It’s Friday night, and while other restaurants in your area are buzzing, your place is unusually quiet. Previously, you were busy most nights, but over the past six months as the pinch has hit Kiwi pockets, you’ve noticed a decline in customers.
Rising food and labour costs have forced you to increase prices, and now you’re worried that your restaurant might be pricing itself out of the market. So, what can you do?
Identify the Real Problem
First, ask yourself if your menu prices are the main reason guests are staying away. Business theories on why certain concepts fail don’t necessarily apply to your situation. To effectively address the drop in traffic, you need to diagnose the actual problem.
Analysing Your Data
Competitors’ Actions: Visit local competitors targeting similar customers. Compare their prices and menu offerings to yours. This helps you understand the market standard and see if your pricing is out of line.
Customer Feedback: Monitor recent reviews and social media comments. Look for recurring themes, especially regarding pricing. Don’t focus on individual complaints, but rather on overall trends.
POS System Insights: Analyze your point-of-sale (POS) data for trends in cover counts, average bills, and product mixes. If cover counts are down but average bill amounts remain steady, you might be losing price-sensitive customers. If both are down, it suggests a broader issue possibly related to perceived value.
Strategies to Address Pricing Concerns
Bundling Products: Consider bundling menu items to offer perceived value. For example, bundling a specialty burger or sandwich with Duck Fat Fries can offset rising protein costs, providing customers with a better deal and increasing sales.
Menu Adjustments: Ensure a balanced range of prices within each category. The highest-priced item shouldn’t be more than 50% higher than the lowest-priced one. For high-cost items, consider making them specials rather than regular menu items.
Value Promotions: Use promotions like buy-two-get-one-free to drive volume during off-peak times. This can increase party size, leading to higher beverage and add-on sales.
Special Coffee Promos: Consider making all your coffees the same price for a month, or start a Happy Coffee Hour for diners from Noon –to -1 pm or 6 to 7 pm – eg: All coffees just $5.00 at this time.
Strategic Messaging: Communicate the reasons behind price increases in a way that customers can understand and appreciate, such as supporting local farmers or maintaining high-quality standards. State this on your menus, or on your receipts.
What Not to Do When Raising Prices
Avoid the American expression of “Nickle-and-Diming”: Charging separately for items that were once included (like specialty breads and butters), or adding service fees can alienate customers. Ensure your menu prices cover all costs without surprising add-ons.
Maintain Portion Sizes: Don’t reduce portion sizes as a cost-cutting measure. Customers notice and it can lead to negative reviews and social media backlash. The last thing you want is for your diners to have to pop into a fast food outlet on the way home because they were still hungry!
Preserve Service Quality: Cutting staff can degrade service quality. If necessary, pitch in yourself, but don’t overburden your team.
Avoid Price Wars: Competing solely on price can reduce everyone’s profits. Focus on value and quality instead.
Competitive Analysis
To stay ahead, conduct regular competitive analysis. This involves researching and evaluating your rivals’ activities, strengths, and weaknesses. Such insights help you identify market opportunities and refine your pricing and marketing strategies.
In a challenging economic environment, raising prices is often necessary to cover rising costs. By focusing on perceived value, fair pricing practices, and strategic adjustments, you can maintain customer loyalty and keep your restaurant thriving.
Be proactive, stay informed about your competitors, communicate your specialities and always listen to your customers.
