Note- The idea presented in this article is based on latest trends in food industry that I have been reading in newspapers, customers perspective on food expenditure habits that I saw on CNN and some hard brainstorming.
Success is not guaranteed. But it is worth giving a shot.
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I watched the CBS news channel online and they were talking about restaurant industry that has been hit hard due to the Downturn Economy. Even the high end New York restaurant like Le Cirque who enjoyed the luxury of serving the elites from Hollywood stars like Sinatra to powerful political figure like Jacqueline Kennedy, is suffering due to the slow economy. There were times when customers had to fight for the seats at the restaurant. But now the restaurant has to fight for the customers to fill those seats by even cutting the prices of the food in their menu.
No doubt it has not only affected the high end restaurants but all types of restaurants around the country. But is this the right strategy to survive in this Economic Downturn?
To survive one has to do anything that would help sustain their restaurant business. But cutting the price alone will not help as your profit margin decreases significantly when your rent, mortgage, food cost remain the same. So what should we really do as a restaurant owners? This is a big dilemma.
In the midst of this economic chaos, there is another restaurant chain McDonald’s that has increased the sales and profits during this year than last year. So why is this happening when one is losing and the other is winning?
There are several factors why McDonald’s is still profitable even during the economic downturn. One of the key reason is the Pricing. Their pricing is so economically scientific that it is virtually recession proof. Be it good time or bad time, people love the price. In fact during the bad economic times like now, people are more attracted because they want to survive but at an affordable price. Let’s face it, no matter how bad the economy is people need to eat in order to survive. I don’t think people are going to say, that economy is bad, so I won’t eat for now and I will eat later when I have the money. Truth of the matter is that even if you don’t have money people will have to eat even if they have to do it by borrowing. They can postpone the vacation or furniture they planned to buy but not the food that they have to eat in order to survive.
The question is what can you as an independent restaurant do to attract those customers who don’t want to cook at their home and try some other reasonable alternative?
Well, I can not tell what you can do or can’t do because every one’s situation is different from one another. But what I can share with you is some of the creative ideas that people have implemented to grow their restaurant business in non traditional way and may be make more profit than you would make other wise.
I read this in one of the newspapers article that there is a trend getting popular in the restaurant industry in some countries like Australia, England and also some Asian countries.The trend is that they offer “Pay What You Think Is Right”
for the food that they serve in their restaurant without ever handing the restaurant bills. Considering the tough economic situation, looking at the new trends and combining with the right pricing logic behind McDonald’s success even during the Economic Downturn, it sparks an idea of introducing the similar “Pay What You Think Is Right”
pricing model here in United States too.
During tough economic times customers have less disposable income to spent in fancy pricey restaurants. So the barriers for any body to eat in a decent restaurant is the price. In order to get rid of the price factors from the mind of the people restaurant could introduce“Pay What You Think Is Right”
pricing model. So now the people who wanted to have a good food at a nice restaurant without having to fear the pricey tag are more comfortable to go and try their food. Psychologically it takes off the price pressure from the customers mind. Now this soft sell enables them to allure more customers who would otherwise not come or would try other alternative like cooking at their own house or go for other cheaper food at some fast food chains. After having the meal, to your surprise the customers actually would leave little more than what you would charge them on the actual invoice. I think this is natural that when people are not controlled they tend to be flexible. In fact they tend to pay more as they feel obligated for the trust that you have on them for their best judgement. Well all of them might not drop the same amount. In most cases larger proportion would drop more than you would charge them. Though there might be few who might drop less than the meal value, when you average all of them, you would still be a winner. Because with this strategy, you would fill the restaurant which other wise would have been empty anyway.