Everybody loves a freebie. This is a time-tested truth. Organizations, enterprises, and a lot of restaurants are using discounts to boost their sales and increase their profit.
However, restaurant owners need to be careful in drawing the line between a valid discount and the one that damages brand reputation. The essence of this post is to tell you how you can retain and keep your customers happy by providing them with discounts on their meals without damaging your brand's reputation. Before going in details about how to use the discount in marketing, this post will list out the top 7 benefits that discounts can bring for your restaurant profitability.
Offering discounts is one of the means of promoting your restaurant. Dominos has been able to acquire a more significant market share because its business model is built on discount. Its success is highly connected to its loyalty program, higher sales, and improved product quality. According to a study conducted by Mark Kalinowski, the CEO of Kalinowski Equity Research, Dominos controlled 14.2% of the total pizza sales; Pizza Hut managed 13.2% while Papa John had just 7.2% as at 2017.
By the end of 2018, the prediction established that Dominos would exceed 15% of the total market share, and Papa John will drop below 7%.
Dominos is presently acquiring Papa John’s customers because of its top-notch loyalty program.
How does this apply to your restaurant's business? When customers enjoy the discount you offer, they tend to refer their friends and family who also refer their network. This is organic marketing at zero cost.
There is nothing wrong with the vendor-consumer relationship you have read in your economics textbook. But in reality, what counts is brand loyalty. Customers will come to your restaurants, eat and move on without meeting you.
The game will change when you offer a discount. In their memory, you are the restaurateur who serves quality food as if it was free. This is enough motivation for them to come back. The goal of the discount is to buy their loyalty and ensure they come back even when the discount has expired.
According to a research conducted by Singh & Imran(2012), an average online startup will lose 25 percent of its client yearly, and an increment in customer retention can push it up by 25%. The truth is your customers will spend more when the meal is on discount. Someone who had the intention of eating one course at the regular price will end up gobbling down three if a discount is offered.
You might be asking," How do I make a profit?". The truth is, you will make a profit, but you need to reduce the margin a bit. This will help you experience an increase in the rate of stock turnover, which will subsequently impact your profitability.
Curiosity is a natural tendency in every human. As a restaurant owner, you need to leverage this.
Once the news circulates that your restaurant offers discounts, customers will start thronging your restaurant to see how they can take advantage of it.
Once they discover you offer not only quality service but also have an incredible loyalty program, you will realize customers will arrive at your restaurants very early.
If you want to go digital or automate your business, there is a perfect strategy to adopt. All you need is a carefully curated business plan and simple software to replace cash counters with computer gadgets.
The software will also enable you to decide on the category, as well as the extent of discount. This will save you from making a grave mistake or damaging your business reputation.
As a restauranteur, you are required to maintain a quarterly or yearly performance reports. However, one or two bad weeks could significantly reflect on the entire report you have been keeping for several months.
What then is the way out? Discounts! If you want to boost your sales and make up for those bad weeks, quickly offer discounts. You may not make much profit, but at least you will have some progress indicators on your reports.
Discounts help you focus on a specific set of clients. For instance, you might want your restaurant to be perceived as the best hub that serves vegan or takes care of the Millenials.
Without stress, offering discounts will help you retain and maintain a committed client base. Customer loyalty is the main reason why you are in business.
Discount is an efficient promotional tool to boost your sales and increase profit, as long as you can manage it with care. When appropriately implemented as Dominos did, you will not only gain a more significant market share in your restaurant business but will be retaining a network of happy customers.
They will not only refer their network but will gladly wait on the queue to be served.
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