Thanks God It's Friday!
And this is a new post from lazygourmet...
Restaurant Marketing experts contend that there are four ways in which hospitality businesses can improve their financial performance. None of these ways are mutually exclusive, so you can try any combination of these four variables at any given time and in any order of importance:
1. Increasing sales volume (getting more customers to your venue)
2. Increasing price (put up your prices on your menus)
3. Cutting costs (decrease your food, beverage and wage costs)
4. Increasing the average spend (get your customers to buy more every time they buy of you)
Combining price and sales volume will no doubt post increased revenue. Cutting costs will also result in savings.
Restaurant marketers (i.e. you the business owner or manager) mistakenly assume that the only means of increasing sales is to net more customers.
While its true that selling to more people will definitely make your sales go up, there can also be several other, more innovative ways of increasing turnover, such as increasing frequency of sales to the same customer or making higher value sales to him/her.
It does follows that turnover also increases when customers spend more each time they buy from you (increasing spend) and when they do it more often (increasing frequency).
McDonald's used this technique to great aplomb when it taught its sales force to prod customers with the seemingly innocuous poser:
“Would you like fries with your burgers, please?”
A simple question like that, marketers testify enabled the snack food giant to increase its turnover worldwide by $19 million a day!
Hence the four variables that impact sales in any business are:
1. The Prospects, i.e. the number of people who express an interest in doing business with you (people that call your or look at your web site etc...)
2. The Conversion Rate, i.e., how many actually buy from you and become your customers
3. Their Average Spend, i.e. the average amount that each customer spends when they buy from you.
4. Number of Transactions or Frequency of Sales - The number of times, on average, that customers buy from you in a year
If we were to express these four variables as a mathematical equation, it would look somewhat like this:
Sales = Prospects X Conversion Rate X Average Spend X Number of transactions
Clearly, sales can be increased by improving any combination of these four variables.
Now let us examine each of these sales drivers more closely:
Increasing Sales:,
Buying decisions are seldom made on the first contact. In fact, according to the National Sales Executive Association, US, you can increase your sales by up to 80% simply by following up on the same, old customer!
Here are some statistics from their survey:
2% of sales are made on the 1st contact
3% of sales are made on the 2nd contact
5% of sales are made on the 3rd contact
10% of sales are made on the 4th contact
This implies that 80% sales are made on the 5th-12th contact!
In other words, that’s the amount of time, energy and resources that you have to spend on ensuring full conversion rate from every prospect!
Increasing your conversion rate can increase sales substantially, especially if you are starting from a low base. So how many pieces of marketing do you need to send from your restaurant?
Increasing Frequency:
This is by far the most powerful sales driver. You have already attracted and converted a prospect. A more formidable challenge is selling to the same customer over and over again. This is well worth your time and effort as research indicates that it costs six times more to attract a new customer than it costs to re-sell to someone who has bought from you before. So, even if you are unable to sell to the same customer, do lot of and cross selling. Turn him/her into your brand ambassadors and through him/her sell to his/her friends, family and colleagues.
Increasing Spend:
In marketing parlance, this would imply up-selling. The Average spend from a customer can be increased both by cross-selling and up-selling. Cross selling simply means selling customers a different but related product, in addition to what they asked for.
This is as simple as up selling to a more profitable and higher prices menu item.
Increasing Price:
Realizing that the increasingly affluent and demanding consumer now comprises a very large spending force at the top end in all developed economies, clever restaurateurs have subtly began to increase price on the same value of product. This strategy is being effectively deployed across sectors in the food and beverage industry.
Price increase however is a risky strategy and should be resorted to only when there is a perceived (if not real) enhancement in the value of the product in the consumer’s mind. This can very effectively be done through a media blitz, before and after announcing a price hike that presents you as a very exclusive, well differentiated brand from the low-priced, run-of-the-mill competing products.
Related post: Bringing New Customers to you Restaurant
Want to learn more?
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