Two-for-one drinks. Free bottle with a reservation. Slashed prices for a happy hour. These are common promotions we see in the nightclub and bar industry, and they all have one thing in common: free or discounted items. While giving things away and discounts may work to attract customers in the short term, it’s an extremely detrimental strategy in the long run.
The truth is that when people go out, they’re looking for an entire experience; it’s not about the discounts or the potential total of their anticipated bill. Today’s consumer is about the value they’re getting from going to your venue. And if the value is there, people are willing to pay for it. This is even true for Millennials and upcoming Gen Z-ers.
The opposite of this is also true with discounts and free items. Customers equate the word “free” with cheap, and rarely expect to pay full price ever again once they receive a free or discounted item. In fact, a guests’ likelihood to spend drops more than 50% with every free drink or bottle. So, while you may have caused a spike by attracting customers by offering a discount, you’ve also created a drop in future earnings with that same guest. To get a good example of this, watch this episode of Bar Rescue.
Instead of giving away free inventory, think of ways you can execute promotions through experiences. Create packages that entice your target market to increase the perceived value. If you’re accustomed to giving away a free bottle with a reservation, try selling a table that includes a bottle of vodka and a bottle of Champagne for a price that’s profitable to you. The guest won’t perceive this as a cheap gesture and will instead see it as a valuable package. This perception is the value of your promotion, and is what differentiates your efforts from simply slashing prices. Once your promotion drives your customer to your venue, the next step is great execution across your venue to create a memorable experience so they continue to come back.
No matter what type of promotions you run, always make sure they align with your target market and your core values as a brand. 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, and it’s what drives the right demographic into your venue in the first place. Understanding both your brand and your target customers is what drives consistency, and that consistency will always help to determine the best promotions to generate results. If a promotion is too obscure or makes little sense in comparison of what your brand is known for, it simply won’t work.
So, the next time you’re about to give away a free drink as part of your promotions, consider ways you can instead spin your promotion into a wholistic experience. Loyalty isn’t built on discounts.