Making discounts count

Discount dining has become more sophisticated than simply offering two meals for the price of one. Paper vouchers have developed two glitzier digital siblings: the online voucher code and the money-off app. Martin Hickman asks what money-off coupons can do for the foodservice professional, and how they can entice diners into hotels and restaurants without damaging the bottom line

In short, during the past few years food businesses have discovered that vouchers are better used as a targeted marketing tool rather than a blunt instrument. Technology has also allowed restaurateurs to fill tables while collecting valuable data on customers’ spending habits.

“In the United States they have been using vouchers and apps and all sorts of other things for years,” says Peter Backman, managing director of the British foodservice consultancy Horizons, which monitors discounts.

“Our general observation is that is that offers are integrated much more into mainstream pricing, and the impact of vouchers on margins is much less than it was because they are much more planned. They’re also beginning to be used to collect information about customers.”

While restaurants have long advertised tasty dishes and special events such as Valentine’s evening and Christmas, half-price vouchers really took off with the global slowdown in 2008. They were aimed at customers who had less money for discretionary spending.

Despite diners previously seeing a meal out as a treat rather than an opportunity for scrimping, a public hungry for value quickly shrugged off any reticence at using a coupon. Two-thirds of 5,000 people surveyed in 2009 said the downturn had led them to try more money-saving techniques. The researchers said: “Paying by two-for-one vouchers would have had a stigma attached to it, yet now it’s almost more normal to hand over a money-off coupon when it comes to paying the bill at the end of the night.”

Branded chain restaurants with higher marketing spend and economies of scale from mass advertising have been the most enthusiastic exponents of the money-off voucher. As a result they are especially popular in the UK and the US and less so on mainland Europe, which has more independent, family-owned restaurants.

However they have spread more widely across the world, often through specialist local websites such as in Australia, or in Singapore.

With the decline of old media and rise of digital technology, the use of the paper voucher cut out of traditional media has fallen. In its place has come online voucher codes from sites such as Groupon, which offers everything from designer furniture to weekend spa breaks. The US eating out specialist, for instance, takes money from customers up front in return for discount coupons redeemed at outlets. To take one example, $6 gets you a $15 “gift certificate” off a minimum bill of $37.50 for the Italian restaurant Palio d’Asti in San Francisco.

Online voucher codes are particularly effective when it comes to encouraging the public to try new products or finalise a purchase, according to a study by Forrester’s research firm. Around two-thirds (65%) of respondents agreed with the statement “online voucher codes often finalise the decision for me if I’m undecided on a purchase” – against just 10% who disagreed. Some 71%  said they would be more likely to be loyal to a brand offering voucher codes.

Apps downloaded onto smartphones are the latest weapon in the restaurateur’s armoury. They avoid the need for paying for vouchers to be printed in traditional media (or paying a cut to other intermediaries such as voucher sites); increase customer loyalty; and enable restaurants to build up a better marketing picture of their customers, allowing them to better develop their menus and personalise marketing. And they take the pressure off margins, which were under pressure with half-price offers, even if they excluded weekends or drinks.

As well as showing the location of the nearest restaurant, the app run by Giraffe, a 50-strong British chain, offers two rewards – a free takeaway coffee and 50% off food, which can be redeemed separately after a certain number of visits. By using the app, the brand knows the customer’s email address, favourite meals and average spend.

Even within traditional vouchers, restaurants are becoming more choosy about when they can be redeemed. Rather than a half-price offer between Monday and Friday, they are now typically just for the slowest day, such as Monday, or for a free dessert, or for a main course at a set amount, say $10.

At Horizons, Peter Backman has noticed through his firm’s Voucher Tracker that while the use of the promotions always fluctuates seasonally (up in January, down in the spring, up again in the summer, peak between September and November, then down sharply in December), their overall use has fallen as the global economy has bounced back. At the same time, there is more discounting in store, with cut-price offers written into the menu rather than printed in media outlets. He said: “I think one of the problems with vouchers was that they were just blasted out with the result that operating margins were knocked sideways – that’s not sustainable in the long-run.

“It started off ‘four for the price of two, or £10 off’, but now restaurant owners are saying: ‘We’ll have a deal on a Tuesday,’ or ‘We want to attract more senior citizens’.” Restaurants are using vouchers more tactically.”

So how do you best use vouchers? Food professionals seem to be concluding it’s best done judiciously, with the sophistication of a chef seasoning a dish.

Martin Hickman

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