I have things to do so I'm going to copy and paste (and tweak) a letter I sent to a former GM in hopes that he could use
these ideas to help the company.
While I was working at Applebee's we did numerous promotions to get the customers in. Unfortunately, the company
thought that the best way to get a new customer was to reduce the prices. In some ways that can be a viable idea, I
think they went to far with the concept by having numerous promotions on and basically being permanent.
This is the letter:
Please tell me what you think and don't worry about being harsh. If you want to use
any of this for your own purposes feel free, give me verbal credit at least. Thank you.
In Sam Walton's book about turning a little five and dime into a major powerhouse
he used loss leaders to get customers into his company. However, he stopped using that
sales trick once his customers were in the habit of going to his business.
At Applebee's we are still paying our customers to come in. I believe that if we
stop doing that we will increase our check average and average per customer, reduce our
costs, and, most importantly, increase profits.
How do we do this? We go back to the basics. We need to cater to the customer we
want not the customer we have. If we remove the $1 draft some customers won't like it
and won't come back. Some will order a soft drink or a different beer. The customers
that order a different product are spending more money and need not be discussed anymore.
The customers that leave because we don't have a $1 draft are no loss at all. The
majority of our problems are with the customers that just want a cheap drink. With less
of these customers we might not need an armed security guard on weekends that we pay over
$20 an hour for. Admittedly there will be less half price appetizers sold but that might
not be much of a loss either considering that there will be less force thawing which
means less water usage and less chance of a foodborne illness originating at our store.
This will also free up seats for higher spenders and reducing wait times during peak
times.
Once we discontinue the value draft we will have taps available to tempt our better
customers. We could put in a cider, heavier stout, premium import or domestic, or even
try some local craft brew such as Rahr. True some of these kegs are more expensive but
we would sell them for more money of course. In fact, a keg we buy for $120 and sell for
$4 a draft would be a better profit maker than a $1 draft keg we bought at $60.
The dollar draft promotion was great to get customers into the stores, but now that
the customers are here we need to make a profit on them and not pay them to come in.