I’ve been striking the same issue repeatedly during recent consulting jobs on a variety of restaurants and cafes. It’s interesting how changes to the general economy throw the same issue up across a range of businesses at the same time. The issue is the problem of how to increase customer average spend in businesses that cannot, or will not, increase their prices for fear of becoming uncompetitive.
The reason that the quest for a genuine increase to the average customer spend is so interesting for a management specialist like me (and should be for any hospitality business owner) is that it is the easiest way to increase both the revenue and profit in a hospitality business. You do have other choices to increase revenue, but they have some difficult problems attached to them.
Obviously, increasing prices seems the easiest way to increase the average spend, but the decision to do this must be taken carefully — if customer perception turns to that of poor value for money, the monetary gain will be short term only and customer numbers will inevitably decline. I do have to make the point that despite the dangers of pricing yourself out of your market, a few of the managers I deal with do have a clear opportunity to increase their prices, but have been irrationally (and frustratingly) afraid to do so.
New customers are not free, you purchase them.
Another way you might approach increasing revenue is to bring in new customers, but this often requires solid marketing expenditure as well as intelligent effort. In effect, each new customer who comes to you as a result of your advertising or promotion walks-in owing you money. They’re not volunteers; you have purchased them from the potential customer pool and each of them represents a portion of your total marketing revenue. In fact, you are unlikely to make any money off them until their second or subsequent visit. If they don’t like you and choose not to return, you might as well stand out in the street and throw hundred dollar bills in the air.
There is further potential in your existing customer baseMy logic suggests that if you already have a loyal customer base, why not invest some energy into getting each of them to spend five or ten dollars more on each visit? The extra income adds up quickly and it has one major attraction to it — it does not increase your labour costs proportionally, and if you sell the right products as add-ons you can increase the bottom line of your business quite dramatically.
The commonality among recent clients with this issue is that they are all trying to run their businesses in the traditional way, by offering a printed menu or similar and then relying on the customers to identify and ask for what they want. We call this passive service.
Move away from passive service
The first step in increasing your average spend is to get your merchandising act together. Merchandising is the art of visual selling, by making things appeal more by adding emotive written descriptions or better still, pictures or photos. The eyes are far more persuasive at influencing purchase decisions than the ears (particularly with male customers). A simple written description on a menu or chalk board is quite an inefficient way to reach the ‘I have to have this’ part of the brain.
Which would you prefer? It’s the same dish in each case, but in the second example we’ve gone straight to the central cortex of the brain with an emotive description, rather than a bland description that is unlikely to evoke desire. We could further boost sales by featuring a nice photograph of the dish, although I tend to keep the photographic option for the high margin items on the menu that we really want to sell in quantity.
We can use these principles for a range of sales opportunities — printed menus, menu boards, wine lists, tent cards, placemats, product displays, etc. In marketing jargon these are called point-of-sale tools.
Getting your service staff to sell is easier said than doneThe next part of the formula for increasing average spend is a little more difficult, but seriously worth while — this is the conversion of your front-of-house team from the previously mentioned passive behaviour, to that of an active sales team. An active sales team is comprised of people who are recruited according to their willingness and desire to sell, and then taught to suggest or create add-on sales at every opportunity a customer need reveals itself.
The recruitment and training skills required to create an active sales team are obviously more sophisticated than the traditional 10 minute chat and then ‘into the deep end’ approach to staff selection and training, but they are not beyond the average business owner or manager to learn quickly, with a bit of external education. It might take you twenty or thirty years to learn them by trial and error.
Measure, or it won’t happen.Another important facet of the creation of an active sales team is the measurement of the sales performance of each staff member via your POS register system. Once you have this information you will undergo an interesting readjustment of opinion about who your good staff are and are not.
In the absence of objective measurement like this, managers tend to subjectively rank staff who ‘chat’ at the tables as the less productive staff, when in fact they often have the highest customer average spend. Conversely, the ones who seem to move the fastest and avoid chatting are probably the passive staff members who bring-in the least revenue.