THE VALUE OF DISCOUNTS
My favorite marketing story involves two new upscale, chophouse-style restaurants in neighboring towns, each of which found itself struggling to establish a regular lunch crowd. Each featured a new, trendy, gorgeous building placed smack in the middle of business districts. Each put together a creative, high-quality menu and each offered very reasonable lunch prices. However, after just a year, the management of each contemplated shutting down for lunch and just remaining open for dinner.
The first of the two restaurants tried a prix fixe menu, in which entrees from the regular lunch menu were listed among a few new entrees on an insert stuffed inside the menu. The entrees copied from the regular menu were listed at the same price on the insert. Atop the insert was the heading, “Ten Items Under $10”. Needless to say, food cost on most of the entrees was not great. The idea was merely to get fannies in the seats, and it worked. Lunch business exploded in a matter of months, as word spread of the great value and affordable prices throughout the town. Meanwhile, the second restaurant wound up shutting down for lunch (it eventually re-opened, using a prix fixe menu).
Prix fixes or special menus are a major trend in the restaurant business, especially in high end restaurants and steakhouses. A cursory scan of restaurant websites yields an array of special menus and price reductions, discounts and family offers, prix fixes and more prix fixes. They are the trendy answer to the question: How does your business demonstrate value? In the above example, the answer was to copy a few entrees onto another piece of paper using a slightly different font, and place it front-and-center before the guests. This worked astoundingly well because the restaurant was able to offer the same high quality of food and impeccable level of service as it does it dinner. The price reduction went hand-in-hand with the typical high quality. It addressed the major question patrons of this restaurant had. How can I afford to eat at a place like this except on special occasions?
It is highly likely that your new restaurant has to find a way to demonstrate value. There a variety of ways to do this, but none is easier than supplying discounts and prix fixe menus. These measures are not always about the margin. In fact, they tend to be simply about getting the door open to new clientele. Prix fixes hinge on the perception of value. They juxtapose an original price with an actual price in the way that retail clothing stores stick discount tags on clothing. Customers can do the math on what they’re saving. When this is attached to the high standards of food and execution that your restaurant aims for, it can be a very powerful incentive.
On the down side, prix fixes, discounts and special menus have the potential drawback of being the only reason that your guests will come. Nobody wants to be known as “the discount restaurant”, just as no operator wants his customers waiting for the ad in the paper announcing the new offer before deciding to come in for dinner. In many cases, prix fixes often have to be the exception rather than the norm. Therefore, prix fixes that are attached to occasions such as holidays, or which are announced to be only valid for a limited time, can often be effective. Additionally, when prix fixes are issued as promotional offers to guests on an email list, or other exclusive roster, a further sense of value is conveyed. Mailing list offers incentivize guests to come in more frequently and can connote the sense that they are valued, or are VIPs.
Prix fixes have become prolific in recent years as a response to the faltering economy. With declining levels of disposable income for many families and operators looking around at empty banquettes, the need to meet guests halfway has grown exponentially. It is usually not enough nowadays to fabricate an elaborate, delicious menu and combine it with a gleaming kitchen, faultless equipment, impeccable staff and a clean, inviting atmosphere. The restaurant industry in our new economy often demands that operators find a way to demonstrate value. It’s therefore worth asking yourself this essential question: how are your guests going to perceive value at your establishment?