There are many opinions on whether you should or shouldn’t discount in our industry. Some say it hurts your brand and some say it doesn’t. Which is true?
Today I want to share with you my philosophy on discounting.
First I’ll say this: I believe discounting can hurt your brand when done wrong. But, when done the right way, it can build one of the most powerful brands. Discounting the right way is the best and fastest way to grow a stalling bar or restaurant business.
I have example after example of bringing more than 1,000 customers through my clients’ doors using a 50 percent off offer. Some would say this is a bad idea and it would hurt your brand and that is true, but also not true. Stay with me.
So how do we know when it’s right or wrong?
When You Shouldn’t Discount
If you have enough money coming in the door, enough loyal customers who keep the consistent cash flow coming, there’s no point to discount, is there? Why cut your own throat?
If this is you, you’re one of the few owners out there who are lucky enough to have this type of business. One that provides security in the form of consistent cash flow that pays managers and staff to run the place for you while you deposit healthy checks into your bank account, allowing you to spend more time with family and friends.
When You Should Discount
If sales are down and you need more income, or if you want to double the number of loyal customers, then you need more new customers walking through your door. Yes, word of mouth could work, but that’s the slow way.
If you want 100 new customers in the next 14 days, word of mouth won’t get you there. What will? An amazing offer that people can’t resist, with some marketing power behind it. Yes, a discount.
I’m not talking getting 10 percent off your $10-$20 meal. I’m talking about an irresistible offer, a Mafia offer, as I like to call it. It’s an offer people just can’t refuse.
Consider offering 50 percent off a check, up to $20 off.
However, when potential new customers see this, do they think we are desperate to get people in the door? Do they think our food and atmosphere is probably bad?
How do we get this Mafia offer out there in a way where it doesn’t hurt us, but helps us?
Let me explain.
Imagine you’re sitting at the nicest restaurant in Vegas that has the best chefs in the world. You can’t find a better meal. You can’t find a nicer atmosphere. The average meal is $200.
As soon as you’re done eating, out comes the owner. He asks how your meal was. He then goes around the table and shakes everyone’s hand and introduces himself with a big smile on his face.
He then says, “I want to do something special for you. I want you and three other couples to come back tomorrow. I’m preparing a five-course meal that I’ve never served before. This five-course meal will sell for $500 per person. But don’t worry, I’m buying dinner. You don’t have to pay the $4,000 for the eight people you have.”
Instantly you’re skeptical. You’re thinking, “What’s the catch?”
When someone sees your Mafia offer on social media or in an ad, this same thing happens.
The owner then goes on to say, “The reason I’m doing this is because I want your feedback. I want to know what you think about the presentation. I want to know about the flavors. I want to know if you’d pay $500 for this experience in the future.”
He then says, “Will you be so kind to take me up on my offer? It would mean the world to me!”
You look at your spouse and both of you are already thinking, “How could we pass up this offer? How could we tell the generous man no? How could we pass up this value?”
You and your spouse are now walking out of the restaurant after paying your bill at one of the most expensive and amazing restaurants in the world. Are you thinking that this restaurant has to bribe people to eat there? Or are you thinking about the generosity of the owner and the fact that he made you feel special?
You’re blown away, right? Even though you may be used to the discounting-hurts-my-brand mentality.
While extreme, I choose this example because restaurants like this never have to discount. So what makes this free $500 discount per person different, to make you feel even closer to their brand and restaurant?
Answer: It’s the message behind the discount that makes a difference.
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When Discounting Will Kill Your Brand
If you’re just using a print ad or social media to shout, “Bring in this coupon and get 50 percent off your next meal!” then yes, this could possibly hurt your brand.
However, you can take this same exact offer, using the same exact channels, and make people want to do business with you over anyone else, while building instant trust and credibility.
How? By using what I call “Reason Why” copy within your marketing message, by expressing your message the way the owner did at that restaurant in Vegas. It’s all about how you communicate your message.
Here’s an example of how I might craft an effective discounting message:
We want to get 100 brand new customers in our doors this month. To make this happen, we’re giving away a valuable offer you won’t be able to refuse, an offer that makes our competitors think we’re crazy.
We want to give you and 99 others 50 percent off your meal the next time you come in, good for up to $20 off. We’re going to make absolutely zero profit from this offer, but that’s not what this is about. We’re betting that when you come into our restaurant, that you’ll have an amazing experience, one that will make you want to tell your five closest friends as soon as you leave, one that will make you get on social media and rave about us.
The truth is, we believe in the prove-yourself-first business model. This is our way of hopefully winning over new loyal repeat customers who want to become part of our growing family!
This is a much more powerful way of conveying the offer. By being honest about upfront with customers, you’re more likely to gain their business.
“Discounting the right way is the best and fastest way to grow a stalling bar or restaurant business.” -Nick Fosberg
But here’s the key: The offer is only redeemable if I receive their contact information in exchange for 50 percent off. This way, I’m able to follow up with each customer to continue building a relationship through marketing efforts.
By doing this, I have the best chance of turning each participant into a loyal repeat customer. I may have broken even on the front end of our relationship, but they could spend thousands over the course of the year.
When You Should Discount, Even When You Don’t Need To
There is a time when bars and restaurants should discount, even when they don’t need an increase in sales or new customers.
When we have very loyal repeat customers who spend thousands of dollars with us per year, I think it’s only right we appreciate them for their loyalty. You can do this through rewards and loyalty programs, or as a special event.
Every year for Christmas and Thanksgiving, I throw a holiday party for my top 100 customers. It’s invitation-only and guests must buy tickets ahead of time.
These parties include free dinner. Yes, free. My brand is getting even stronger and stronger by giving away free dinners.
Let me explain.
We presell tickets ahead of time to our VIP members for $5 per ticket. By pre-selling these tickets, we know how many people are coming and when to cut off reservations.
At the end of dinner, we raffle off $400 to $700 worth of gifts. Not only are we giving away free dinner, but we’re giving away free prizes.
I believe in giving back to those who make you successful. There should be a few nights out of the year that you do something very special for your most loyal customers. They appreciate it. They’ll remember you forever.
And when a new bar or restaurant opens up down the road from you, sure they’ll probably check it out, but they’ll stay loyal to you because you’ve been so good to them.
Plus, we never lose money on these types of events. We host on the slowest nights of the week, and we make a small profit from the drinks sold.
The Bottom Line
If you need to grow your business, the fastest way to do that is to put out an irresistible offer. You’re bribing someone to come in to try you out.
By doing this, you’ll get 10 times the traffic walking in the door. But to be successful, make sure you have the right marketing message that explains the why. Also, don’t forget to get something in return, like their personal contact information so you can email or text them in the future to get them back in the door.
There are right and wrong ways to discount, but if you follow this guideline, you can build a stronger brand.
Check out Upserve’s Restaurant Marketing Strategies Guide!