Marketing for your hospitality business, when done well, will;
Attract more customers (new)
Get customers coming back (repeat)
Increase your sales
Increase your profitability
Let’s be clear - doing just one of these activities all of the time, or all of these activities some of the time will not provide a significant long-term benefit to your business. We’re looking for small, incremental increases across a number of areas, repeated consistently to create long-term sales growth.
The days of thinking ‘If I spend x, I’ll get a return of y’ are gone, in fact this only leads to disappointing results. That advert in the local newspaper that used to bring in a few customers is a short-term and costly way to give your business a little (‘ego’) boost from time to time.
And here lies the first problem with how a lot of restaurants market themselves. As a restaurant owner, a lot of advertising or promotions are knee-jerk reactions to a quiet period, or a panic when things seem to be slowing down. This is a recipe to serve up some poorly planned and costly marketing. Fail to plan, plan to fail, right?
When marketing isn’t planned it is less effective, and, probably more damaging than that, it can put restaurant owners off from doing more marketing in the future when it doesn’t work out. The upshot is that the cycle of ‘no marketing activity’ mixed with ‘knee-jerk marketing’ results in no real marketing at all and a poor return on investment. Be honest with yourself, you can probably add the words ‘half-heartedly’ to the end of the sentence ‘but we do social media’ or ‘yes, we do keep in touch with our customers’.
The aim of hospitality marketing should have the overriding goal to either attract new customers or engage with your existing customers.
Let’s look at a simple formula illustrating the effect on sales turnover of an increase of 2% in new customers (attract) & 2% in repeat customers (engage);
Current customers per year; 26,000
2% increase in new customers = 26,000 x 2% = +520
2% increase in repeat customers (now 26,520 per year) = 26,520 x 2% = +530
Increase in revenue from new & repeat customers = 1,050 x £20 = £21,000 - a 4.2% increase in sales turnover
Example based on a restaurant taking £10k a week; 500 customers a week spending an average of £20 a head.
A conservative increase of 2% in new customers combined with a 2% increase in repeat visits converts into a 4.2% (gross) increase in sales turnover. A pretty tasty figure for a small, but achievable, marketing objective.
One of the most effective and indeed cost-effective (because they’re already in your restaurant, so no extra cost) ways to increase your turnover is to increase the amount each customer spends. There are a few methods for increasing customer spend, or spend per head, that we’ll cover in future posts.
Let’s take one method as an example - menu engineering. Menu engineering (also referred to as menu re-engineering) is the process of analysing your menu design and optimising the layout to encourage customers to purchase your most profitable menu items, thus increasing spend and profitability. Think of it as menu psychology, if you like.
Menu engineering is nothing new, but is increasing in popularity and awareness in the hospitality industry.
Research shows that menu engineering can increase spend by somewhere between 5%-15%. Using the conservative lower percentage of 5%, with some clever menu engineering we could see an increase in sales (based on our new yearly sales in our example, as calculated above) of;
£521,000 x 5% = £26,050
In the above example, the effect of achieving these three simple marketing goals combined could increase turnover from £500,000 to £547,050 (£21,000 + £26,050) which equates to 9.43% gross.
In summary, a 9.43% sales increase can be achieved with a 2% increase in new customers + a 2% increase in repeat customers + a 5% increase in spend per head. Seemingly small percentages on their own, but combined they have a powerful cumulative effect on sales.
Looking at these figures from a different perspective; a 2% increase in customers equates to attracting 2 more customers for every hundred you presently attract, persuading an extra 2 out of every 100 customers to return and for every one of your customers that spends £20, encouraging them to spend another £1 (and there’s probably nothing on the menu that cheap!).
Let’s be realistic and keep our feet on the ground for a moment. This is, of course, a very simplified calculation and in reality would be a fantastic result. However, what it does illustrate is, that with good planning and execution, you can achieve some tangible sales growth with a number of small gains. Even if you don’t achieve results as impressive as in the above example, somewhere between 0% (doing no marketing at all) and 9.43% (with some well-executed marketing) would, I’m certain, be most welcome.
Add some cost analysis and cost reductions on top of this and if you could shave even just 1-2% from your costs this could add even more to your bottom-line. We'll discuss cost analysis and reductions in more detail at a later date.
Drop me a line if you would like help with your marketing, or a FREE marketing audit at email@example.com