How to avoid a costly promo disaster in your restaurant or café

Offering promotional deals is a tried and tested way of driving new customers to your hospitality business, but how do you make sure your promo doesn’t backfire?

Coupons, giveaways and discount deals are a top choice on every hospitality business’ marketing menu, but they don’t always go to plan.

A Chengdu-based hot pot restaurant recently gained global media attention when it was forced to close after its ‘all-you-can-eat’ offer left it more than $100,000 out of pocket.

The restaurant created a deal that saw customers receiving unlimited food for a month – all for the cost of a $25 membership card.

The result? It was soon serving over 500 customers per day, but at a loss.

A world of promotional opportunities

Restaurant and Catering Australia’s Deputy CEO Sally Neville says the popularity of promotions in the hospitality space is driven by a crowded marketplace, with restaurants using them to grow their share of new customers, causing “operators to promote their business to grow their share of new customers and to remind and incentivise past customers to return”.

This has created an array of promotional options that’s “as broad as the industry itself”.

READ: Standing out in a crowded marketplace

“From 25 to 50 percent off menu prices, to ‘buy two get on free’, to ‘vouchers with incentive to return, to ‘complimentary glass of wine with a main course’, to ‘special pricing’, to ‘free BYO’, to ‘value add’ – the list goes on,” said Neville.

And the distribution channels for these promotions are just as diverse, including traditional methods like print vouchers and letter drops, or more new-age ones like email marketing, or apps that can push messages to customers as they pass nearby the shopfront.

While each of these types of promotion and methods for delivering them can be effective, it depends on what business owners are willing to put into testing and learning.

“The success of any promotion depends on the product on offer and its perceived value by the customer, the distribution reach of the channel, the age and demographic of the target market, as well as their preferences and trust in certain channels over others,” Neville said.

5 ways to make sure your promotion hits the mark

In the past 10 years, new ways to promote restaurants or cafés caused businesses to see varied results as they trialled each new option.

According to Neville, there are plenty of cases where hospitality operators got burned in the process (though perhaps none so extreme as the recent Chinese hot pot example).

“Businesses sometimes oversold the vouchers which led to an influx of business that was low or no profit which meant that the product offering was compromised,” said Neville.

“The result was a poor customer experience, so although there was quick revenue generation, the venue’s reputation was damaged in the eyes of the consumer if the experience was poor.”

What can you do to keep your promos on point? Neville offers the following five tips:

1. Keep the offer simple – “Customers don’t like being surprised or embarrassed by hidden fees and charges.”
2. Make the message clear – “The offer must ultimately work for the business, so if it’s only cost-effective to make your deal available from Monday to Thursday, the wording must make that clear in order to be understood by guests, staff and operators.”
3. Ask for feedback – “An invitation to have a coffee or a glass of wine with the owner will generate loyalty and provide valuable feedback from their guests on what promotions are valued. Staff will also have ideas given they are at the front line of the business.”
4. Test, measure, rinse and repeat – “The owner or manager must assess the performance of all promotions to determine whether they are generating profit or simply turnover. Has the promotion brought in new business that is likely to return? After all that’s the ‘holy grail’ of hospitality – raving fans that return and spend.”
5. Build your promos into long-term marketing plans – “New businesses have a shorter honeymoon period than ever before since we have more businesses opening than in the past. A plan to continuously engage with your customers throughout the life of the business is imperative to keep the business growing.”

As competition for new customers remains fierce among retail and hospitality businesses, the promo phenomenon has become par for the course.

For business owners, it’s become clear that the selective use and constant refinement of these dollar-driving deals must be a mainstay in any marketing plans with the clear aim of driving foot traffic, repeat customers and increasing revenue.