In my previous article I told you the marketing strategies that didn't work for me when I acquired my restaurant. (My energy and willingness to keep trying to make them work exceeded my marketing experience - that cost me a lot of wasted money).
Now let me tell you the changes that I made after losing money following those strategies, and the impact that these changes brought to the restaurant.
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My first move was to look for a new coupon service. By the way, I am a firm believer in coupons as a means of bringing new people to a restaurant, since they are very measurable. You can just collect the coupons that your visitors bring to your place and instantly know exactly how many new people visited because of the coupon offer. This allows you to measure if your investment in a coupon program is worth it.
The problem that I had with my previous coupon company wasn't the coupon offers themselves but the audience that they targeted.
You see, my restaurant was a middle- to upper-scale Italian place, and the coupon company was targeting bargain hunters, more interested in saving a few bucks on their meal than to have a great dining experience.
Suffice it to say that the other two restaurants in the coupon package were a sandwich place and a pizza parlor! (Not that those eateries don't have their place; I was trying to target prospects interested in a higher-caliber experience.)
As you can imagine, these weren't the kind of clients that I was trying to attract. They usually came to eat the cheapest dish that we had, drank only free tap water - then used the coupon to get the discount (not to return until they received the next coupon).
Not really exciting stuff.
Coupons may work for some establishments; if you have a fast food restaurant where high volume is more important than the quality of your meals, then they may be effective. However, they surely didn't work for us: a small place where people spend two to three hours talking over dinner.
So, after some research, I found a company that delivered exactly what I was looking for. They would target the client prospects we wanted to bring in.
The name of the company is RSVP. They target middle- to upper-class homeowners (they have their own specialized mailing database). RSVP mails beautiful, professionally made card decks with 4 x 6 heavy-duty color paper postcards that impress those markets.
The mailing was scheduled for once a quarter, and every time the mailing went out, we saw hundreds of people coming to our restaurant with the postcards/coupons. And not only that, we made a nice profit - even after the discount (we offered a 15% discount).
We could see right away that this system worked!
By the way, I want to mention here that I prefer to offer a percentage off for the discount rather than a free item as a means to attract new clients. The reason is: if the total discount equals a high dollar amount, this means that they spent a lot of money and you still profit (as they do your servers since the tips are usually added before the discount).
A standard percentage discount can be also easier to manage; instead of having to deal with the terms and conditions of offering free items (with variables such as: does this include your expensive special of the day? Does the salad order counts as an entrée as well?).
Now, what is a good percentage to discount? The answer depends of how much profit margin you get from each of your clients.
You need to do the numbers, but you should be getting 25% or more profit margin from each client. So even if you offer a 15% discount, you still make a minimum of 10% profit from every coupon-holding visitor.
It might not looks like much, but remember that the idea is not to use these coupons as the only way to fill your place:
You need to use these coupons to bring new customers who will be so thrilled with the experience that you provide they will become regular clients.
This is what your goal should be using coupons.
So now I had the coupon system set up and running - what now?
I still needed to bring in more clients, so I started thinking about other businesses and industries that had similar types of clients that I wanted to target?
I realized that there were many other businesses that cater to the same income audience that I wanted. So this is what I did:
I invited the owners of these businesses over for a free meal at my place (this strategy is best delivered in person, since establishing a personal relationship with these people will open the doors to cooperation much quicker).
I wanted them to experience my restaurant for themselves, and offer them a deal that would benefit both of us.
When I explained my proposal to them, they couldn't refuse since their business would also benefit from my offers to their existing clients. This was a win/win situation for both of us. (In my seminar, I give you all the information about what to offer that will get them to agree and send over their existing clients).
So I had my coupons and I had my joint ventures with other business owners in place - now what? Was this enough?
When I started analyzing my current client base, I realized that 80% of my clients came through referrals or as walk-ins (because they happened to see the restaurant and they liked the look of it).
I thought: "Talk about wasting marketing dollars - so many thousands spent in Yellow Pages, newspaper and magazine ads to only bring in a very small percentage of the total traffic through the doors!"
Wouldn't it make sense, I thought, for me to redirect my efforts to create a formalized referral system that could bring in ten times more people, ten times more quality people than any ad that I had spent money on?
Referrals are perhaps the most powerful weapon that I had in my marketing arsenal and yet I wasn't using this strategy at all.
Of course, I probably already had an informal referral system, where happy clients recommended my restaurant to their family and friends. But what I needed was to create a formal, managed referral system.
Think about it: this marketing technique can be a cost-effective, efficient system. The top five benefits from using a Formal Referral System as a marketing strategy:
1. It is very inexpensive to implement.
2. It brings quality people who you'll convert into clients (won't you?).
3. It gives you instant credibility (people trust their friends and colleagues much more than any brochure, flyer or ad that you can design).
4. It fills your restaurant with people who know other people, and therefore they will frequent your business more often with the hope that they will meet their friends, colleagues, acquaintances, etc.
5. It keeps people talking about your place and therefore fresh in their minds.
(Again, in my seminar I will tell you how to implement a Formal Referral System that will bring you lots of new - and lucrative - clients).
Based on the marketing knowledge I gained from the job I had in the IT industry, I knew that there are only three ways to increase my business:
1. Increase the number of clients who come to my business.
2. Increase the amount of money that they spend per visit.
3. Increase the frequency of their visits (number of times per month/year that they dine at my place).
Attracting new clients is just one of the three ways that you as a restaurant owner has to increase your business (and it's not even the best one).
I realized that if I really wanted to grow my business, I needed to work on the three methods at the same time. In this way I would increase my profit exponentially.
So this is what I did, and the results were amazing. I will talk about the other two ways of increasing the restaurant business in upcoming newsletters.
I hope that this information was useful to you.
Feel free to contact me if you have any feedback or questions for me.
Happy Sailing,
Jose L Riesco
© Riesco Consulting and Marketing.
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