Discounting Dilemma

Published October 9th, 2015 by Unknown

Recently, I was at a local bar and grill known for their terrific pizza and impressive selection of imported and craft beers. When our server approached the table I asked her what kind of beer they had (I know, an obnoxious question in a place like this, and one we’ve all had to answer a million times, but read on!). She proceeded to inform me that we’d arrived at the tail-end of happy hour and that we had about 5 minutes to partake in $1 Pabst Blue Ribbons. My companion ordered two PBR’s for himself, sliding in under the happy hour wire and picking up 2 rounds for 2 bucks. I am not a big fan of PBR (no insult, just not my fave), so I asked what else was available. The server started rattling off beers, starting at the low end with cheap domestic drafts (“Brand X, Brand X Light, Brand Y, Brand Y Light,” etc.), and going up. By the time she hit the 7th or 8th choice, I heard something I liked and ordered a local craft beer.

This scenario plays out in nearly every restaurant and bar nearly every day. And it’s killing your business, your sales and your tips. Just in this short, extremely common transaction, there were enough mistakes to sink the ship. Here’s what went wrong, and what to do to turn it around and make this a rewarding experience for the Guest, the business and the server…

Discounting Dangers

1. The first thing that went wrong was that the server defaulted to the discounted “special” when describing the restaurant’s offerings to the Guests. Discounting is a very powerful marketing tool, but should be used in a very particular manner. Marketing drives traffic, not necessarily sales. Discount marketing is designed to reach out to people outside of the restaurant and bring them in – particularly if they wouldn’t have otherwise come in. It is discount marketing’s job to entice a customer to walk through the front door. Once they are through that door, the service team’s job is altogether different. The service team’s job is not to sell the special. It is to connect with the Guest and sell them awesome products and experiences that will make them spend more money and come back soon and often and bring their friends. Sometimes that’s the special… most of the time it’s not. People don’t always want “cheap.” They want awesome!

My friend and I love beer and can afford to drink whatever kind we want. By actively selling my buddy on the $1 option (when he surely would have bought one of his favorites at full price, had he been made aware they carried it), she not only cut her sales - and TIP - by 70%, she denied him a better drinking experience, lessening the chances that he will become a ‘regular’ at this bar. If someone asks what the happy hour deal is, tell them. If you want to increase your tips exponentially, don’t lead with that information… start with something awesome (and full-price).

2. Be aware of the order you communicate your offerings to Guests! In the scenario above, when asked what beers were offered, my server started at the bottom with the most affordable domestic drafts (about $3) and worked her way up. By the time she got to the 7th or 8th beer on her list, I was so fatigued by hearing her rattle off beer names, I just stopped her as soon as I heard a middle-of-the-road craft brand I recognized (about $5). She never even got to the $8 beer I would likely have loved. She probably never does. She likely sells a boatload of domestic drafts at the bottom end of the list, though, because that’s where she starts. People have a limited attention span for lists and, by nature, become weary of them quickly. Why not start with the high-end, interesting and exotic options and work your way down to the cheap options (which the customer already knows are carried everywhere anyway)? You will find that “list-fatigue” works in your favor, landing on more $7 beers and fewer $4 beers and potentially doubling your tip income. It will also have the added benefit of delivering a higher-end, more interesting and satisfying product – and experience – to your Guest, increasing the likelihood of their return.

3. Lastly, though this didn’t occur during my visit, be mindful of how Guests who do take advantage of discounts are treated and what you offer at a discount. If you offer some sort of discount or other promotion to drive traffic to your restaurant, what do these first-time customers get and see when they arrive to take advantage of the deal? Do they get a cheap or watered down version of your products or do they get a taste of the very best you have to offer? Do they get second-class or even resentful service or do they get blown away with a memorable experience they can’t wait to repeat? Customers who are drawn into your restaurant by discount marketing represent a huge investment. Rather than brushing them off as “cheap” customers, focus on converting them into high-value, loyal regulars. It is only by taking the discount opportunity to impress and delight them to the point that they come back again and again, bringing more friends with them that you will ever realize a profit on them.

At the end of the day, we must recognize discounting as an effective and sometimes necessary marketing technique. But always remember that it is most effective outside of the business for the purpose of bringing Guests inside. Once inside, it is our job to not focus on cheap, but to focus on awesome. Awesome products. Awesome service. Awesome experience. Only awesome, and never cheap, will convert low-value, discount driven, trial customers into high-value, loyal regulars.

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