Foodie Biz
  • Home
  • About
  • Blog
  • Consulting
  • Contact

Foodie Biz Blog

Easy to Please, Hard to Impress

Loss Leaders Can Boost Earnings Like Crazy

11/4/2016

0 Comments

 
Picture
The term ‘loss leader’ can be a bit misleading at the onset, steering restaurant professionals away due to its negative connotation. Look further into the art behind loss leaders, however, and realize that they open up a whole new world for pricing strategy, menu engineering and word-of-mouth marketing. 

Loss leaders can take many different forms, from standard menu items to happy hour specials, discounted drinks and everything in between. They all share one common trait, however—in one way or another, all loss leaders meant to boost sales of other items.

Let’s go over a few loss leader examples and how they can drive profitable volume at your establishment.

Low-price items
Perhaps the most common type of loss leader, lower-priced items are meant to draw customers in through the door. Often enough, these are standard menu items that don’t have any promotions or discounts tied into them. However, once a customer sits down and takes another look at the menu, they’re enticed to order some appealing, higher-priced items.

Burgers are a classic example: many new-age gastropub-style spots will incorporate a ‘hip’ burger onto the menu that’s about half the price of the rest of the entrees. “Oh, I can get away spending $16 for an entrée” circulates through prospective customers’ heads. But the desired effect soon sets in: “Okay, the steak frites look so good, and they’re just $5 more. And those cocktails look excellent. And they have truffle fries?!?”

Happy hours are a tried-and-true method of attracting customers during otherwise low-volume times, but even already-discounted menus are prime real estate for loss leaders. It’s very easy to mark down a few high-margin items by as much as 75% and promote the heck out of those prices, while featuring other items at a much smaller discount, or no discount at all. The same gastropub can woo people in with $2 pretzel bread/cheese dip and $3 draft beer, but sell $8 flatbreads and $10 cocktails at the same time. 

Upsell is the key to converting profitable sales. Once the customer walks in through the door and sits down, the low-priced items have done their job and don’t even have to be mentioned. If the customer wants to stay on the cheap route, fine, but the opportunity is there for you to promote your restaurant’s full experience. 

High-price items
Higher-price items drive volume in a completely different way: they make everything else on the menu seem cheaper. You’re not exactly going to draw in new customers by advertising these dishes, but you will likely see success in upsell, cross-sell and repeat visits by fencing your core menu items in the middle of lower and higher-priced selections. 

From a consumer psychology standpoint, ordering ‘from the middle’ is almost mandatory. In a group setting, people don’t want to come across as being cheap by getting the lowest item on the menu. At the same time, they’ll often steer away from the most expensive item, especially when they know the group is splitting the check or that someone else is taking care of the bill. Additionally, high-price items are a critical complement to low-price items because if you’re only upselling to the middle, customers have less of a chance of feeling gouged. 

Two key components to high-priced items exist: 
1) Do not expect to sell many of them. Their loss leader status comes from volume, not price. 
2) Do not make these your ‘signature’ items. Some restaurants’ ‘must-order’ dishes are literally twice the price of everything else on the menu…this is a great way to upset your customers and ensure that no matter how good those items are, they ‘won’t be worth it’ and you will have a hard time getting people in for a second visit.

Marketing tactics
Discounts are the go-to for getting people in through the door, but only drive profitability if they lead to upsell, repeat visits or both. Tie your discounts into an overarching strategy: whether discounting/giving away appetizers with entrée purchases to encourage multi-course meals, selling 2-for-1 drinks to promote your new cocktail menu, etc. 

Some tactics, however, only loosely tie to price but spark tons of conversation about the restaurant. Todd English P.U.B. at Crystals, Las Vegas is a prime example with its ‘hourglass challenge.’ Customers choose a beer off the menu, and if they finish it in seven seconds or less, it’s free. Whether they complete the challenge or not, it creates a story that they share with their peers for years to come. 

​Each of these methodologies can be applied to virtually any restaurant or bar. Just be sure to monitor their impact to ensure that they’re boosting your bottom line. 

0 Comments



Leave a Reply.

    Picture

    Author

    Benjamin Brown is a seasoned restaurant writer and hospitality consultant, serving up SoCal's hottest food news and reviews.

    Categories

    All
    American
    Anaheim
    Beer
    Beverly Hills
    Biz
    Biz Tips
    Brunch
    Celebrity Chef
    Cocktails
    Comfort Food
    Consulting
    Downtown
    Economical
    Food Festival
    Glendale
    Hollywood
    Huntington Beach
    Irvine
    Italian
    Japanese
    Koreatown
    Las Vegas
    Long Beach
    Marina Del Rey
    Mexican
    Middle Eastern
    Newport Beach
    Pasadena
    Peruvian
    Pizza
    Rancho Santa Margarita
    San Diego
    Santa Clarita
    Santa Monica
    Seafood
    Small Plates
    South Bay
    Steakhouse
    Studio City
    Thai
    Venice
    Ventura
    Westlake Village
    Westood
    Wine
    Woodland Hills
    Yorba Linda

    Archives

    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    September 2020
    April 2020
    March 2020
    February 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016

    Instagram

    @Foodie_Biz

    Picture
Home
About
Blog
Consulting Tips
Contact
Legal
Foodie Biz provides restaurant news and reviews for the food community, as well as consulting advice for restaurant owners and other hospitality professionals.
Contact Foodie Biz for media opportunities and freelance consulting projects.

Contact Foodie Biz

Picture
  • Home
  • About
  • Blog
  • Consulting
  • Contact