Hospitality Industry Resource Center Reference Library

Restaurant Marketing - Both Art & Science

by Aaron D. Allen, Quantified Marketing Group

Restaurant marketing is both an art and a science that is shrouded in mystery for far too many restaurant owners.  Unfortunately, many advertising sales people don’t want you to know what’s really working.  They want you to think that the television spots your competitor is running with them will be the answer to all of yours sales-building challenges.  Not so.

This brief report seeks to outline some of the restaurant marketing techniques and principles that are working in successful restaurants around the country.

Let’s get started with some of the most frequently asked questions restaurant owners ask when seeking a better way to market their restaurants:

What are the keys to great restaurant marketing? There are several components of successful restaurant marketing.  This isn’t an all inclusive list, but some top strategic marketing issues include:

BRANDING:  There has been lots of hype over the last few years about branding.  We’re all being told we need to do more branding and a better job branding, but no one has really stopped to explain what a brand is and how you build it.  A brand is a promise.  It’s what customers, employees (Internal Customers), vendors, the media and all other key constituents come to expect in dealing with your restaurant.  Brand-building is closing the gap between what you promise and what you deliver.  A strong brand is one that has alignment between the promise and execution.  It’s not something that happens when you advertise, and it’s not that people recognize your logo or recall your advertising.

POSITIONING:  Positioning is an underleveraged restaurant marketing component.  Positioning is the place you hold in the customers or prospects mind relative to the competition (the cheaper choice, the higher quality choice, et cetera).  Effective positioning involves incorporation of your Unique Selling Proposition (U.S.P.).  The USP is the one thing that only you can claim.  It’s a point of differentiation that the competition either cannot or does not claim.  An example is Burger King versus McDonald’s.  If Burger King can convince you that a flame-broiled burger tastes better than a fried burger, they’ve won the war because McDonald’s will never go into all 14,000 stores and rip out fryers to install char-grilling pits.

DUE DILIGENCE:  Restaurant marketing doesn’t happen in a vacuum.  Effective restaurant marketing must be built on a foundation of fact and knowledge about the market, your competition, your customers, your Internal Customers, financial history, marketing history, the industry, and outside forces that will impact your business.  It’s a lot to worry about, but restaurant marketing has to factor these considerations into the overall strategy.  Not even Coca-Cola can afford to market to everyone all the time, so effective market research and due diligence can help you be more effective in your restaurant marketing efforts.

MENU MIX:  Every six to twelve months, you’ll want to conduct an analysis of your menu.  This will include profitability analysis and competitive menu analysis.  To keep your menu fresh, relevant, and profitable, you’ll need to know specifically how each item on your menu is performing and also how it stacks up next to your top competition.  Think of each item on your menu as a tenant leasing space and it has to earn its right to the space you’ve granted it.

TRAINING:  Marketing, human resources, operations and training are inextricably connected.  You’ve heard before that great marketing will just kill a bad operation faster.  That’s because if you send people into an operation that is performing at a B- level or below, people will have a bad experience and your money would be better spent on operations improvement rather than marketing.  Training is a vital component of restaurant marketing for this reason.  Your training will have to go beyond just employee orientation.  You’ll need an ongoing program that constantly improves and evolves your staff competencies.  It’s also a good idea to include a restaurant marketing component in your training program so that you have a staff of ambassadors to help your sales-building efforts.

There’s only 4 ways to increase sales for your restaurant: Sales-building is so much easier when you know how it works.  And fortunately, the methodology is much easier with the following definitions.

Every effort you could make to build sales falls into one of just four categories.  Every promotion, advertisement or offer will push one of the following four buttons:

NEW TRIAL:  These are first-time customers buying from you for the first time.  They will establish their opinion of your company during this first purchase and decide what percentage mindshare to award you in the future.  New trial is the most expensive of the four sales-builders as acquisition costs are typically 7-10 more costly to execute than the other sales builders.  However, it is impossible to increase frequency, check average or party size without customers to start with.  After a customer base has been established, however, it is advisable to focus considerable efforts on the sales-builders listed below.

FREQUENCY:  Is how often existing customers return to you for future purchases.  Frequency is generated by developing enduring relationships and loyalty among customers.  While it is rare to disagree that frequency is important, an alarming number of businesses fail to appropriate the needed mindshare and resources to developing successful programs.  Consider that the average Pizza Hut loyalist purchases a pizza every 30 days.  If Pizza Hut can get this group to purchase just one more pizza in those 30 days, they’d double their sales.  So why do they blast the airwaves versus developing more successful frequency programs, such as bouncebacks, loyalty programs and the like?  You’ve got me.

CHECK AVERAGE:  Often refers to the total purchase for each transaction.  In this instance, however, we are referring primarily to per person check average – the amount each guest or customer spends at purchase.  Check averages can be built through price increases, suggestive selling programs, effective internal merchandizing, and through add-ons or upgrades to name but a few techniques.  You’ll want to make sure that the increase in check average remains consistent with your overall positioning strategy.

PARTY SIZE:  As the name would suggest, Party Size refers to the number of people in each party.  Do customers primarily visit alone, in groups of 2, groups of 5 or more?  Whatever the number, you’ll want to devise programs that encourage customers to bring more of their friends with them for each visit.  Examples of programs include bus drivers eat free, birthday clubs and refer-a-friend tactics.  Encouraging party size turns customers into advocates and enlists them as part of your sales-building team.

When asked what was the single most important event in helping him arrive at the theory of relativity, Albert Einstein was reported to have said, “Figuring out how to think about the problem.”  Use the above definitions help you better frame the challenge of growing your sales. 
                 
How much should we spend on marketing our restaurant?

There are several rules of thumb and ratios in the restaurant industry and there are some for restaurant marketing as well.  A typical restaurant should allocate 3% - 6% of sales to marketing.  It’s also a good idea to allocate this money proportionally to your sales volume.  Meaning, if July is your busiest month, you should spend a proportionate amount on your restaurants marketing budget in that month.  Fish where the fish are biting.  Some restaurant owners look at slow periods and think that’s when they need to spend money to drive sales, so they spend a big chunk of cash trying to build a happy hour business and forgo building on top of their busy periods.  Fact is, there is a reason people aren’t coming in from 4:00 PM – 6:00 PM and you’ll be sending valuable marketing dollars down a black hole if you try to build this period.  There are nearly one million restaurants in the United States and probably only 2% of them are busy from 4:00 PM – 6:00 PM.  Marketing can’t change behavior; it can only influence existing behaviors.  Spend your marketing dollar where it will have the best return for your restaurant.

How do most restaurants market themselves?

It’s sad really, but 80% - 90% of restaurant marketing budgets are spent against new trial – getting a new customer to visit for the first time.  This is the least effective place to spend your money.  The majority of new trial efforts are spent against mass media advertising, which is costly and has dismal return on investment.  The fact is, new customer acquisition is 7-10 times more expensive than building restaurant sales through increased frequency, check average and party size.  But restaurant marketing isn’t always about what’s most effective, more often, it’s about what everyone else is doing.  Restaurant operators see that their competitor is on television or in the yellow pages or on a billboard and that they should be too.  They do this without regard for what’s working.  Restaurant owners have to wear so many hats that sometimes they just do what’s easiest – they write a check for mass media advertising and hope for the best.  Mass media is often more about feeding ego than driving sales.  It’s also impossible for most companies to compete in a toe-to-toe battle with the big guys.  Subway spends $290 million per year on television.  They can do that because they are a multi-billion dollar enterprise – a title less than 100 restaurant corporations in the world can claim.  The question you’ll have to ask yourself is do we want to jump off the bridge just because so many other people are?

Who is doing a great job marketing their restaurant & what works about their restaurant marketing efforts?

There are several examples of companies large and small that are doing a great job.  I’ll give you some examples of each.  On the larger side, Starbucks is doing an awesome job.  They spend more money on training than they do on advertising.  They do a great job with their internal merchandizing and their menu is very focused.  They don’t spend money on mass media and instead focus on a core product line and flawless execution.  They are now the fastest growing take-out operation in history.

A great example of a regional chain that’s doing an impressive job with marketing their restaurants is Firehouse Subs.  They have strong internal merchandizing, training and culture programs.  They also have a very impressive direct mail program.  They send out quarterly saturation mailers offering a free sandwich with no strings attached.  The mailers draw double-digit responses and drive equally impressive comparable store sales improvements.  Research showed that 70% of the people that redeemed the cards became loyal customers visiting with a much higher frequency than the industry average.

Examples of successful independent restaurant marketing abound.  Charlie Trotters is world-renowned, but you’ve probably never seen a billboard or television spot for them.  Charlie Trotters does an incredible job with promotion and positioning the namesake chef as a culinary expert.  When you visit Chicago, you want to go to his restaurant just for that reason – not because of any advertising he has done.

What are some examples of good restaurant marketing tactics?

There are literally thousands and thousands of marketing tactics that you could employ to lift sales at your restaurant.  This causes many restaurant operators to think that there is a silver bullet out there that they need to find.  There are no silver bullets.  One hit wonders may be out there to give you a big spike in sales, but those are rarely sustainable over time.  Great marketing is about solid operational execution, effective positioning and the cumulative results of marketing inside the four walls of your restaurant and in the immediate trading area – not taking over the airwaves.

That being said, some good examples of successful restaurant marketing tactics are email marketing, bounce-backs, affinity marketing programs, publicity through event marketing, partnerships with other local retailers and, of course, internal merchandizing such as bathroom signage and menu merchandizing.

How do I measure the effectiveness of our restaurant marketing?

If you cannot prove the dollars you spend persuade people to do business with you, you should not advertise.  If you can’t see a direct relationship between marketing and increased sales, your marketing isn’t working.

One piece of analysis we have conducted for Clients is to compare the variances, period over period, for sales and marketing expenses.  We look to determine a correlation.  It’s amazing how frequently we find that there is absolutely no correlation between sales and marketing.  The graph here is an actual Client chart that shows this relationship.  This was an independent restaurant operation that had a steady period over period sales increase of around 8%.  The other line represents their advertising expenditures.  As you can see, there is absolutely no correlation between the two lines.  For this independent operator, that represented about $150,000 in advertising dollars that could have gone straight to the owners back pocket instead.  This restaurant owner had solid operations and he wouldn’t have felt any change in his sales volume for at least a couple of years by canceling his advertising.  The advertising wasn’t working.  After some modifications, we ran the analysis again and found that each dollar spent had a direct impact on sales and showed a positive return on investment that could be measured.  Before the measurement wasn’t there, so it was hard to say with absolute certainty if the advertising was working.  The poor marketing was masked by the increases in sales, but one had nothing to do with the other.

What is Local Store Marketing and Neighborhood Marketing and does it work for restaurants?

Local Store Marketing and Neighborhood Marketing are basically the same thing.  It’s a marketing philosophy that seeks to build competitor proof relationships with customers and employees without a reliance on mass media advertising.  It’s about all of the elements we’ve discussed so far in this special report plus a whole lot more.  Simple fact is, unless your one of those 100 restaurant companies that’s doing hundreds of millions of dollars in sales per year, you can’t afford not to focus on Local Store Marketing over advertising.  Don’t fall into the trap of jumping off a bridge (and advertising) just because everyone else is.  The competitive advantage is found in the fact that many of your competitors are not running effective Local Store Marketing for their restaurant.  Local Store Marketing and Neighborhood Marketing are potent tools in a variety of retail business arenas, and the restaurant business is definitely an environment for which it’s well suited.

A word of advice on making offers:

Surely you’ve heard them before too – those radio commercials that start off with some incredible offer that gets your interest.  Then the final one-third of the commercial is dedicated to the restrictions, disclaimers and legal jargon that take all of the air right out of the balloon.  Trust is eroded, apprehension fueled and relationships damaged.

Or maybe you’ve seen those television commercials for a new break-through drug that solves one problem, but then the disclaimer advises you of the 15 new ailments that you’ll have for taking it - many of them seem worse than the original problem the drug was supposed to fix.

Why do companies play this game? Because, in their headlong pursuit of short-term volume goals, they have focused on creating transactions -- building traffic count, creating trials, “butts in seats” -- and not on building competitor-proof relationships and garnering trust. Why? Because that’s what companies typically measure, and that’s how their managers are held accountable. So companies make promises, hoping that the more powerful and grandiose the promises are, the stronger the consumer response will be. But the more powerful and grandiose the promise, the tougher it will be for companies to keep it.  A typical offer today has more strings attached to it than a gathering of the Muppets, Fraggle Rock and cast of Pinocchio.

Overpromising engenders customer disaffection, disappointing those who were attracted by an expectation that remains unfulfilled. The long-term consequences for companies, customers, and stakeholders are anything but positive.

Instead of overpromising or making offers impregnated with restrictions, make offers that are totally free of strings and disclaimers.  For instance, your restaurant may try “Come in on your birthday and your meal is absolutely free!”

Now I know what you’re thinking; restrictions are to prevent having the company taken advantage of by problem customers.  Sure, you’re right.  But the fact is that 5% of the population is out there to take advantage of you no matter what the restrictions.  You can’t run your business looking out for the 5% if you want to attract the other 95%.

When you make an offer free of strings, the benefits to you transcend the immediate sales induced by the offer.  Customers and potential customers stand up and say “wow!”  They take notice, and even if they don’t come in for the offer, they’re far more likely to think of you as a restaurant deserving of their trust and attention.  You are also far more likely to benefit from the explosive word of mouth that is generated by a compelling offer free of restrictions.

Give it a try.  You’ll be pleasantly amazed how much the world pays attention and also how few people there are out there that try to make you regret the offer.

The fact that marketing in not easy is part its competitive advantage:

Effective restaurant marketing isn’t easy.  It takes a lot of careful research, analysis and testing.  It’s also ever evolving, which makes it even more difficult to master.  The most difficult part is that restaurant owners are in the restaurant business, not professional marketers.  But don’t be discouraged.  It’s not all gloom.  The fact that effective restaurant marketing is difficult to master is what can give you the competitive advantage.  Resist the temptation to change everything at once or to go it all alone.  You can start small and build your marketing competencies over time.  In the beginning, do simple programs so you can execute them well and measure the results.  And if you’re not sure if your current marketing is working, save your money until you can prove the dollars invested persuade customers to buy more and buy more often.

Aaron Allen is founder/CEO of Quantified Marketing Group, an Orlando-based strategic marketing consultancy specializing in foodservice & hospitality. Email Aaron at: aallen@quantifiedmarketing.com