Like many industries, the Restaurants have felt the impact of the recession. The restaurant industry saw a downturn this past year, with total restaurant traffic declining 3% in the year ending May, 2010, according to market –research firm NPD Group Inc. Restaurants are seeking new ways to retain their loyal customers and attract new ones. They are dangling free ships, and a shot of winning pricey items. Restaurants such as Outback Steakhouse, Red Lobster, and Starbucks are using a points and gift program to not only hang onto their loyal customers but also get them to come more often and spend some bucks. Outback Steakhouse customers can earn points to win Tim McGraw memorabilia such as CDs, the country singer’s namesake cologne and footballs or cowboy hats autographed by him. Red Lobster is seeking to enhance customer satisfaction by creating the “Fresh Catch Club,” which provides the customer with a chance to win a trip to coastal cities in New England and the Florida Keys.
These “rewards” programs do come at a cost. The Strategic Resource Group estimates that it costs restaurants typically 1% of its sales to launch a rewards program. Thereafter, the discounting associated with a “rewards” program can cost another 5% to 15% of sales. The return on the investment in a “rewards” program is roughly 2% of sales.
I believe if the restaurants pursue more aggressive sales tactics such as rewards programs and free gifts, they will be able to retain a greater number of customers and get them to feast more frequently. Perhaps my opinion is best reinforced by a Panera Bread customer, Daneen Feeney, a 43-year old Chicagoan who stated that she would return to a favorite restaurant more often if it had a rewards program. “If a restaurant can offer a little extra something it would show they appreciate your business,” she said. Even though there is an upfront cost associated with the reward programs, I believe the return on investment justifies the cost. At the very least, a crowded restaurant is contagious. Customers like to see they AREN’T the only ones eating at the restaurant.
http://online.wsj.com/article/SB10001424052748704271804575405363647189110.html?KEYWORDS=restaurants
I agree that restaurants should use incentives such as the reward programs to attract its customers. Sometimes people stop going to certain restaurants not because the food was bad, but because there is nothing attracting that makes them want to go back. If the restaurant industry wants to keep growing, it needs to come up with new ideas to grab its customers' attentions. The new ideas can be putting something new and delicious on the menu or by having rewards programs. Whether it's one way or another, restaurants need to advertise themselves in order to gain more customers. A customer will go to a place that has something different, new, intriguing and/or delicious. Restaurants have to keep up with what their customers want in order to continue to grow.
ReplyDelete~Irma Mendez~
I think its a smart idea to launch the rewards programs. Losses now could be worth the return later. Customers need incentives to go back to spending after being hit by such a tough economic crises. The hospitality industry as a whole is one of appeal, companies need to appeal to today's customers who are a bit more conservative with their spending. As Irma said they might also need to take some steps to freshen up their look such as a new menu or a new store design.
ReplyDeleteMo