| ask the following question to restaurateurs: | | | | investment. Not bad. |
| What's their biggest challenge as a restaurateur? | | | | Restaurant B focused instead on bringing back their |
| This is the number one answer from a significant | | | | existing customers via a formalized referral system. |
| number of restaurateurs every month: | | | | They gave 100 of their best clients four gift |
| "To bring new customers to my restaurant." | | | | certificates: one for them to come back again and |
| It looks like a logical answer, doesn't? Who doesn't | | | | three others to give to their friends and family |
| want to have lots of new people walking through | | | | members so that they can try your restaurant for |
| your door? However, if I continued to my manage | | | | themselves. These gift certificates give them 50% |
| my restaurant - and after learning a lot in the last | | | | off of their entire meal. |
| years about marketing - my wish would probably be | | | | Now, remember, an average meal only cost |
| different. It would be something like: | | | | Restaurant B $15 since the other $10 is profit as we |
| "I want my existing clients to come back to my | | | | mentioned before. Even when you offer a 50% |
| restaurant over and over." | | | | discount, it will only cost you $7.50 per meal. |
| Does that mean I don't want new customers? Of | | | | Also, when you give somebody a gift certificate, |
| course I do, new customers are new opportunities to | | | | chances are that they won't come to your place |
| convert into repeated clients, but targeting your | | | | alone. Most likely they will bring some company to |
| marketing efforts towards getting new clients | | | | enjoy their meals with. Let's assume that for each |
| shouldn't make up the bulk of your expenses | | | | $12.50 (50% of the price of the average meal) that |
| or efforts. So what do you need to do? | | | | you give away, you bring back two people. Now, |
| I will explain to you by presenting a | | | | your cost is $3.75 for each. Wow! It's even better |
| hypothetical exercise: | | | | than the initial investment. But that's not all, three |
| Let's imagine that we have two restaurants with | | | | things are also happening here: |
| similar capacity. We will call them Restaurant A and | | | | If the people don't use the gift certificates when |
| Restaurant B. | | | | they dine, you're not losing any money, making this |
| For the sake of simplicity we assume the following | | | | investment a sure thing (versus spending money on |
| parameters are common to both restaurants: | | | | advertising that can't guarantee you any results). |
| * The average price per meal is $25 * The | | | | New visitors will come predisposed to like your place; |
| profit margin per meal is $10 * The marketing | | | | after all, your restaurant has been recommended by |
| investment for both is $5,000 | | | | a source that they trust more than any other |
| Now the differences are: | | | | restaurant review - their friends or family members |
| Restaurant A invests all the $5,000 in bringing in new | | | | who gave them your gift certificate in the first place. |
| customers. They invest the money in a very | | | | If your restaurant offers great food and service, |
| successful campaign and create direct mailing, | | | | they'll likely come back again since they felt that not |
| discount coupons, etc. | | | | only did they get a good deal because of the |
| When the $5,000 marketing dollars are over, they | | | | discount, but you can also give them a gift certificate |
| brought to their restaurant 1,000 new customers. | | | | for themselves plus three extra for their friends to |
| Pretty good, eh? Five dollars per customers is an | | | | try your place. This is called viral marketing since they |
| extremely small investment towards bringing in new | | | | are spreading the word about your place. |
| clients. | | | | Do you see how this goes? You can invest a lot of |
| Restaurant B does things differently. They spend the | | | | money to bring new people to your place that may |
| same amount of money ($5,000) but instead of | | | | never come back, or you can spend less money to |
| expending the entire amount focusing on bringing | | | | create a referral system that will bring people |
| new clients via advertising, they decide to invest all | | | | wanting to eat at your place, and with a solid |
| the money in their existing clients to bring them back | | | | predisposition to having a great time. |
| over and over. | | | | These techniques will, if you stick to your system, |
| They will also give them incentives for their friends | | | | bring in new repeat clients and also will establish a |
| and family members so that they can also come in | | | | referral system for you and your place. |
| and try their restaurant. | | | | In these times of economic crisis, every single |
| Who do you think will do better? Let's do some | | | | marketing dollar that you spend needs to be |
| numbers. | | | | leveraged to bring you the maximum amount of |
| Restaurant A invested $5,000 and brought 1,000 | | | | profit. Be wise and think strategically before spending |
| people who will give a profit of $10 each so they | | | | your hard earned money. |
| made a total of $10,000 profit or a 50% return of | | | | |