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Digital discounting – The offers you can't refuse?

16 April 2012 by
Digital discounting – The offers you can't refuse?

Almost everybody in hospitality is giving online discounts these days, it seems. Used wisely, these schemes are a great way to bring in business at quiet times and collect data about new customers. But it's important to make sure the offer is the right one for your business. Tom Vaughan reports

These days, everyone wants a bargain. Since the start of the recession, the hungry diner has been only an internet search away from a hatful of money-off or two-for-one restaurant deals. Recent stats from Google claim that consumers booking travel online visit 23 different websites before completing a purchase. A similar amount of research now goes into dining out as well, and with sites such as Lastminute.com, Toptable, Groupon and Vouchercloud, the quest to find value-for-money has never been easier.

Casual-dining chains have monopolised the discount market and are clearly benefiting from the hordes their offers attract, in the short- to medium-term at least. But how easy is it for independent hotels and restaurants to make online offers and marketing work, without falling into various traps along the way?

There are numerous avenues a hotelier or restaurateur can go down when choosing to launch an online offer, and each has specific advantages and disadvantages. But before choosing how they are to go about it, a restaurant or hotel should first establish why they are running an offer in the first place. To simplify matters, there are three principle reasons: to fill empty times, to raise awareness and to capture data.

The quest to fill empty times is nothing new in the hospitality business. It has been going on for decades, if not forever, says hotel consultant Melvin Gold. From happy hour to pre-theatre menus, the bid to pick up extra custom in quieter times has not changed. And to some extent, these online offers are just the set-menu of old dressed up in a digital packaging. "What's new is the internet; what's new is social media," Gold says. "You can bring offers to customers very rapidly. Consumers these days are used to online booking from the likes of budget airlines, where you know the person sitting next to you probably didn't pay the same price."

Time-slot discounting

Using this budget-airline model, businessman Stanley Wootliffe last year launched SmartDiner.com, where restaurateurs can discount meals according to half-hour slots. "The basic idea is that a meal at six o'clock on a Monday, when the restaurant is not full, should not cost the same as a meal at eight o'clock on a Friday, when it is busy," he explains.

Colin Tenwick, CEO of LiveBookings.com, says it's OK to take a hit on gross profit in dead times: "Restaurateurs these days have a much better understanding that if you are able to provide an offer where you break even on the food, then you can be making money on drinks and other services you are providing."

Groupon, which offers consumers often-large discounts on everything from hotel stays to spa breaks and fine-dining meals, says that getting the customers through the door in the first place is part of the power of a focused marketing campaign: "Remember, too, that once the customers are on the premises, there's an opportunity to upsell," says CEO Roy Blanga. "So while the offer might be for food, there's still the opportunity to make money on drinks."

Hotel du Vin, which normally shies away from discounts, runs an offer to attract customers on the normally dead time of Sunday night. But rather than knock money off, says group marketing manager Louise Philip, it goes down the route of offering value-added experiences, such as giving guests the chance to buy a room for £10 if they spend £75 or more in the hotel's brasserie. "As a group, our model is more adding value and engaging with customer loyalty than bringing out discounted offers," she says.

Similarly, the group's attempts to raise awareness of its brasseries doesn't involve mass discounting, but a more focused attempt to win customers by offering money-off deals to members of its loyalty scheme, Society du Vin.

This goal of raising awareness is one of the more valid reasons to discount, says hotel consultant Mark Harris: "I tend not to recommend the larger discounting schemes. Discounting should be used only as part of a bigger marketing campaign. If you have just launched a breakfast and want to get the word out, use it for a short time on that, but it should not be a long-term strategy."

Going stale?

The dangers of relying on discounting or flooding the market are vast. Harris says he has seen restaurants that have taken such a hit on profit in an attempt to get bums on seats that there is no money left to reinvest in the business, and the offer starts to go stale.

Tenwick also cites businesses gone broke from mass discounting, in the assumption that once people are through the door, the hard work is done, when in fact the hard work has just begun, and all that is happening is that the business's brand perception is eroding.

"I've spoken to people before and, rightly or wrongly, they often think they don't get the same meal as if they were paying full price. Sometimes they are correct, and that quickly affects how they perceive the restaurant," Wootliffe says.

However, online offers and digital marketing can also be a huge asset to a business. "When it's done really well, it is about helping businesses build a database which will lower marketing costs in the future," Tenwick says.

Loyalty schemes such as Society du Vin and online marketing tools such as LiveBookings provide the vehicle for such data capture, with the ultimate goal not to fill empty times in the short term, but to build long-standing relationships in the long-term.

Whatever the reason for discounting, and whatever the method used, it is vital never to lose sight of the end game, and to make sure your offers work with you towards that goal: "Discounting is a fact of life these days. There's lots of theory as to whether it is a good thing or a bad thing, and people have to look at how it works best for their business," Gold says. "What it is ultimately all about is adding revenue."

Fine-dining restaurants rely on experience

Priyanka Sharma
Priyanka Sharma
While mid-market chains are synonymous with online offers these days, fine-dining restaurants are also getting in on the act, but in a more subtle manner.

At the Cinnamon Club in London's Westminster, marketing and events manager Priyanka Sharma (pictured) says the restaurant's customers don't want straight-up discounts: "There is lots of pressure for restaurants to knock 20% or 30% off, but we surveyed our diners and their motivation is not to save money, but to have an experience. So we might give them a little cocktail demonstration, or surprise them with little extra gestures during the meal."

There are definitely different approaches at the opposite ends of the market. "At the lower end it is definitely price sensitive and about discounts," says Colin Tenwick of LiveBookings.com. "At the higher end, I don't thing it's about discounting; I think it's about selling an experience and based on the chance that those diners will have a much better chance of returning as a result."

How to make the most of online offers

Colin Tenwick
Colin Tenwick

â- Stay in control. There are famous examples of people running deals when the service couldn't cope with the amount of people turning up, and where people were queuing at the door not quite sure of what their voucher offered them.

â- Aim for repeat business - don't do a deal unless you're going to be left with information you can use. Can you track whether the customers who took up your deal then came back to dine at full price?

â- Make the deal as logistically easy as possible. Drive offers through your own technology so that you can control uptake and so you don't just have a mass of people turning up with a voucher.

â- Negotiate - mass deal providers are now making 50% less on dining deals than they were 12 months ago as restaurants are in a stronger position and need to cover their costs.

â- It's all about longevity. Reflect on the success - after the deal has run, what have you obtained? Have you got data on the customers that came in, which you can use for marketing?

Colin Tenwick, CEO LiveBookings.com

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