Marketing Your Restaurant: Part IV

In reality, most managers share that selling price points are determined both by costs incurred and by targeted profit. When you begin to look at the macro-snapshot of your operation—the overall 'picture in time' which a customer views when they visit your operation—it's much easier to think about pricing strategy as a lever for product mix movement, and, therefore, a driver of volume.

Let's look for just a moment at the holistic Marketing program as a driver of volume.

Early in this series, we spoke of the fact that Marketing can serve as a driving force in bringing customers to your operation. Marketing can serve as a driving force to "suggestively sell" the operation in top of mind awareness to both existing and potential customers over and over. Elements of what we have labeled "holistic marketing" enhance the ambiance, drive value perception, and help develop cohesive elements in what the customer views, smells, touches, and hears. All these elements combine into part of what we have called this holistic Marketing experience.

Pricing strategy for items offered depends on a variety of factors. One of the decision points in the equation should be product mix.

Another element we addressed earlier in this segment was the question, "How well do you know your customer?" If you know what drives the customer to your operation, and you know what brings the customer back to your operation over and over, and you aren't pushing those buttons, shame on you for not capitalizing on those elements. Don't compromise sales opportunities. More likely than not, however, it's not the low percentage seller in your menu mix. Shepard's Pie in a Mexican-motif operation, flan in an Italian fast feeder, or sushi in a Barbecue restaurant are probably not the driving forces that bring profit in quantities to keep the doors open for business. They may present great alternative specials, but probably don't drive your sales to the extent they merit permanent inclusion.

Every successful foodservice operator knows menu mix statistics. Possibly, you don't know what your exact percentage of sales are on every item, but you have a successful foodservice operator's "intuition" of what will sell and what won't sell, right? That's part of what got you where you are.

Let me ask you a simple question. Would you please explain to me why items remain listed for sale on your menu when you've proven that they won't, or don't, sell?

Several years ago, I flew outside the USA to meet with a chain operator who had "modified" his menu—with a variety of "non-approved" menu items. Being an entrepreneur, and unafraid of innovation, this operator had actually put together an extensive menu designed to satisfy a majority of customers in his small town. He had positioned his restaurant as the "go to" place for special occasions. His sales were twice the national average of the chain whose sign hung outside his door. He had developed his own Birthday theme, and had a sizable list of guest birthdays. Everyone celebrating a birthday got a card and a discount for bringing the family in to eat. He had a separate meeting room where local civic organizations met on a regular basis--which drove his sales even higher.

Believe me, there were lessons here to be taught, and lessons which were learned.

It goes without saying, as you can imagine, the number of unapproved menu items was in the double digits, and that there were serious contractual issues at stake, but let's overlook that aspect of the situation for a moment--my consult focused more on the aspect of concept and cost savings—the learning of the "why."

Never believe that true entrepreneur/innovators do not respond to cost savings. I challenged the operator to review his total sales by item for the previous 8 weeks and showed him how to summarize costs associated with items not selling at least 1% of the menu mix to determine if sales of these items were really justified.

Here's a surprise. He found his inventory was inflated by almost 12%, and his prep labor was reduced three points when he removed the "modified" items from the menu.

Better still, he came to realize that his inclusion of those items was predicated not on scientific analysis, but more on "operator's intuition." Operator's intuition sometimes tells us what we think we know, and not in the most analytical terms. A customer will ask for an item and in our zeal to satisfy the customer, we serve it—and may even add it to the menu.

1.7 user occasions a month--even if increased to 3.1 user occasions a month--may still not cover added inventory cost and labor necessary to satisfy a single customer or group of customers. It's one thing to consider a "change" to a standard item for a guest—but another thing entirely to carry inventory and add menu items which may or may not turn on a regular basis, and to consider the ongoing additional training required in the back and front of the house.

In menu rationalization, the same process can be followed for entire chains of restaurants—just like the simple one we performed. Dynamic sales and costs projections are prepared for menu items to be considered. Cost factors are studied extensively to determine which raw ingredients must be inventoried--and in what quantities--to produce the finished product. Percentages of sales to be achieved are matrixed against existing sales to dynamically project changes in menu mix with resultant food cost variables.

In some cases, we use an Excel-based program called a Monte Carlo Simulation to program out menu item changes and the resultant impact they will have on the variables of sales mix, cost strategy, and variables including labor cost, inventory turns, and profitability. The process becomes a "science" as opposed to an "art."

Never stifle innovation, because innovation is the hallmark of the foodservice industry. Realize, however, that innovation has a cost, and that with the implementation of new menu items, we must realize the impact each of those items contributes not just to the sales Mix, but to the overall profit scheme. Marketing of those items drives every aspect of your contribution to profit. Use your product mix wisely to help determine pricing strategy.

In our final "Classic Marketing" segment, Alan will address the issues of Marketing Channels and their impact on your operations. Qsrweb.com is committed to offering our readers every opportunity available. In today's financially-oriented and competitive foodservice environment, we need every benefit we can get.

Email Alan at alan@qsrweb.com.