5 dollars. Now you have to split that $5 with Groupon or the other media outlet. So you receive $2.50, and your food cost is $3.00. No matter how many guests the promotion drives, you are losing money. The more successful the promotion is, the more money you will lose.
How Will I Get The Coupons Distributed?
There are endless ways to distribute your coupons. From free-standing newspaper inserts in the Sunday paper to direct mailers, local coupon clippers, nickel ad papers, and a wide variety of mom and pop coupon mailers, you have options. Add in the internet and all the coupon sites, there’s no shortage of outlets for your coupons. You also can distribute them in your restaurant but this needs to be done strategically. Use them as bounce backs that are good on their next visit. The absolutely worst way to coupon is to place a stack of coupons by your register. Every customer will use a coupon at that point, and you are just giving away money.
If I Start, Can I Ever Stop Couponing?
That question can only be answered by you. For many, coupons are like a drug. They distribute the coupons, see the spike in guest traffic, then want to see that again next month. If you judge success on year to year comparisons, you had that traffic spike last year so you want it again this year to match last year’s results. But the real test should be whether those guests are making you any additional profit.
The reality is that most coupon customers are not loyal. If they don’t have a coupon they probably won’t come back in for another visit, so they have to be profitable on their coupon visit. Know your numbers, do your coupon math, and you’ll be able to judge whether you should continue couponing or not.
David can be reached at: http://www.RestaurantMarketingSecrets.net
Since 1991 retail food consultancy Foodservice Solutions® of Tacoma, WA has been the global leader in the Grocerant niche for more on Steven A. Johnson and Foodservice Solutions® Bing or Google Grocerants or visit http://www.linkedin.com/in/grocerant, twitter.com/grocerant or Facebook Steven