Don’t Discount Yourself Out of Business: Tips on Creating Customer Value

By Andrew Carlson, Foodable Industry Expert

How do brands bring in paying customers through the doors? And how do they create customer value in hopes of enticing consumers to return again and again? The biggest mistake some restaurants may make is trying to attract new customers by discounting their products. This is a mindset that will make your business fail.

Discounting your products not only shortchanges your worth, but your brand also loses customer value. One of the biggest reasons customers don’t value your product is not because they don’t think that it's worth it — it’s because you don’t think that you’re worth it. When you discount your products, what you’re actually telling your customer is that your food or drinks are not worth what you charge for them.

It’s really that simple.

Now, giving guests a discount because they had a poor dining experience at a previous visit or giving customers a discount because they work for the industry and drop in a couple times a month is completely different.

But giving discounts to people who have never stepped foot into your restaurant, just for the sake of wanting to make them a regular customer? This is not the way to do it.

Why?

They’re not loyal.

This type of guest will continue to wait for the next discount that you provide to come back into your establishment. That’s not the customer that you should want to have in your restaurant. How can you avoid this? The key is to target the right audience and to utilize loyalty programs.

How Do Discounts Downgrade Your Business?

The question that I always get after I talk about discounting products is, “How is it possible to discount yourself out of business?”

Most restaurant owners, while passionate about cuisine, foodservice, and hospitality, are often not students of their own numbers. If you track your numbers closely, you can see how discounting multiple tickets quickly adds up to what could have been in your bank account!

Think about it this way: The money that you’re missing due to heavy discounting could have been better spent on a training program for your staff. It could have been spent on raises to your high performers. It could have been spent on a manager retreat or holiday party.

But instead, it was thrown onto a fire all for the sake of (hopefully) grabbing the attention of someone who wouldn’t have stepped foot into your establishment prior to the discount. (Of course, there are always exceptions. But if you're going on the route of the discount, educate your staff on how to properly discount an item and why there should be a manager to approve all discounts throughout every shift.)

This is why I’m a firm believer in loyalty programs and why I’m not a big fan of discount websites.

Loyalty programs give you the ability to discount items in a way that gets the customer coming back time and time again, and rewards them for being loyal. I like to think of loyalty programs as a magic trick. The basis of magic is to create an illusion to make the audience believe something to be true. You are flipping their world upside down on what’s reality and showing them a different perspective.

That’s exactly what loyalty programs do.

To the customer, they see that the more points they get, the higher the discount. What’s actually happening is that the customer has to keep returning to your establishment to get these “discounts.”

So, how is that any different?

Instead of your products being perceived as not worth what your restaurant normally charges for, you are actually putting more value into your products, and starting to shift consumer buying habits into your favor.  

What Loyalty Programs Work Best for Your Restaurant?

I’m not recommending any products, but I do believe that punch cards, often seen in smaller establishments, are not enough to keep loyal customers — that method provides no way of reaching out to consumers and reminding them that they have points to spend.

Implement a program that allows you to capture email addresses or phone numbers to send your customers updates and promotions currently running at your restaurant. Make sure that the program is separate from your POS, as to not slow down your speed of service. Today’s higher-tech loyalty programs use an iPad or tablet-based system that allows customers to check in themselves through a key card or mobile app on their phones.

The main focus is to look for programs that offer great customer relationship management (CRM) systems to communicate with your customer base.  

Do the research on what companies work best for you, and before you purchase, have a clear understanding of why you’re getting a loyalty program. All of this will help you in purchasing the right one for your establishment.

Remember, the reason behind opening your restaurant was to share food that matters to your community. Don’t just give them a reason to come in once — create customer value and give them a reason to come back again and again.