There is little doubt across the UK that the government’s infamous ‘Eat Out to Help Out’ scheme has been a runaway success. The latest treasury figures showed that the UK has cashed in big time. With diners eating their way through 100 million meals worth over £522 million in the four-week period.
Such a boost has the scheme provided, that many restaurants around the UK are now offering the same incentives throughout the month of September. There’s only one big difference: they are doing it on their own dime.
‘Eat Out to Help Out’ has served its purpose dutifully throughout the last month of summer. Making eating out accessible for all and increasing covers up and down the country. But, one can’t help but think, it’s a slippery slope for restaurant brands in the long term.
So, what is the collateral damage?
Discounting sets expectations
We all have that one thing we love to get for a discount. For some it’s Tuesday night movie tickets, others it’s their favourite chocolate. The problem with this is that no matter how much we love something, if we regularly pay one price for it (£7 movies / £2 chocolate), it’s the price we come to expect. The true price (£15 movies / £4 chocolate becomes much harder to stomach. Think of it as the ‘Groupon Effect’.
For the restaurant industry this is a scary and sobering proposition. A local brand that has clearly fallen into the trap of discounting long term is Pizza Express. I don’t always go to Pizza Express, but when I do, I’m definitely not paying full price. Despite being nearly £1.1bn in debt (an amount which accrued over £90m in interest in 2018) Pizza Express continues to steam ahead with heavy discounting. If restaurants continue to bank roll the ‘Eat Out to Help Out’, people will invariably start to expect a £10er off, or some kind of Pizza-Expressification, when they dine out. No matter how good the food.
Discounting puts price on a pedestal
Another of the biggest and most obvious disadvantages of discounting, is its focus on price, rather the benefits of the product, service or experience. This issue is particularly true for the hospitality industry, where the overall experience of a customer is the drawcard. By continuing to focus on discounts, restaurants are taking away from all the amazing things (food, ambiance, escapism) their restaurants offer.
In its most basic terms, the money saved, rather than food gained, gets more focus than it should. It’s the opposite of that menu without any prices. No prices? It must be amazing. Luxury fashion houses, such as Prada and Dior, are amongst the biggest proponents of this approach. As Daniel Airely argues, ‘price impacts our perceptions of quality’. Restaurants consistently discounting will end up paying the price.
But it’s not all doom and gloom. Discounting definitely has a role to play for restaurant brands moving forward and can be a powerful tool when used correctly.
Here’s three things to keep in mind:
- Draw people in with discounts then over deliver: discounting is designed to get people through the door. It’s then the brands responsibility to go above and beyond when people dine. This will ensure people are at least tempted to come back and pay full price the next time.
- Surprise discounts: at the end of the day we all like to feel special. Offering people a discount post meal is a certain way to build goodwill and bring people back.
- Provide discounts to your most loyal: People want to be appreciated. Positioning a discount as an earned reward makes your diners feel loved. We’ve all got loyalty cards lurking in the bottom of our wallets.
The ‘Eat Out to Help Out’ scheme has been a breath of fresh air in a stunted summer, but restaurant brands must be wary of discounting long term. Some sage advice from Alan Ries and Jack Trout - discounting is a drug. You continue to do it because the withdrawal symptoms are just too painful.
- Calvin Lyon, strategist at Publicis•Poke