Combating Groupon-type Deals Sucking $280M from Independent Restaurants

The Gramercy Tavern

Gramercy Tavern selected 2nd best restaurant in the United States by a panel of 176 food critics for The Daily Meal

In 2011, Americans ate out 60.6 billion times. That’s down from 62.7 billion in 2008 and flat compared to 2010. Of the 2.1 billion visits lost, 2 billion would have been to independent establishments.

This lost of visitors was compounded by daily deal providers sucking value away from local merchants. In 2011, revenue for daily deal providers like Groupon grew 138% but visits to independent restaurants were down 4%. According to Bill Bice of Coverboom this works out to $280M lost by independent restaurant owners.

“The number one way small businesses can compete with chains is by nurturing the relationships they have with the customer,” says Joe Erickson, editor of RestaurantOwner.com, an online resource and networking tool for independent restaurateurs. “Collect their names, birthdays, anniversaries, and their specific likes, and use that [information] to start a direct mail campaign.”

Savvy restaurateurs know how important it is to keep their customers coming back. That’s why they take the time to collect  information about their guests. Knowing your customer gives you the opportunity to send them a birthday card or invite them back during special promotions.

Building and maintaining a customer database opens up unlimited opportunities to directly market to your guests. Frequent diner programs, email promotions and announcements of upcoming promotions are just a few of the methods available to keep your guests coming back.

This is database marketing where the basic idea is to build a close personal relationship with each customer that is based on quality, service, friendship, loyalty, and communications. And, not based on discounts. You would not give a neighbor $5 for helping you move furniture. It would be an insult. Instead, you offer a cup of coffee or a beer, and 15 minutes of chat around the kitchen table. That is the kind of relationship that database marketing creates. Discounts send the wrong message: we are cheap guys whose basic product is overpriced. We want to buy your loyalty. We don’t care about you. We care about your money.

All businesses have Gold customers – a small percentage that provides 80% of your revenue and profit. With a marketing database, you can identify these Gold customers. Then you develop programs designed to retain them. You use resources that you could not afford to spend on all of your customers. Profits come from working to retain the best, and encouraging others to move up to higher status levels.

The Customer Connection has spent the last eighteen years helping restaurants to improve sales and profits. As President Judd Goldfeder explains: “we find that any communication, irrespective of whether or not there is a promotional offer, will increase visits…However, the right promotional offer to the right recipient at the right time will dramatically increase response.”

Before TCC, one restaurant had an average of 3,934 visits per week TCC set up a special promotional program. Visits jumped to 13,924 and sales grew from $129,700 to $464,900. In addition, sales per visit increased by an average of almost $2.00. Contact us and we tell will tell you how they did it.

Employee satisfaction is also very important to growing a business. According to Christopher Groening at University of Missouri:

We found that keeping your employees satisfied with their work experience, providing them with challenges and allowing them to have a sense of ownership in the business can have a tremendous effect on customer satisfaction and loyalty.

Tony Palombino, who owns Tony Boombozz, a gourmet pizza shop in Louisville, Ky., advises all restaurateurs to use the freshest and highest quality ingredients they can afford, because customers will notice the difference. Although the cost of extra virgin olive oil has nearly doubled in the eight years that Palombino has been in business, he insists that it is an irreplaceable component of his signature pizza crusts.

John Foley, a former restaurateur and writer of The Restaurant Blog on AllBusiness.com, believes that changing the menu frequently is one of the easiest and most effective ways to differentiate your small restaurant from competitors. “One of the things people don’t want to see is the same thing on the menu day in and day out. Menu changes not only keep you coming back, there’s an adventure there.”

Independent restaurants have a long way to go in using the potential of the Internet. What most online users really want from a restaurants site is probably to look at a menu. Yet, only 40% of independent restaurants have online menus.

According to research done by Lab42, 95% of respondents use their smartphone prior to dining out but, 95% of independent restaurant don’t have mobile sites.

You should also remind your customers how important it is to shop with locally-owned independent businesses. Neighborhoods with thriving independent businesses saw home values outperform citywide markets by 50% over the last 14 years. Counties with a greater concentration of small, locally-owned businesses have healthier populations with lower rates of mortality, obesity and diabetes.

Some restaurant facts:

  • According to the National Restaurant Association, industry sales are projected to be $660.5 billion for 2013.
  • In 2013, New York’s restaurants are projected to register $33.6 billion in sales.
  • in 2013, restaurants account for 750,900 jobs in New York — 8% of employment in the state.
  • In 2011, there were 42,610 eating and drinking places in New York.
  • In Eliot Engel’s 16th Congressional District there are 1,212 eating and drinking establishments that employ 15,371 workers.
  • In Nita Lowey’s 17th Congressional District there are 1,708 eating and drinking establishments that employ 21,665 workers.
  • According to the NPD Group, for the year ending Spring 2012, the number of independent restaurants, which have been on the decline since 2009 posted a slight increase of 984 locations, bringing the total of independent restaurants to 320,193.
Restaurant growth

Restaurant growth

Pistis Database Marketing

For more information contact Terrance Jackson:

terrance.jackson17@gmail.com

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