Cost Reduction

Ensuring Profitable Promotions

A really good take out place in my neighborhood is offering 10% off for police officers, students and teachers. I kind of cringed when I saw this discount. While the sentiment is good they just might lose their shirt on the promotion. Food service is a notoriously a business where profit margins need to be managed carefully. Margin is the profit that is left over after all other costs are calculated. Since food is a perishable item, margins can vary and smart decisions need to be made with products.

The intention is a good one. Clever marketing can be a way to draw crowds, move slow moving items or build loyalty. In addition to hard dollar profits a restaurant can also build intrinsic value. Building intrinsic value is likely what this take out restaurant was attempting to do by serving a segment of the community that could use a break.

 When designing promotions consider the following:

Create A Win/Win Offering

Create a Special at a low price using items that may need to be disposed of if they are not used within a week or so. Utilize your restaurant management software to stay on top of inventory and minimize waste. If you are in an area that is rich with students, military personnel, police officers or any other demographic you want capture it’s a great idea to market to them specifically.

 Define the Parameters

If you choose to offer discounts to students, will you require that they display a student ID? Is any level of school acceptable? Will the promotion be ongoing or for a limited time? Mismanaging expectations on deals can lead to customer complaints and negative online comments which can harm your establishment more in the long run than a one time discount.

 Keep on Winning

Naming a food or beverage special after an employee who helped design the item creates a strong connection. Employees will likely take ownership over the really amazing entree selection they created with their favorite ingredients. It might be an in-season vegan entree or a ‘breakfast for dinner’ item. Your employees will no doubt have great ideas. Customers who want to know what the staff favorites are may feel more connected or engaged creating a deeper and more memorable dining experience.

 A Strong Menu is Part of Branding

When you are designing your promotion think strongly about how it relates to your brand and what you are trying to achieve. Discounts can create the assumption that menu items are overpriced and there is room to discount. Value based pricing can create the expectation that your restaurant provides an abundance of good food for a good price attracting a greater demographic.  Market Priced items can create the expectation that the food is fresh and in season. Patrons who care about locally sourced items at the peak freshness will likely be willing to pay more for items that are fresh, in season and priced accordingly.  

 There is no wrong choice when thoughtfully creating promotions that keep profit margins in mind. The best promotions are those that are strategically designed to reflect the brand that you are trying to establish while building loyalty with your customer base.


Cost Reduction
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