March 8, 2010
On discounting and why you shouldn't do it and when you can
My dislike of discounting at chef-driven restaurants is by now well-known in my tiny little corner of the world (which is chef-driven restaurants, only, really).
Restaurants, so I am told, discount in order to bring in new audiences. Sometimes they do this because they are desperate. Other times because they are just interested in seeing who else is out there.
But on the whole, they feel they need to reach out beyond their target audience and find people who wouldn't normally try them out because the restaurant is perceived as "too expensive." I guess the idea is that all these new customers will be so overcome with awe over the food/experience, they will revise their monthly budget to work in fancy dinners on a regular basis.
My issue, of course, is that likely the restaurant hasn't maximized their existing audience or even really attempted a cohesive marketing strategy in the first place. So, even if they do increase the size of their audience, they don't have mechanisms in place to retain these new customers either -- just as they couldn't retain the original customers.
The fact of the matter is, there's an actual problem if a restaurant isn't busy, and by resorting to deep discounts, the problem itself isn't getting solved, it's just getting ignored a little longer.
When you shouldn't
Discounting should never be done to stem the tide of slumping sales. The minute you freak out about your low customer counts and decide to offer a significant discount on your food, create a a cut-price promotion that is off-brand or sign up with a discount program, you are devaluing your brand.
It's of course easier to discount than to figure out how you can be more valuable or more compelling and build your numbers authentically. In fact, Paul Williams, in the post Can your brand afford to discount, said it best:
When you can
That said, there are times when "discounting" can work. A lot of fancy restaurants struggle with customer perceptions -- everyone, it seems, thinks chef-driven restaurants are something to be saved for monumental special occasions.
In fact, many chef-driven restaurants are more affordable than people think. And many that may be out of range for regular dining do offer affordable options, such as an attractively priced prix fixe, lunch menu or lounge menu that isn't outside the realm of possibility -- if people only knew.
In these cases, one can use "the discount" to make a point. Blackbird did this very well during Restaurant Week, using the media hysteria of the city-wide promotion to drive home the point that their year-round lunch prix fixe is always $22. In doing that, Blackbird communicated to a very large audience that the restaurant can be approachable.
When you might
In more desperate times, likely the best scenario is to look to Steve Jobs. Primary Apple product pricing doesn't swing much but discounts are often to be had on things like refurbished iPhones. So, the value of the brand itself is kept intact while new customers are captured and cash flow is buoyed.
In chef terms, this means not discounting your food -- which is your brand -- but maybe hosting a half-priced wine night because the wine is not uniquely yours. The idea here is to keep your brand intact while creating cash flow -- presumably so you'll save the leaky boat while you figure out how to fix the hole so you can sail on for the long term.
Restaurants, so I am told, discount in order to bring in new audiences. Sometimes they do this because they are desperate. Other times because they are just interested in seeing who else is out there.
But on the whole, they feel they need to reach out beyond their target audience and find people who wouldn't normally try them out because the restaurant is perceived as "too expensive." I guess the idea is that all these new customers will be so overcome with awe over the food/experience, they will revise their monthly budget to work in fancy dinners on a regular basis.
My issue, of course, is that likely the restaurant hasn't maximized their existing audience or even really attempted a cohesive marketing strategy in the first place. So, even if they do increase the size of their audience, they don't have mechanisms in place to retain these new customers either -- just as they couldn't retain the original customers.
The fact of the matter is, there's an actual problem if a restaurant isn't busy, and by resorting to deep discounts, the problem itself isn't getting solved, it's just getting ignored a little longer.
When you shouldn't
Discounting should never be done to stem the tide of slumping sales. The minute you freak out about your low customer counts and decide to offer a significant discount on your food, create a a cut-price promotion that is off-brand or sign up with a discount program, you are devaluing your brand.
It's of course easier to discount than to figure out how you can be more valuable or more compelling and build your numbers authentically. In fact, Paul Williams, in the post Can your brand afford to discount, said it best:
"The root of the problem is in the lack of creativity by companies. Or at least a lack of being able to think creatively - quickly. Companies are having to do something QUICK and FAST to drive sales, so they turn to the 'low hanging fruit' of marketing tactics - discounting."Discounting is a lazy way to drive sales.
When you can
That said, there are times when "discounting" can work. A lot of fancy restaurants struggle with customer perceptions -- everyone, it seems, thinks chef-driven restaurants are something to be saved for monumental special occasions.
In fact, many chef-driven restaurants are more affordable than people think. And many that may be out of range for regular dining do offer affordable options, such as an attractively priced prix fixe, lunch menu or lounge menu that isn't outside the realm of possibility -- if people only knew.
In these cases, one can use "the discount" to make a point. Blackbird did this very well during Restaurant Week, using the media hysteria of the city-wide promotion to drive home the point that their year-round lunch prix fixe is always $22. In doing that, Blackbird communicated to a very large audience that the restaurant can be approachable.
When you might
In more desperate times, likely the best scenario is to look to Steve Jobs. Primary Apple product pricing doesn't swing much but discounts are often to be had on things like refurbished iPhones. So, the value of the brand itself is kept intact while new customers are captured and cash flow is buoyed.
In chef terms, this means not discounting your food -- which is your brand -- but maybe hosting a half-priced wine night because the wine is not uniquely yours. The idea here is to keep your brand intact while creating cash flow -- presumably so you'll save the leaky boat while you figure out how to fix the hole so you can sail on for the long term.
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