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Friday, November 25, 2011

EVERYTHING ON SALE!!!


This blog is about human nature.  Everyone wants a bargain. Everyone is looking for a deal.  It's Black Friday and people were camping out, missing dinner with loved ones to get a bargain on a TV or an iPad.

It works though - I saw tents outside of our local Target last night.  We can debate how we should be focusing on one and other, and that the "reason for the season" is being forgotten, but brass tax people, if it wasn't wanted, this marketing tactic would not work.

Since everyone wants a deal, sites like Groupon, Travelzoo, Yelp, Amazon.com Local and Google Offers have all sprung up to save people money and give you a little change back for your trouble.  Yeah, you hear from my tone, that this is not really that supportive of the little guy in most cases.  My first experience with this deal was with a local radio station... they offered me these coupons that would pay for $3000 worth of advertising. It would "benefit" me because it would come in slowly, and would bring in traffic.  This is what happened:
  • No where in the document, did they say they were going to discount my gift certificates and that people would be paying $5 for $10.
  • They sold more than my contract expected
  • These "gift certificates" are still coming in two years later
  • Customers rarely tip the waitresses on what they spent before the gift certificate
  • People constantly try to use them all and dicker
  • New business was not created, because these customers were not our market
So then, I looked at Travelzoo.  They made a deal up from our menu, halved  it and told us we would get 60% of the sale.  So, math people.  Our Food/Wine goods costs are around 50%, add all the wonderful things like rent, lights, heat, employees, insurance... we have a slight margin.  So Travelzoo is asking us to lose money on the deal to get bodies into our restaurant - that is a SHORT TERM GAIN - and an overall loss.  Again, this is what I should be expecting from our Radio Ad:
  • Loss of revenue
  • Customers outside of our target
  • Employee morale hit
So, I decided, it was to big a commitment to too large an audience to experiment.  So I went to Yelp and played with their deals. They are the same commitment (they are all the same, 50% off, and they take a cut), so I wanted one that I could experiment with, turn off, modify, and play with our internal systems. So this is what I did:
  • Made it so it was very clear you could not use more than 2 at a time
  • Modified our POS to add gratuity when the cert is used to cover  the employees
  • Asked for them to be presented at beginning of the meal
The third bullet is super important.  This is why... This whole discount idea, really replaces my print advertising budget.  Unlike the snail-mailed coupons, that look kinda cheap, these sales online feel like a bargain for people to have an extravagant night out.  My servers need to know when someone has these coupons so that they can:
  • Make sure that their experience is so good that they come back (build loyalty)
  • Take the time to share what is great about the menu and the wines, and get them to have a big night out on their savings (upsell, because the majority of couponers that came in, don't spend more than the coupon)
  • Get them to have something that brings them back in a timely manner (we have dated coupons to get them back within 2 weeks)
This seems to be working.  I am working on a training plan for new employees. After my Yelp training, I was ready for Travelzoo (http://www.travelzoo.com/local-deals/California-Central-Coast/Restaurant/8371). We started this week - our sale expires soon.  I will give you updates on how we have been working, and the issues we have seen so far.  I think you need to go into this with a plan.  I worked with my Chef on how much traffic we could handle, I am printing special menus from a suggestion from another business that did this.  Overall, we keep repeating the goal:

Get the customer to become a repeat customer.

I warn against the TV and Radio deals. You see no cash come into your business at all.  It's a trade for advertising, and in this economy - cash (even if just covering costs) is king. Take a look at each program closely before you consider them.  They pay in different intervals, and some (Groupon) has not been paying quickly.  Check them out, and ask for local references. That was the best thing we did after our Radio debacle.

Have you worked with these deals?  What's your advice?  Like us on FB at: http://www.facebook.com/SocCentral and get into the conversation!