Effectively managing discounts is critical to driving customer loyalty.

Offering discounts is an age-old marketing tactic used to get people interested in and affiliated with a product, in the hopes that they will return as a loyal customer. We see this across all industries—from retail stores to movies and even in the sharing economy, where companies offer free trials or discounts to bring on new users.

But do these same techniques translate to success for the restaurant industry? If so, how can restaurants—particularly independent restaurants—leverage deals to get more people in the door?

Big chain restaurants with expendable cash often and easily take advantage of discount opportunities. For example, Chipotle recently offered free guacamole to anyone who could guess the unnatural ingredients in their food. Another recent example comes from popular sandwich shop Jimmy Johns, which held a promotion for $1 subs in honor of customer appreciation week. 

It may seem daunting to an independent restaurant owner to invest in these kinds of deals and promotions, but when done thoughtfully, discounts have great potential to bring in additional revenue and retain customers.

For instance, our team at CAKE recently pulled data from 400 independently owned bars and found that those who offer a happy hour saw 33 percent more transactions than those without. Despite this, only 30 percent of all CAKE-enabled independent restaurants or bars offer any discounts to customers at all, and the average of these discounts totals to just 3 percent of overall revenue.

Here are some basic tips on how to effectively leverage discounts in your restaurant:

  • Discounts do not need to be reactive: Offering treats or deals to first time customers can make them feel welcomed, appreciated, and connected to your establishment.
  • Create loyalty programs: Loyalty programs are an easy way to engage with customers, build relationships, and reward them for repeated business.
  • Offer meaningful holiday discounts: Giving moms a free meal for Mother’s Day or teachers a discount during Teacher Appreciation Week can be a unique and targeted way to drive traffic to your business for special occasions.
  • Data from CAKE has shown that holidays bring in a great deal of extra revenue across the board, with Valentine’s Day increasing revenue by 67 percent over an average day and Saint Patrick’s Day by 23 percent over a comparable day. Capitalizing on holiday promotions can ensure your business enjoys consumer preference.
  • Take advantage of technology: Platforms like Yelp and Groupon are powerful and accessible ways to promote your discounts and reach a larger base of consumers. Nearly 100 million people use Yelp, and the majority do so to search restaurants.
  • Social media is also a great channel to share promotions with an audience that is already connected to your restaurant in some way.
  • Look at the back end: Make sure your discounts are effective by monitoring on the back end of your business. Point of sale and guest management technology can track sales and give you insight into the data you need to create targeted discount programs based on historical customer purchase habits.
    • Using data, restaurant owners can see their most and least popular items and create unique promotions around what customers are demanding.
    • Restaurants can also use back-end technology to see when their busiest days and hours are, so they can leverage discounts to get more people in the door during slow times.
  • Offer gift certificates: While not exactly a discount, gift certificates are a great way to allow your customers to give their friends and family the gift of a free, delicious meal at your restaurant.
  • Don’t overdo it: While discounts can be a great way to get people in the door, it’s important to be selective and strategic about what promotions you offer. This is an area where back-end technology can be especially helpful to track and refine your discount strategy.

Running a restaurant is all about offering a great experience and building meaningful relationships with customers, so they feel a connection and want to come back again and again. The most important goal in offering any discount program is to build these relationships with your customers and foster loyalty. While discounts are not the only way to do this, innovative technologies in the restaurant space have made it significantly easier for restaurants to build and maintain discount and loyalty programs that are effective for business. 

Expert Takes, Feature