Discounting often is considered a dirty word in the restaurant industry. “Oh no, we don’t discount,” many operators say, running from the notion of devaluing their product in any way. Those same operators have no problem copping to giving “freebies and goodies” to loyalty-club members, however. The tactic may essentially be the same—offering customers a break to get them in the door—but the semantics key into the type of diner operators are targeting.
“Discounting became more common during the recession,” says Annika Stensson, director of research communications for the National Restaurant Association. “We’re starting to see recovery from that now,” she says, explaining, in part, the latest flight from the practice.
With the rise in fast casuals, anything that detracts from the quality of ingredients is especially taboo. “If you have a good product, devaluing it through discounting is not a good strategy,” says Rachel Phillips-Luther, VP of marketing for 103-unit Zoës Kitchen. She adds that margins already are slim without price cuts when operators spend on higher quality ingredients. Discounting is a short-term fix to bring in business when traffic is down, she says. “But as a restaurant, we need to be invested in the long-term relationship with the customer.”
Still, operators are willing to give freebies to help foster that bond. And technology is making it easier to target offers through loyalty programs and apps. “You used to just give your phone number and email,” says Stensson. “Technology from apps and POS systems can tie [personal and spending data] to patterns.”
Christina Coy, VP of marketing for Pie Five Pizza Co., says the fast-casual pizza chain developed its loyalty program because of a need for more data, “to find out more about our customers in an intimate way.” Through Pie Five’s Circle of Crust program—of which 30 to 35 percent of Pie Five’s diners are members—Coy is able to pull frequency, check averages and demographics such as age, gender and residential area. “We build a profile to help with marketing. For example, we can target neighborhoods where we have a lot of customers or where we have low penetration in different ways.”
Not only does this transactional data help marketers understand consumers’ buying behavior, it helps with recovery, Phillips-Luther says. Zoës’ data shows exactly what customers have ordered in the past 90 days, and then provides tailored rewards as a result (an example of that buzzed-about tactic of “one-to-one marketing”).
When Zoës pulled an item off the menu in January, for example, it sent an offer for a free entree to guests who had ordered that dish in the past to get them back in. For Mother’s Day, Phillips-Luther toyed with sending a goodie to any female who had a kids’ item on her history. “I can understand where the opportunity is,” she says.
While this movement towards loyalty over discounting is industrywide, says Stensson, limited-service concepts have a leg up on data collection because it’s more convenient to pay by phone at a register than tableside. Fast casuals have an extra edge due to their wide acceptance and use of apps. Nearly half of all fast casuals offer rewards or deals via app, finds the NRA—and 62 percent of fast-casual operators expect that to rise.