Should you give it away?

Many restaurant owners tell me they are afraid of leveraging strong offers such as free items. But if you are confident in your restaurant, and are convinced that you will get repeat customers once they have discovered your business, then the potential for growing your customer base far outweighs the expense and risk of people taking advantage of your offer and never spending another cent with you. Just consider it marketing money; you are taking money away from advertising or another campaign that doesn’t work and putting it to something that does.

The key is to consider the long-term potential of a new customer. Let’s say you offer a free glass of champagne or an appetizer as an inducement. Checks at your restaurant average $100. If a new customer eats at your restaurant only four times a year, that’s $400 in revenue; over three years, it’s $1,200.

Once you have done the math you will see that $10 cost of that champagne or appetizer becomes almost inconsequential in the scheme of things. As with everything, test it and compare the incremental increase in business to overall cost (not the one person who came in and didn’t eat anything else, but the five people who came in accompanied by their friends, and will keep coming back.). If your numbers are up because of the activity, then keep it.

An Italian ice shop at a beach resort town my family visits uses a simple, but incredibly effective campaign that demonstrates how powerful “free” can be. I was on the village trolley with my two young children while on our annual beach holiday. While getting off the tram the driver handed us a coupon for a free Italian ice at a place up the road (I came to find out later that the trolley driver was told to give the coupons out to families. What was in it for the trolley company? They were able to distribute ads for their trolleys at the Italian ice shops). The coupons were for a free Italian ice at any time. Not one free with a purchase or after midnight or when accompanied by four other people, or any other complicated criteria. Just a free Italian ice if you went to the shop.

Although I’m not much of a fan of Italian ice, I couldn’t resist something free, so off we went to find the Italian ice shop (which, by the way, was off the main drag, so they did have to get creative to compete). Not only did we end up buying a few other items (now that they had us on their turf, they had a better chance of selling us something), but we so liked the Italian ice that we went back several times, and now that Italian ice has become a summer tradition for us.

Wouldn’t you agree that acquiring a family of loyal customers was worth two free Italian ices that probably cost them less than $1 to produce? The manager confirmed that the campaign was highly successful and that their revenue had increased that month because of the free offer. This was simple, clever and inexpensive marketing that was very effective.

Use free offers to reach a new market. Put postcard offers on the windshields of cars parked in an industrial zone to introduce your lunchtime menus to local business people. Get creative and entice people to try your food and drinks. You know that once they have tried it they’ll be back.

One note on perceived value. There is a difference between real value and customer-perceived value. Make sure that you clearly state the value as the customer would perceive it. So if you are offering an appetizer, make sure to say it is an x dollar value. State the value it represents for the customer, not the value to you. Remember, money talks, so impress customer with the value of what they are receiving. “A cocktail” has an uncertain value to the customer. But $10 is $10.

The best way to encourage people to act is to remove the risk and give them something to try. Remember the power of free.

Interested in other marketing ideas to increasing your profits quickly and easily? Send me an email.

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