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Restaurant Edition: The Value of Offering a Discount, Especially Given the COVID-19 Impact

It has been a rough few months for the hospitality industry and given the new wave of infections spreading across the country, restaurant owners are in a tough spot on how to keep their restaurants open profitably.

Even pre-pandemic, many restaurants struggled to find an easy and affordable way to consistently bring in new customers. And raising average order value was nearly impossible. But now, worries about how to stay open safely at 25% or 50% capacity while offering curbside pickup and delivery options have changed the way a lot of restaurants do business.

Additionally, most consumers have had to tighten their belts with the economic impact hitting home so there is limited discretionary income to spend on dining out. But one thing has not changed and has become even more important during these uncertain times, the popularity of discounts.

Everyone loves a good deal, right?

The statistics speak for themselves:

  • 92% of consumers have used a coupon in 2019. (Statista)

  • More than one-third of restaurant-goers search for deals before choosing where to eat (RetailMeNot)

  • 77% of consumers use restaurant coupons. (Valassis)

And the most staggering is:

  • 81% of consumers seek out dining deals regularly. (Valassis)

Since the majority of restaurant-goers use a coupon, it follows that you may be at a disadvantage versus other eating establishments in your area if you do not offer a discount.

Misconceptions about Discounts

You may be worried about whether or not coupons will positively impact your revenue in the long-term. Does a discount only serve to drive a new customer into your restaurant once? Will they spend enough to more than pay for the discount given?

You are not alone in trying to balance profitability with marketing endeavors. 52% of restaurant professionals say high operating and food costs is their biggest challenge, while 33% say attracting and retaining customers is their biggest challenge (2019 Restaurant Success Report).

Misconception #1 - Discounts Negatively Impact Profit

A perceived challenge about discounts is that you have to pay for the discount and then you take a double-hit because the sale is smaller as well. However, if the perceived value of the discount is high, then the customer will spend more which increases the average order value and the profitability of the sale.

Misconception #2 - Discounts only Attract Deal Hunters

Once again, 77% of consumers use a restaurant coupon, but that does not mean that all of these consumers are spending less than those who do not use a coupon. On the contrary, a study by Washington University in St. Louis found that shoppers spent $8 more on unplanned items for every $1 coupon they received.

As a restaurant owner, how do you know which is the best type of discount to give?

Given the overwhelming evidence that discounts influence both new and repeat consumer purchasing habits, it makes good business sense to start offering discounts at your restaurant. But there are so many types of offers to choose from: coupons, cashback, BOGO offers, etc. that it can be overwhelming to choose one.

As previously mentioned, you want to give a discount that incentivizes your customers to spend more and makes them feel like they got a great deal, without compromising too much of your profit. It has been proven that consumers will spend 30-40% more if they know they have a discount. In restaurants that translates into a couple of extra drinks or an additional dessert, which is “gravy” on their tab.

Card-Linked Offers are Effective and Easy to Implement

Also, you want to make it easy for customers to redeem the discount. With card-linked offer technology, once a consumer links their credit card, all they have to do is pay with that card and they automatically receive cash back. And with 62% of consumers paying for small ticket items (e.g. coffee) with a credit card and 88% of consumers using credit cards for large ticket items (e.g. fancy dinners) (2019 Restaurant Success Report), most consumers can easily set up and use card-linked offers.

There is absolutely no change to the consumer’s buying behavior which is critical in order to achieve widespread adoption. You don’t have to print out and distribute coupons or issue-specific promo codes for a seasonal offer. Rather, a card-linked cashback offer is digital and can be updated easily and quickly. Consumers don’t have to worry about remembering a promo code or bringing a coupon to your business for redemption.

And of course, you want to make it easy for your staff to accept and process the discounts to avoid any confusion at the point of purchase. With card-linked offers, your employees just swipe the customer’s credit card and that’s it. No hardware, software or employee training is necessary.

So, as you are gearing up to have your dining room expand back into more regular services, it’s time to start thinking about how to get more customers and drive more revenue. Customers love discounts, so make it as seamless as possible to offer the discounts they crave by using card-linked offers.

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