5.X — The Immediate Gratification Trap #
The biggest obstacle to getting off the discounting treadmill is the pressure of right now.
Operators want tonight’s seats filled, this week’s revenue gap closed, this month’s rent covered. The little voice starts: just run a deal. Get somebody in the door. Half-price appetizers. Two-for-one drinks. Anything to cover tonight’s overhead.
I’ve heard that voice. Every operator has. And listening to it is one of the most destructive decisions you can make for your business.
Here’s what actually happens when you run the deal. You get bodies in the door. You cover tonight’s costs. You feel like you’ve accomplished something. You haven’t. You’ve pushed the problem down the road and made it worse. You attracted deal-seekers who have no intention of returning at full price. You alienated your regulars who were paying full price and now feel like suckers. You depressed your check average. You conditioned your market to expect discounts. You eroded your brand equity — one coupon at a time.
The research makes the cost concrete. Frederick Reichheld at Bain & Company found that a 5% increase in customer retention increases profits by 25 to 95%. Acquiring a new customer costs 5 to 25 times more than retaining an existing one. The Guests you attract with a discount are the least loyal and least profitable you have. The ones who come back because they love you are the most profitable and cost the least to keep.
Every time you run a discount instead of building the relationship, you are choosing the expensive path. You are paying to fill seats with people who were never going to stay.
If you limit your thinking to something versus nothing, most of the time you still get nothing — because the cost of desperate discounting to simply pay the bill always creates more problems than it solves.
