Ways to make daily deals work for you

The oldest joke in foodservice goes something like this: “How do you make a small fortune in the restaurant business? Start with a large one.”

It is no secret that the lifeblood of success in foodservice is repeat business. We are one of the few industries outside of Hollywood whose core assets, customers, walk out the door every single day. But follow the logic: before customers can come back they must first come in, and then see value in returning. So, to promote first-time patronage, food- service operators throw hundreds of millions of pounds at media advertising every year without ever truly knowing if the resulting traffic bump was due to choice or chance. It is wise to remember why marketing experts call initial visits “trial”.

Who does not want more customer traffic? How many of you would be willing to stand outside your restaurant and hand a £5 (or £10) note out to any brand-new customer that would be willing to come in and spend £10 (or £20) to try your restaurant for the first time? When I ask that question at the live seminars I lead, the majority of hands go up, so I am guessing most Peach Report readers would agree. This pervasive willingness to offer incentives to first-time patrons is predicated on the operator’s certainty that the staff will consistently deliver a positive experience (menu, service, quality, cleanliness) that ensures return visits.

This mindset gave birth to the discount voucher in the 1960s. Restaurateurs now had a way to track their marketing ROI but it came with a companion moral dilemma: “Am I cheapening my brand by discounting the price?” No matter, vouchers quickly took off: the QSR segment (especially pizza brands) jumped in with both feet, while full-service brands held back. That was before the 2008 Great Recession of course, when discounting by any means to drive traffic in a sputtering economy was embraced by every foodservice segment.

Out of the economic free-fall of the past three years a new kind of voucher platform has emerged, the so-called “collective buy-ing/social media” daily deal brands led by Groupon, Living Social (owned by Amazon), Google Offers and others. These companies differ in two significant ways from the traditional cut-out voucher vendors: first, the merchant pays no money up front. (Groupon, for instance, splits the discount amount 50-50 with the merchant. If the deal is £20 of food for £10, Groupon gets £5 and the restaurateur gets £5 for every consumer who signs up.)

Second, the “deal” or discount does not go into effect until a minimum number of diners sign up for it and then it is limited to a specific time period. This encourages the sites’ users to encourage all their friends, families and neighbours to register for the daily deal they receive early each morning via email. The discount codes are redeemed at the restaurant in person via printout or mobile phone bar code and checked off against the confirmed purchaser list. Redemption rates are reportedly much higher than the traditional cut-out Sunday insert voucher, especially among tech-savvy Millennials.

These companies have been wildly successful. Consumers across socio-economic strata use them. Merchants, for the most part, like the volume of business they bring. But there is also some discontent and hand-wringing, too. When restaurateurs complain about Daily Deal companies, they cite four main issues. So if you are thinking about jumping in, let us address each concern relative to what you can do to turn them into deal-makers instead of deal-breakers.

“The 50-50 financial split is too high.”
The deal is the deal, and you cannot negotiate a higher percentage split. So resolve to make money by converting first-time guests into long-term patrons. Train your team to be world-class in suggestive selling and hospitality. This does not mean exclusively targeting voucher-bearers for upselling, but being habitually consistent at this art with every customer.

“The bearer is already your customer.”
If this is the case, then be pleased to learn that they are also users of Groupon or Living Social, et cetera. You occasionally buy a dessert or a drink for regulars don’t you? Chalk up the voucher to the same discretionary fund. Do not stoop to sarcasm or snide comments.

“No guarantee the first-timer will ever come back.”
That is true for any customer, whether they have been lured in by a discount or not. Do not treat the coupon-bearing customer with disdain or disrespect. See them for the ten-year-spend potential they represent if you can convert them into regulars. Kill them with kindness. Educate your staff and managers to display both grace under pressure and extraordinary service when it gets extraordinarily busy. This extends to the facial expression or body language the cashier or server or bartender or manager uses when the coupon is presented. And finally: make certain you are staffed properly for the expected rush of business. Emphasise any process that fosters more hospitality in and around each transaction.

“It attracts only deal-loyal, not brand- loyal customers.”
All traffic is not profit- able traffic. There is no doubt that a certain percentage of your coupon customers are there only for the discount. But the belief that the majority are is not supported by research. Last month the Chicago Tribune shared a Technomic survey of 5,000 restaurant-goers’ attitudes toward daily deal couponing sites that offered some surprising insights:
• 48 per cent of deal buyers used the coupon at a restaurant they have not yet visited, and 25 per cent used it at a restaurant they have only visited once before.
• 67 per cent later returned to the restaurant without a daily deal.
• 83 per cent recommended the restaurant to family and/or friends.
• 34 per cent posted a review of the restaurant on a site such as Yelp or Zagat, and 25 per cent wrote about the restaurant on their Facebook page.

While the process of social media/daily deals is digital, the fact remains that people are analogue. Leverage high tech to bring more business in, but focus on “high touch” to bring those people back. Service is the invisible product. Do not drive more traffic to your business without first having quality, service and cleanliness hard-wired into your people and processes. Great marketing can kill a bad business.

You can follow Jim Sullivan on Twitter @Sullivision and get his product catalogue of training tools and resources at www.sullivision.com