Discounting ‘here to stay’

Speaking at the Allegra Marketing in Foodservice Conference, Allegra projects director Steve Gotham pointed out that only 37 per cent of branded restaurants were offering discounting promotions in Q2 2014, compared to 50 per cent the year before.

Although this trend might indicate the end of a marketing technique many operators see as a vicious cycle, consumer behaviour shows the opposite. In the same time span people using discount vouchers when eating out grew from 9 to 11 per cent at breakfast, 12 to 14 per cent at lunch and 15 to 20 per cent at dinner.

Vouchers and promotions are still among the five leading reasons consumers choose a particular restaurant for lunch and dinner, particularly in the branded segment.

“Is discounting activity yesterday’s news? Consumers effectively disagree,” said Gotham.

Positive impact on sales​

Though some have argued that discounting had a negative impact on profitability​​, statistics show that 67 per cent of operators using promotions have seen a 10 per cent increase in sales as a result, with 33 per cent believing it has also boosted profitability by 10 per cent.

Half of industry executives disagree with the idea that customer usage of vouchers is declining, and 54 per cent think the restaurant sector is now inextricably stuck with discounting activity. However, 77 per cent of them believe discounting has weakened restaurant loyalty.

“Discounting has maybe weakened customer loyalty; it has challenged it for sure, but by no means has it permanently damaged it,” added Gotham.

Personalisation​

According to him, the way to restore customer loyalty while still offering discounts and vouchers is to target discounts and use them as loyalty rewards.

For example, PizzaExpress now offers meal deals that are exclusive to its email customers; Byron invites Byron Burger Club members to pop-up events, launches and tastings; and Chilango is offering free burritos (and equity) to investors in its mini-bond.

Social media​

Whatever targeted approach they decide to take, operators need to leverage social media in their marketing efforts. For 71 per cent of consumers, vouchers and discounts are the main reason they follow restaurants on social media platforms (22 per cent do it out of loyalty to the brand).

Restaurants should also get familiar with the typical discount user profile: A female aged 25-24, likely to live in London or the South East, and a regular social media user.