Promoting without Discounting
The most common types of promotions in this industry are happy hours, two-for-one drinks, or free bottles for booking VIP tables. The common denominator in all of these options is discounting drinks. Discounts and promotions aren’t the same and it’s possible for you to run promotions without giving up your profit margin.
When you boil it down to basics, a promotion is simply the act of 1) raising customer awareness of a product or brand, 2) generating sales, and 3) creating brand loyalty. To do this, you’ll need to focus on four areas, discussed below. But first, you must abide by the number one step of marketing: identifying your audience.
Know Your Audience
Before you can start any type of marketing, you first need to know who your audience is. Customers are the number one component of a successful venue; without them you don’t have a business. Discover who your customers are, what their idea of a good party is, the music they like to hear, the alcohol they like to drink, and the experience they expect. This information dictates your entire marketing strategy, including your promotions.
Once you’ve solidified your target audience, it’s time to get the pieces in place to set up your promotions. To be successful, you must understand the importance of brand marketing, pricing structure, inventory control, and brand perception.
The first part of promotions is brand marketing. Brand is king. This is something most venues don’t consider, but is one of the most important parts of setting up your business. People connect with venues that have a focused style, and that style is your brand image. It’s what aligns customer expectation with customer experience. Your brand needs to represent your club’s reputation through your attributes, values, purpose, strengths and passions. It should clearly differentiate you from the venue down the street or even across the country. Define your vision, create the essence you want your customers to experience, and design everything – from the logo to the interior to the message – around these items. From there, your featured drinks, events and other promotions should align with your brand image. Never lose sight of your brand, and always work to strengthen it online and inside your doors. This is what drives consistency for the public’s perception of your brand and what gets people to connect with you on an emotional level.
There are three critical components to brand marketing:
- The experience. Promote and provide the experience you have for guests. This is what your customers are really seeking.
- The venue. Ensure your venue supports the experience you are proposing. This includes interior design, layout, DJ, drinks and service. Your customers expect a certain type of atmosphere based on your branding and your venue needs to support that.
- Special events. Events are a bonus to your branding and shouldn’t be the branding itself. When putting on an event, make sure it aligns with what you’re creating and gives your guests that extra bump in excitement.
The second part of promotions is the pricing structure. It’s critical to understand what customers will pay in return for your atmosphere, party, drinks and food. To do this successfully, focus on these three items:
- Market Research What are your competitors pricing structures? Is that working for them? Why or why not? Learn from this information to help you determine your own pricing structure so you’re not pricing yourself out of the market.
- Target Market What is your target market’s potential entertainment spend? This goes back to knowing your audience and understanding what they’ll pay for a venue like yours. It also goes back to your brand experience. If you’re a higher-end establishment, your prices will naturally be a bit higher. If you’re the neighborhood bar, then your pricing needs to reflect that. If you price yourself too high, you’ll scare your customers away; too low and they might see you as cheap.
- Profitability Always remember the formula r-e=p. That’s revenue minus expenses equals profitability. Understand your margins relative to pricing. The only way to increase your revenue is to either raise your profit potential (by increasing the price of inventory) or decrease your expenses.
The third part of promotions is inventory control. You need to manage your inventory and reservation process to get a predictable level of what you can promote. There are three steps to do this effectively:
- Designate a decision maker. There need to be one or more decision makers who control what your sales and promotions team are selling. Every item of inventory – from drinks to tables – is up for grabs in terms of promotions. Remember, it’s not just the price that drives your guests in, it’s the overall experience. Bottle service is a part of that experience. The party is a part of that experience. All of that can be sold and can be promoted.
- Sell. Create the demand for what you’re selling and price accordingly. For VIP tables or event tickets, guests understand they have to pay more when it’s busy, so capitalize on that when you can. That’s your yielding strategy: increase prices as tables or tickets become sparser.
- Control what inventory you give away for free. This is where promoting without discounting comes in. Free equates to a loss. A guests’ likelihood to spend drops more than 50% with every free drink or bottle. To get a good example of this, watch this episode of Bar Rescue.
The final part of promotions is brand perception. This is the difference between promotions and discounts. Promotion is raising customer awareness of a brand, generating sales and increasing brand loyalty. Discounting, on the other hand, falls within the price area of the marketing mix. Discounting and promotions are congruent in marketing, but they are not the same.
Let’s go back to free. Free is a four letter word and that’s it – that’s all it should be to you. The last thing you want to do is promote anything for free. Customers equate the word free with cheap and never expect to pay full price. Do you really want them to think of your brand that way? Instead of giving away free inventory, create packages that entice your target market to increase the perceived value. Also, make sure your promotions make sense to your target demographic. If something is too obscure or makes little sense in comparison to what your brand is known for, it simply won’t work.
Next comes the fun part: putting it all to work. If you know your audience to a T, you’ll be able to better identify which marketing channels are the best to reach them. It’s best to use multiple channels to spread the word and target your audience directly with messages that tie into your overall brand image. After all, brand consistency is a critical part to making your promotion work for itself.
Editor's Note: Whitney Johnson's articles are provided by BookBottles. Whitney will also be speaking at the 2016 Nightclub & Bar Show in March at the LAs Vegas Convention Center on Marketing Tools to Drive ROI. Make sure to check out her session by registering for a conference pass.