MARKETING IN RECESSIONARY TIMES
By Chris Wadham
Wednesday, May 6, 2009 
Bad economic times are here and maintaining sales stability and growth or holding off the decline can be a major marketing challenge. If a restaurant concept has a fatal flaw, this is the time it will show; however, the well-managed ones are still holding their own.
Over the next year, some operations will not make it but overall the industry will manage to survive and even thrive.
I owned restaurants during the last severe downturn in the economy (early ‘90s) and have experienced the effects firsthand of what happens during a downturn.
First, restaurants in the middle to lower end should see an increase in sales. During the last downturn, I had a middle-of-the-road diner and we saw a sales increase of 20 per cent or greater five years in a row.
Why?
During hard economic times people trade down. The high-end moves to the middle, the middle moves toward the bottom and the bottom bags their lunch and eats at home.
Being in the middle allowed us to stay full and our cheque average increased as the high-end that had moved down tended to spend more (as it was still less than they were used to spending).
So, how do we market during hard economic times?
It is very simple: Value.
Value does not mean two for ones nor does it mean dropping prices. Rather, it means having offerings that appear to (and do) have value to the consumer.
Let’s look at the high-end first as it probably has the greatest challenge ahead of them.
If your main business comes from locals, a value proposition can generate a great deal of business. If customers are tourist-based, then you must create a greater value proposition that can be marketed to the locals. Examples include a lobster fest in the winter or the package deals for Whistler currently advertised on television. A value proposition at the high-end means creating packages that appear to have greater value than a regular priced meal. For instance, if you know your customers’ birthdays (or anniversaries), you could send them a fixed price menu, which includes an appetizer, entrée, dessert and wine pairings (for each) for a set price. With careful costing and the right selection of spec wines, you can have a birthday menu that has great value to the customer yet still manages your cost of goods and generates revenue. This value proposition must be done with a high level of sophistication so as not to “cheapen” the concept. What you are doing is making sure customers come to your location for all their special events instead of trading down or going to your competition. If customers see exceptional or additional value in what you are offering, they will spend the money.
This value proposition is the cornerstone of marketing during a recession. While you need to continue with regular marketing, you must also touch your customers with a value proposition so they keep coming back. Remember, it is easier and cheaper to get a customer to return than it is to get a new customer through the door.
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“The good news is experts feel Canada will not go into as deep a recession as it did in the early ‘90s.” |
During the last downturn, our value proposition was a steak dinner for $9.99. We had three steaks (fresh, never frozen, Alberta grade A) that came with a baked potato with all the toppings and salad. This value proposition created huge customer traffic and revenue. Interestingly, the cheque average did not drop and the food cost went up only half a per cent. By the time I moved on, the steak dinner was $11.99 and still bringing in customers.
The good news is experts feel Canada will not go into as deep a recession as it did in the early ‘90s; however, the experts seem to change their minds based on the latest economic disaster. In the U.S., I don’t recall ever seeing it hit this hard and operators are going to have to work extremely smart to get customers in the door.
If you go to a food court, you will see signs hanging in almost every outlet with a value proposition. It is hardest to create a value proposition in a food court because every unit seems to have one. This means your value proposition must be based on price point as well as content. In a food court, not only must you have value, you must have a value proposition with your most popular selling items.
Now is the time to really work at the little things.
Is food quality what it should be? Is service consistently great? Does the décor need a touch up?
You are in a fight for customers, so fix everything to ensure customers keep coming back. Additionally, remember to market your location.
At the end of the day, operators are very focused on their business, making sure they are doing everything possible to keep customers coming back. Operators who are not working hard are going to be the ones who suffer the most during this recession. Once the recession is over, the hard working operators will be perfectly positioned to see great sales increases when everyone starts spending money again.
Chris Wadham is president of Restaurant Office Intelligence Inc., a full-service hospitality operations consulting firm. Chris brings a great deal of knowledge to the company. In the past, he has owned a very successful restaurant company, opened Canada's Wonderland, was director of ancillary food services at Vancouver Community College and Expo ‘86 and worked in various restaurants in Canada. Contact Chris at chris@ro-i.com.
