Episode Transcript
[00:00:01] Why would someone buy this product? Why would they buy it from you? And why do they need to buy it now? Whether they come out and say it all consumers are thinking of those three questions every time they go shopping, every time they go to book a vacation, every time they figure out if they want to go out to dinner and where they need to go out to dinner. The thing is, you've got to answer those questions. You are already supplying an answer to those questions whether you're doing it intentionally or not. So let's be deliberate about it. Really, those three questions come down to creat urgency in the sales process, right? Why would someone buy this product at all? Why should they buy it from you and why now? So how do we do that? How do we answer that question and inject urgency into the sales process? How do we do it in a real way? I'm going to tell you what we have to stop doing in order to even have a fighting chance. We have to stop discounting. This episode is all about the death of discounts. Don't go anywhere. All that More on Restaurant Strategy there's an old saying that goes something like this. You'll only find three kinds of people in the world. Those who see, those who will never see, and those who can see when shown. This is Restaurant Strategy, a podcast with answers for anyone who's looking.
[00:01:29] Hey everyone, thanks for tuning in. My name is Chip Close. This is Restaurant Strategy, a podcast dedicated to helping you build a more profitable and sustainable business. Every single episode, two episodes every week, I leverage my 25 years in the industry to help you build that more profitable and more sustainable business. I also have a group coaching program. It's called the P3 mastermind. We've grown this group from one group all the way up to four unique groups. Currently over 150 people enrolled in the program. We we target consistent, predictable 20% returns. If you are stuck making single digit profit margins, it is worth A conversation 30 minutes absolutely free. The way you start that conversation is to grab time on the calendar. Visit restaurantstrategypodcast.com schedule grab time on the calendar. You'll chat with me or someone from my team and let's figure out if you're a fit again. RestaurantStrategyPodcast.com Schedule let's see if it makes sense for you to talk about the P3 mastermind, my coaching program. As always, you'll find that link in the show notes.
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[00:03:56] Okay, so the questions I. I brought to your attention at the very top of the show, right? Why would someone buy this product? Why would they buy it from you? And why should they buy it now?
[00:04:07] Whether we realize it or not, all consumers are asking themselves those three questions. You, by the way, if you're a restaurant owner, you are a merchant, but you are also a consumer. You go out to dinner, you buy things at stores, online, you decide where to book vacations and whether to go on vac or not. So you are asking yourself those questions as well. And the key is, from a merchant perspective is we have to make it obvious that we're the answer. We have to make it obvious that now is the best time to do it. So how do we do that? How do we inject?
[00:04:39] How do we inject urgency into the sales process in a real way? And I know the thing that doesn't help us is discounting. Here, the thing, here's the thing, right? And so this title of this episode is the Death of Discounts. When we discount, right? And Seth Godin, right, Seth Godin is somebody. I quote a lot on this show. He is A marketing guru, bestselling author, brilliant public speaker. And he said a very long time ago in a lecture that I was listening to, and he said, price is the last refuge of a marketer who doesn't know what else to do. When we just start discounting, what it does is that it assumes, right? It assumes that that is the deciding factor for people.
[00:05:23] But I would submit to you, just like Seth Godin would submit, right, that that's not true, that there are lots of other things that go into the decision making process, whether you're buying new shoes, figuring out a school for your kid to go to, or figuring out where you're gonna go to dinner for your anniversary, right? Vibe, location, convenience, consensus, quality, accolades, word of mouth. And I'm gonna break all those things down, but I want you to understand that all of that goes into it, right? So if there are two bagel places and one is right here by the train station, by the train I have to take, and the other one is half a mile away, I can, I can promise you that any amount of discount that that other place offers is not going to get me to go a half mile out of the way to loop back a half mile and park my car and get on the train, right? So convenience, like actually geographically speaking, where that location is has a lot more to do with, with, has a lot more to do with my decision than the discount.
[00:06:26] Maybe the discount will peel off some people, but really location and convenience is the deciding factor because plenty of people come to this parking lot and then go and get coffee and bagel sandwich at one of the two or three places and then go and get on the train and head into the city, right? So when it comes to that situation, no amount of discount is going to get the majority of people to go out of their way. Maybe somebody who's really penny pinching, but I would submit to you that somebod, really penny pinching is also thinking about the gas usage that's going to take to go all the way up, out of the way and then all the way back. Just my line of thinking, also the time, not only the money that's being spent, but the time, right? So we pay with time or money. So either I can pay full price and it's more convenient and it costs me less gas and it's less time, I can go park my car, get my bagel sandwich and coffee and go up to the train, or I gotta plan more time, go out of my way for a little bit of a discount, but I spend more on Gas. It's a push for most people who aren't that, that focused on, you know, on every single penny, it's a push.
[00:07:34] When it comes to, let's say, when we're gonna go out with friends, with couples, right? I will say that vibe is a big part of it, right? When I'm going out with my in laws, we pick one kind of place. When I go out with my friends, it's another kind of place. Consensus. You know, this might not make sense, but this makes a lot of sense. I think about, you know, when we're going to go out, does everybody want to go here? Does everybody, is everyone going to be able to find something that they're going to be able to eat? If you've got a vegetarian in your group, that throws a wrench in the works. If you've got somebody who's gluten free, if you've got somebody who is vegan, all of this, right? All of this will throw a wrench in the works. There has to be consensus. Maybe somebody isn't eating meat right now, maybe somebody's not drinking right now, maybe all of that, right? So are they going to have choices available to them? Right? So the vibe, the convenience, the location, making sure there's consensus with what's chosen quality. Maybe in some instances when you're making a decision, quality doesn't matter. I just need something really quick. But in other instances, quality does matter. When I'm trying to impress my wife and I want to take her out for a nice dinner, I'm not going to just take her anywhere. I'm going to take her somewhere elevated, right? Somewhere that's nicer than the places we normally go. Especially if I'm going to mark the occasion for her birthday or for our anniversary, right? Accolades and word of mouth go, you know, are a big deal, right? What sort of reviews is this place getting, right? Are they getting good reviews? Are they on best of list, top 10 lists? Do they've got a, you know, any other sort of demarcation that shows us that this is somewhere worth going? Am I hearing about it a lot from friends of ours or all of that to be said that when I'm figuring out somewhere to go get my breakfast sandwich before I head into the city, there are certain criteria I look up, there are certain factors that go into that decision. Likewise, when I'm trying to find a place to go out for my anniversary, there's a certain number of factors that get considered before I make that decision. Before I take out my parents, my in laws before I take out my son and his friends. These are all different experiences. And I promise you there are many other factors and aspects that have greater weight than any sort of discount, any sort of deal I might get financially. My point for bringing this up is I hope this is resonating with you. I hope you know, this much is true.
[00:10:05] You have to win in those other areas. You have to win on those merits in the, at the opportunity when it. When it matters. Right? Here's a perfect example. So I'm using the example of the. The train station. So I live in a little bedroom community just outside of New York city. It's about 30 minutes, 35 minutes into the city.
[00:10:23] At my train station, when I go and park my car in the lot, I've got a Starbucks there, I got a Dunkin Donuts there. And then I have this little independent sort of bakery where they do bagel sandwiches and coffees and all that. For most people who are going to the city every morning, they've got really three choices. And we talk a lot about in marketing, the value proposition. Value proposition is a fancy way of saying, why does someone choose one thing over another?
[00:10:48] And I promise you, Starbucks, Dunkin Donuts, and this independent right, different people consider themselves, identify, have loyalty to certain brands than another. And I think you can search your soul and think of your own lives and think of the people who come into your restaurant and the people you see to go to competitors of yours. We think of like your family, think about your friends and where they go and where they don't go. My point being is if we're going to talk about the death to discounts and we're going to spend time talking about how we kill them off and what we do instead.
[00:11:23] The first point I really want to make is that we have to.
[00:11:27] The underlying assumption is wrong. The underlying assumption when you discount is saying all things being that all things are being that are equal. Right.
[00:11:37] The idea is all things being equal, people will make their determination on price. For example. My point is all things are not equal. One place is cooler than another, one place is more convenient than another, one place is cleaner than another, one place is on and on and on.
[00:11:56] That I think it's tough to say, okay, these two are, you know, exactly the same, apples to apples, and I bet you we'll win if we give everybody a 15% discount. I just don't think that's true. So again, when we talk about the death of discounts, we have to embrace and accept that our underlying assumption is wrong and I'm going to talk to you about what we do instead, what we replace it with in just a moment after a word from another sponsor.
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[00:14:17] All of those links will be in the show Notes.
[00:14:20] Okay, so we're talking about the death of discounts. How do we finally kill off discounts? We have to acknowledge that our underlying assumption that would lead us to discount is fundamentally false. It is wrong. Okay, for most of the people listening to this podcast, I'm guessing most of you out there are independent operators. Maybe with multiple units or multiple concepts. But you're still an independent. You're not a chain. You're not a group. And I'm here to tell you that discounting is not the way. That's not why people pick you anyway.
[00:14:53] Pick you because you are cleaner. Because you are better quality, because you're more personable, because you are more convenient. On and on and on. Not because you offer a really great 15% discount. So the alternative. Right? And when I Started this whole conversation with those three questions, right? Why would someone buy this product? Why would they buy it from me, and why should they buy it now? Right.
[00:15:17] That factors into every single sale that is made on the planet Earth, whether you're selling food, whether you're selling hotel rooms, vacations, running shoes, whatever. The alternative to discounting is to create scarcity and urgency is to inject in scarcity and urgency and not artificial. Right? You're manufacturing it, meaning you're being deliberate about injecting that into the sales cycle. But I'm not saying to fake it.
[00:15:47] Don't say. Right. So this was something we dealt with a long time ago. We always bring people into my mastermind. Every single month, we bring about 15 to 20 new members into the mastermind, and we split them up across the four groups. And so there are always new people coming in, which is. Which is amazing.
[00:16:04] And I was working with a consultant once, and they said, oh, you should say, oh, you know, last chance before the doors close. And I said, but that's false, because next month we're gonna say, doors are open again. And then we're saying, doors are almost closing. And the next month doors are open again. People see through that. That's false.
[00:16:21] It's disingenuous, and I didn't like it. And that's why we parted ways. One of the reasons why we parted ways with that particular consultant, because as I was growing my business, I just thought, that's not right. I want to bring people on whenever and if I have to create some false sense of urgency that just doesn't feel right to me, people are going to see right through it. I'm guessing all y' all are smart enough to see right through it. I am here for whenever people are ready to join my coaching program, and there's no reason to push them. The urgency, at least the way I see it when I work with restaurant owners, is that they are tired that you are tired of the way things are going. And it's a matter of enough is enough, that that's the urgency that I am not making what I need to be making for my business. And I have real urgency, a real drive to make what I need to make. And that is all I need to do to convince people, right, to join my program. The bottom line is, do you drive with this program? Do you have the time to invest in this program?
[00:17:23] And do you believe that I can get you there? I've got a great track record. We've done this for hundreds of restaurants already. But that's why we get on a call. That's what we talk about. But I don't need to create any urgency.
[00:17:35] That's more important than somebody not making the money they need. That creates all the urgency we need. So just to sort of translate this into a different place now, how do we create scarcity and urgency? Here are a couple of ways.
[00:17:50] Offer special items that are available only certain times of year or only certain nights of the year or only certain days of the week. Right? So this is, you know, if you think of.
[00:18:02] So we're just in the spring right now. So morel mushrooms and white asparagus, right? Two items and ramps, let's say. So those are three items that have a very narrow window, have a very short season, and there's a lot of urgency. If you like those things, you are going to nice restaurants to get morel mushrooms, to get ramps to get these, the white asparagus or the rhubarb or anything that's just right here. Super tight little season, right? So that's not false. That's actually based on the seasons and when we harvest these things. So special items are only available certain times of the year. Again, seasonality plays into that a lot. Maybe it's only a certain, you know, night of the year. So I think of like 11 Madison park and we're going to talk about them more in a minute. But a lesbian Madison park used to be a do a big derby day party. They shut down the restaurant and they threw a big derby day party. It was very expensive. Couple hundred bucks to join for the day. It was like open bar. There was like fully catered food. It was an experience.
[00:19:02] They owned that day.
[00:19:04] They only did that event one day a year when they ran the Kentucky Derby. Or maybe there are things you only do certain days of the week, right? So perfect example of this is, hey, we only offer prime rib on Friday and Saturday nights, right? And there are ways you can embellish beyond that. But special items only certain times of the year, certain events that come on a certain day of the year, or then certain items that are only available on certain days of the week. Here is really crucial. Here's some other rules to build on that. You limit the number of those things that are available. You pre sell those items as much as possible to get the cash in hand. Make people want to buy them before they sell out. When you do those items, you make them more expensive than the rest of your menu or at the very least at a higher margin than your regular menu. The best part Here is, I want to give you a couple of examples. Four examples come to mind and they all sort of illustrate this in a certain way. So if you offer things that are only available certain days of the week. A buddy of mine runs a restaurant in Madison, Wisconsin and for a time they used to do these saucy Sundays. So they all, they made homemade fresh spaghetti with, you know, red sauce, grandma's gravy. It was like a 100-year-old or an 80 year old recipe. And it was, you know, you know, cooking for, you know, whatever, 16 hours, you know, as it was getting ready and it was so labor intensive, they only offered it one day a week. On Sundays it was spaghetti and meatballs with grandma's red sauce.
[00:20:39] And you could then add on a salad and, or you could add on garlic bread. And it was just charged by the person. And so if there was six people at the table, they just sent enough for six people. If four people, they just sent enough for four people. It was very, very profitable. It was obviously very good.
[00:20:58] It created a lot of energy in the restaurant. On a Sunday night it was downtown Madison. Not a lot of people are thinking about going downtown Madison on Sunday night. And it was a way for them to drive business. It was actually at a lower price point but much higher margin. And then they had the add ins, the upsells baked in so that they could drive the check average up. So they had a specially curated Italian wine list that was only available. It was like the Italian cellar only opened on Sunday nights. So again, creating real scarcity. The only time you can get this, you can, the only time you could experience this, this experience at this restaurant or on Sunday nights and it was like between 5 and 9pm that's it. I mentioned 11 Madison park just a few minutes ago. Again, they don't do it anymore. But years ago they used to run a Derby day party. So Kentucky Derby typically always runs on the first Saturday of May. And they would basically shut the restaurant down, sell tickets for like three or $400. It was sponsored. There were cigars and oysters and, you know, mint juleps and it was a whole party. And then they would have a massive TV screen where they would show the races all day. And of course everyone came in and was, you know, cheering on while they, when they ran the Derby actually at whatever, 6 o' clock, 6:15 at night, they owned that it was somewhere you had to be. They would pre sell tickets. They would sell out in a matter of minutes every time they did it. And they did it multiple years in a row. It became obviously more popular the more time they ran it. I get a client pasta supply company out in San Francisco and theirs is not the place that you think of for Valentine's Day. So they went the complete other direction and they did what they call goth promotion.
[00:22:35] So they run goth prom where all the spaghetti is squidding. So it's that black pasta sort of, you know, feeds into this goth prom theme and it sells out so quickly. It's one of their biggest nights of the year. It's one of their most profitable nights of the year. And it's a really cool caters to, you know, this whole sort of like subculture. It's, it's like a great place to be. And now they own that day.
[00:23:02] If you want sort of like the anti Valentine's Day night out, they've got it. So pasta supply company in San Francisco, go check it out, find pictures, you'll find them. They crush on that day. The last one I want to talk about is a restaurant in New York City. It's actually upscale Chinese restaurant called Hutong. It's an Asian concept that now is, you know, exported out. It is here in New York City they have something they're famous for, the flaming chicken. Flaming chicken is $150. It serves up to six people and you have to not only pre order but you have to prepay. And here's the thing, even if you end up canceling your reservation, you are forfeiting that $150 because they order just enough of the, of the product to serve the people who have pre ordered. So they don't have stuff on hand.
[00:23:49] It is, it's awesome. It's this great idea where they again, they're creating scarcity because they're only a certain amount of them. They create urgency. You got to order them before they sell out and make sure you book your, you know, you purchase this product when you book your table.
[00:24:09] It's something so simple to do.
[00:24:12] Right. Again, now that isn't certain times of year, that isn't certain days of the week or certain, you know, nights of the year. This is something that's available all the time, but there are only a certain amount of them and you have to pre order which again I think it's like they need a 72 hour window. So you've got to book further out, which helps their reservation system, which helps them with staffing, on and on and on. Four examples I can give you. And I'm sure if I sat here, thought about it. I could give you another, you know, 20 examples, I'm sure, or at least I'm hoping as you're listening to this episode that you're already thinking about instances when you've seen this, other players, maybe in your market that do this. Well, this is a long way of saying I would like you to get out of the discounting, especially as labor goes up, especially if the cost of goods is going up. We just can't survive if we continue discounting. And again, like I've said, I think the underlying assumption is false. The idea that the deciding factor is price. It may be one of the factors, but I'm guessing people say, hey, do we want to go out somewhere nice or somewhere more casual? Meaning what sort of price point are we prepared to spend for this night out? They already make the decision about price when they decide to, when they decide that they are going to go out. But I think when it comes to figuring out where they want to go out to, I think those decisions are made on many other factors that do not have anything to really do with price or costing. Again, maybe low end, super cheap and affordable. Affordable. Yeah, maybe those. But I don't think we can afford to play that game anyway. I don't think that's a market we can really try to win.
[00:25:55] We can't beat Burger King or Taco Bell or McDonald's. Just like any big retailer can't beat Walmart or Costco, you can't.
[00:26:04] The purchasing power they have and their ability to undercut just about all of the competition forces you out of that market. You can't compete. So don't even try.
[00:26:17] That's it. Guys. I want to talk about death discounts and I wanted to give you a path forward, a way that we do it. So instead of doing half price wine Wednesdays, instead of doing Taco Tuesdays, we do dollar tacos instead of, you know, 20% off all margaritas on Sunday night. Instead of that, why don't you do something different? Why don't you do something fun and something exciting? Why don't you do a pig roast every Sunday night? Right? Pig roast is more expensive and people are there and they're going to buy drinks anyway. Do something that will actually entice people. Something that's something that people will go out of their way to have. This goes hand in hand with the luxury conversation we've had and the, the commodity conversation we've had. You just can't survive if you're selling commodities anymore. So don't even try that's it guys. Appreciate you being here, obviously every single week. Quick favor, if you haven't done this before, I haven't asked in a while, but if you get any sort of value from this show, please go leave us a five star rating and review Apple Podcasts. I don't need you to say anything fake. Just tell people what you get out of the show, why you tune in, and why you think they should tune in. That more than anything else would help us continue to grow this community. Thank you very much guys. I appreciate it. I will see you next time.
[00:27:40] Sam Sa.
