Hey Everyone!
This has been driving me nuts for awhile - hopefully you all can help me find a solution! I bought my restaurant about 2 years ago. The previous owner (who owned the place for about 10 years) put out a ton of BOGO Free coupons. They seemed to be on most, if not all, of his mailers for the 10 years he owned the place. I tried switching to BOGO 50% and it really hurt business last year, so I needed to bring them back. With current food prices, this seems to hurt more and more each month! I’m absolutely stumped on the process of phasing them out (or at least down dramatically). So many of the regular customers have been in the habit of using these coupons for years, I need to find a way to keep them happy, yet not run so high on my coupon percentage (overall, my coupon % is around 20% of gross sales each month). It gets frustrating because if I put out a BOGO free coupon in the local paper, I’ll get like 1000 redemptions. But if I do a BOGO 50% off, I’ll get less than 100 redeemed! I would like to avoid raising regular menu prices to compensate for this, I dont feel it would be fair to my customers who dont always use the BOGO coupons. Any ideas?
First important part is to ensure you know who much (if any) margin you are making on BOGOF. Selling 1000 pies BOGOF and making .25 each is not as good as selling 100 and making $2 each when you factor in labour etc (ok its not a great example but you hopefully get the point).
To wean people off BOGOF try some of the following:
try buy any pie and a side and get a 2nd pie free
buy any pie and get a second for $1, $2 etc (every $1 helps)
make sure it is your largest pie only i.e. buy any large pie and get a 2nd free
If you can’t get rid of it restrict the BOGOF to a quiet time of year or to your quiet days of the week (mon-weds)
Ensure it is collection only
I hate BOGOF BUT I do use it to drive sales to quiet periods. Its a tool available to me and I choose to use it when I want and it works for me. Don’t be afraid of increasing prices if you have to.
Try offering other menu items for free. Perhaps it is the word “FREE” on the coupons that is drawing attention. Experiment with “buy a pizza get and order of breadsticks (wings/salad/etc.) FREE!” Or maybe double down on the free angle and go try “buy a pizza and get FREE breadsticks and a FREE 2-liter!”
See how customers in your market respond to bundling. For example, “A large pizza, an order of wings & a 2-liter for only $xx.xx!” Also can try “two pizzas for $xx.xx” or “two pizzas for $x.xx each!” This is playing the value game so the key is to tell them what they are spending up front and have that be perceived as a good bargain.
Don’t forget to look at the entire order too - if 75% of the people getting the B1G1Free deal are adding sides and beverages, include those extra sales into your profit calculations. Experiment. Test. Find the deal that turns the biggest profit for the number of orders it generates and feature that one for the next 10 years.
I did this exact same thing. We started seeing the effects of the recession around April '09 here and started sending out a lot of BOGO coupons just to keep cash flow up. It served its purpose at the time, but we couldn’t do it forever.
We gradually dropped them over the course of three months by continually reducing the amount that we sent out. At the same time we started to more aggressively advertise our BOGO Tuesday Nights (a special that we have run for 6 years.) In essence, the customers didn’t see them go away - if they still wanted BOGO they just had to order on Tuesdays - but we had more control over it.
While we were winding the number of BOGO coupons out we did exactly what Brad Randall posted and got back to package deals, which were always our bread and butter. We even gradually increased our profit on packaged deals by first decreasing the size of the pizza, then switching one of the sides to a cheaper item, and then raising the price of the package by $1.00, and then another $1.00 about two months later.
Sitting here 17 months after getting ourselves into deep discounting to survive I can say we have mostly controlled the coupon monster again. Our COGS and Labor are down significantly while running up on sales from last year.
There is still a place for BOGO coupons in my restaurant, and I actually sent one out this week for the first time since February because we were having an off week. The great part about phasing them out is that this coupon had a huge pull last night because it’s now a “treat” for customers instead of something that is just always there.
I guess my advice is to do it gradually so your customers barely even notice.
The Wiz offers some good points – gradually change the direction of the ads. Another way of doing this is by limiting when the offers are available. Maybe they are only good on Monday through Wednesday nights???
Another way to prevent “any” offer from discounting your menu too much is not doing the “same exact” offers all the time. Eventually people will just automatically call in the offer whenever they place an order. It becomes a permanent discount.
Another thing you have to decide is what kind of shop are you running? Are you discount pizza or are you offering a better quality independent pizza? Decide and market accordingly. A percentage of people out there are coupon chasers only. They are not “your” customers in the first place, but rather customers of the next big offer.
The have found when you offer deals like this, it attracks the bottom feeders that are not loyal. They jump ship when the next deal comes by.
Phase out like mentioned above and always have complimentary breadsticks or something business cards on you at all times to combat a frustrated customer who feels entitled to this deal and really doesn’t care if you make money or not. I call it the Wal Mart mentality. Wal Mart takes anything you return or B*itch about. These are the same people that will give you the hardest time - throw them a breadstick coupon and move on.
A new menu design would help also showing a different direction.
I use to advertise in the entertainment book but after dealing with those bottom feeders, I stopped.
The most spirited conversations I had with a former partner was about pricing…We took over a place that competed in the 2 for 1 pizza business…I wanted to up the ante but my partner was quite content with the 2 for 1 pricing…In the end we increased our pricing 40% and improved quality and service…Took about 3 weeks and then our volume was back and increased…Discount coupons were gone and we promoted package deals that were designed to increase cash flow…
Thanks everyone for your ideas. I got a few new ones here that I never would have thought of. I think my short term plan of attack is to switch them to “buy a 16” or 18" and get a free 12" one topping". I really like the idea of adding a high profit margin item attached to the special. That is definitely something I’ll be trying in the near future!