The Discount Conundrum

The majority of restaurants have not a clue as to why their customers are their customers. Most restaurants make assumptions about what really drives their business. Many think that price drives sales, and for some segments this is true. The problem is that when you constantly drop the price of your product you start a dangerous trend.

By reducing the price consistently you have now devalued your brand and simultaneously created price junkies. It's hard to get customers to pay full price when you set the precedent of lower pricing for similar items.
When you operate your business from the mindset of "fear". Fear of losing customers to another restaurant, then you set the stage for a spiral of bad decisions. You drop prices more often to drive sales and the thing is that IT WORKS...on the surface. Behind the scenes is that those price drops eat away more and more at your profits. Yes, more people are coming into your restaurant, yet less and less is going to your bank account. Combine this with an ever increasing rise in the cost of goods and you find yourself in a hole that can be difficult to get out of.

Creating price junkies creates a co-dependent relationship. You need them to come in and they only come when there is a deal. You have not created loyalty to your brand, only to the deal.

When you do not believe that your brand is more than a price driven commodity, in your customers mind that is what you become. Here is where you have 2 options. You can either compete or stand out.

Compete

Let's say you are an independent restaurant in a smaller market and a big chain moves in like Buffalo Wild Wings. Many restaurants would move to quickly put chicken wings on the menu to offer the same items as the big chain. Big mistake.

Now you are competing with Buffalo Wild Wings in their market niche. Trust me, it's hard to go up against bigger themed restaurants in their own area of specialty. Their advertising budgets are much bigger than yours and they will flood the market with advertising to keep them always a little in front of the newly added wings to your menu. Far better to stand out.

Also, let's look at focus. I have had a few clients that get so fixated on what the competition is doing that it almost becomes an obsession. I had a client that would park outside his competitor's restaurant for an hour (maybe 2) counting the guests that went it! That is time he should have been in his own restaurant, working with and training his own team. Better yet, engaging with the guests that he currently has! He stopped doing it when I explained how creepy it was and even bigger a waste of time. When time becomes a challenge in your business that is the perfect time to take stock of what you are focused on and whether those tasks are getting you substantial impact on your bottom line.

Stand Out

So the big chain is coming to your market. Big deal. You need to focus on what you have that separates you from the big chain and not what you have that is similar. They have chicken wings....you have mini pork wings. They are corporate, you are local. You need to understand that as an independent restaurant you have a huge advantage over the big corporate driven chains. You can adapt and make changes faster than they can. That is your number one tool.

You are like the confederate soldiers during the civil war who used the technique of guerrilla warfare. You don't play by their rules. You move quickly and adapt to your local market. You stand behind and support a local charity or cause. You have roots in your community and you drill down even deeper to make your brand so damn solid in your market that they have little effect on you.

Repeat customer vs loyal customer

I ask this question quite often in seminars, "Can anyone tell me the difference between a repeat customer and a loyal customer?" I am surprised that many do not raise their hand. Most answer that they are the same. How would you answer? There is a big difference between them. A repeat customer will only return if the conditions are favorable to them. If it is the right distance and you have the right deal. A loyal customer will drive past all the others just to have the experience you provide.

Let's use the computer industry as an example. Many people use windows based computers. The thing is that they also switch from brand to brand often. One year it's a Dell, then a Toshiba or maybe Hewlett Packard (HP). You might buy the same brand a few times if it was good to you. Now take a look at people who use an Apple computer. They are totally dedicated to the brand. They sleep on the sidewalks for days before the launch of a new model. They even have a common saying of, "Once you go Mac, you never go back!" That is customer loyalty.

Creating Loyalty: The Brand Promise

"People don't buy what you do, they buy why you do it." ~Simon Sinek

Simon Sinek has an amazing book entitled, Start With Why. He discusses the concept that most brands focus on telling you what they do and how they do it. Sinek goes on to explain that great brands explain why they do it. Marketers love to throw out the words brand differential or unique selling proposition. Most restaurants can adequately describe what, and how they do what they do to stand out from the market. Great restaurant brands connect at the emotional level of why.

Let's take the example of your typical Mexican restaurant. Their brand statement might read as, “We make tacos and burritos following traditional family recipes. We use great ingredients, made fresh daily.” Not bad right?

Here's how Chipotle does it. “We believe that food should not only be fresh, it should not contain hormones, antibiotics or GMO’s. We believe your food should be prepared in front of you so you can see our commitment to using fresh, local and sustainable products. We also make a damn great burrito.”

When you explain the why behind what drives your restaurant, you'll stand out so far in the market that others will be playing catch-up.