Spending Your Restaurant Marketing Budget Wisely (1st part)

A few years ago, I bought my first restaurant. It was a turnkey operation; a charming small and upscale Italian restaurant with loyal clientele in a great location.
 
The previous owner was an experienced guy who told us: “It is working fine. Don't change anything...”
 
For a while, we complied. I didn't have really much experience running a restaurant so we kept on running the business as he was doing, including his marketing and advertising expenses.
 
Well, after a few months I realized that we were spending several thousand dollars each month in marketing. I am fine with spending marketing dollars if I can see the results of my expenses, which, in the case of a restaurant means people walking through the door and having a meal.

A restaurant has a really big advantage over many other businesses: when a person walks in and sits at your table, you've pretty much have made the sale (unless your staff screws up and your customers leave your place!).

Very few other industries can claim this advantage. Many businesses spend thousands of dollars in marketing just to bring people to their stores or websites without any guarantee that these people will spend any money on their goods or services.

So - going back to my experience - after seeing that my marketing budget wasn’t producing enough, I started questioning all these expenses. Why wasn’t my marketing working? How can I measure if a campaign is working? What kind of advertising brings in clients? Was I wasting money?

The first steps were to collect and analyze all the marketing expenses. I was spending money in the following marketing initiatives:

1.    Pocket cards distributed in hotels, some businesses, etc. (Very expensive!)
2.    Ads in a weekly Seattle magazine
3.    Big and very expensive ad (1/4 of a page) in one of the Yellow Pages Books
4.    Premium positioning in a well-known online city directory.
5.    Passport Card program
6.    Direct mail coupons

All together, these marketing efforts represented a considerable amount of cash. But how many of these were really working for me?

To make an objective decision, first I looked at which of these campaigns could be measured.

To my dismay, I realized that only half of them (numbers 1, 5 and 6) could actually be measured. The pocket cards had an incentive so we could know how many people actually came to the restaurant with them. Same with the direct mail discount coupons and passport cards, since people needed to present them to get a discount (coupons) or free entrée (Passport card).

The ads in the local magazine and Yellow Pages were a total mystery. I assumed that they brought customers. But how many?

The CitySearch was an interesting one. I could get specific analytics about how many people clicked in the ad to access our web site, but this didn't tell me how many people actually came to the restaurant because of our web presence.

So with this data in hand, I started my analysis:

The pocket cards were extremely expensive, so I asked my servers to collect them and keep them in a special box that I bought for that purpose. After three months, I counted the cards: we had only received around 20 cards and the funny part was that most of the customers were usually single diners.

Of course, this made sense since the main distribution center for these cards were hotels and the audience business travelers. This was double bad news:

1. These were seldom repeat clients (since they didn't live in the area). If I was lucky they would come once every few months - if they happen to travel to Seattle.
2. They came alone, so their average ticket was small.

So with these pocket cards, I was losing an incredible amount of money. I could just give away free food to these people and it would've been cheaper for me than subsidize the very expensive pocket card. Obviously these cards were gone from my marketing list really fast.

The direct discount coupon fared better, but I realized that it brought very cheap customers who just came to my restaurant looking for a bargain. I looked at the package that included our coupon and realized that ours was the only fancy restaurant in the list. Most of the others were pizza places and fast food chains. Again, after compiling coupons for several months, I realized that it wasn't worth it to keep bringing bargain hunters, so I also discontinued this marketing strategy.

Next was the Passport card. I had mixed feelings - and results - with this one. On the one hand, it brought us many new customers that only go to participating restaurants in the Passport card program. On the other hand, it also brought "the abusers": parties of two eating just a salad each, nothing to drink (but free water) and three hours of conversation. Total spent: $12 + free water + free bread + service. And they tipped poorly as well (tipping after the discount - even if the rules of the Passport program explained that members should tip before the discount). I decided to keep it for a while, since I wasn't brave enough to cut all the marketing from the previous owner.

So this left us with the non-measurable marketing: Yellow Pages ad, weekly magazine ads and CitySearch premium positioning.

Before dropping these strategies, I decided to test them. To do this is simple: I just needed to place an attractive discount coupon in the ad and see how many people presented them.

So I did that. We placed a 15% discount coupon in the weekly magazine and same in the Yellow Pages. To get the discount, the customers needed to either bring the original coupon (from the weekly magazine) or a unique code (printed in the Yellow Pages book). I then asked our servers to keep all the coupons and code discounts (and store them in our special marketing box). After a few months, we counted them.

Total disaster! We only got a few coupons a month from both ads. In order to break even, we needed to bring at least 100 or more customers from these ads. We weren't even close to that number, so I had to cut losses - and discontinue these marketing systems as well.

This left me with the online directory for local establishments. I asked myself: Was it worth to pay extra to have a big heading in an effort to get more people looking at our restaurant review and web site? Well, the answer wasn't simple.

First, I went to our restaurant review link in the online directory, and realized that we had less than perfect reviews. Some people can be really mean when they post restaurant reviews, and I was confronted with a very harsh reality about what some people thought of our service, our food, etc.

If you are already familiar with my marketing, you know how much I insist that you need to make your clients feel special. I learned this the hard way by looking at these reviews.

I realized that it didn't matter if the premium positioning worked or not. With the negative reviews posted there, I actually wanted people to avoid clicking the link! Obviously, we had lots of improvements to do in our service to make our clients happy before we could even think about promoting our place. I decided to cancel the premium positioning.

So, “Great”, I thought, “From all the money that I’m spending on marketing, I’m left with only one marketing campaign: the Passport program.” And I wasn't even really happy with it!

The one positive about the Passport program is that it didn't cost me anything (other than the free entree available through the program) so at least, I wasn't wasting money for nothing - as I was doing with the rest of my marketing efforts.

So the bad news was that nothing that I was doing up until that point was really working. The good news was that I started saving lots of money in marketing with no noticeable negative results in the number of clients.

However, this left me with a dilemma about how to invest in marketing wisely. What could I do that really brings in more clients? How could I maximize my marketing budget?

It was obvious that I needed to invest in marketing campaigns and advertising techniques that were clearly measurable and inexpensive (if possible). The million-dollar question was: How could I promote my business efficiently?

In my next newsletter, I will talk about what I did and how well it worked.

Happy Sailing,
Jose L Riesco