The Yin & Yang of Restaurant and Hospitality Marketing

Updated: November 02, 2010

There are only two types of restaurant marketing philosophies.

1. Transaction Based Marketing (TBM)

Transaction Based Marketing is marketing done to maximize sales to guests solely through a focus on increasing the number and amount of customer transactions. This can be done through a segmented focus or not. No past, present or future relationship with the guest is demanded or leveraged.

This is basically ‘push' marketing designed to promote impulse buying through an emphasis on only price. You have an offer or deal (coupons or discounts) you want to ‘push' out to as many people as possible with an expectation that they'll use it thereby driving as much traffic into your business as possible as immediately as possible. This is a short-term tactic and requires more and better offers or deals to both maintain existing traffic levels and to increase them over the long-term. This type of strategy is also supported by utilizing frequency schemes disguised as loyalty programs wherein the customer accumulates points towards future discounts.

TBM is expensive because it focuses on both aspects of pricing strategy, cost and profit, at the same time. Costs for executing this type of program run between 10 - 20+% of sales or higher due to the actual production costs, medium delivery costs, discount costs and a very important lost opportunity cost for sales and profits that would have occurred if you had not discounted your products but sold them for full price and typically have lower ROI's.

An example of this would be an operator who email blasts a ‘Buy-1-Get-1-Free' (BOGO) offer to everyone in his email database. The campaign is focused on a specific menu item or groups of items and is not segmented to go to particular groups within the database that may have indicated an affinity for that particular item or group of items.

2. Relationship Based Marketing (RBM)

Relationship Based Marketing is marketing done to maximize the guest relationship with the business and its brand with a desire to increase the lifetime value (LTV) of each guest instead of a per transaction approach. This type of approach is highly segmented as it attempts to match guests who prefer to interact and develop a deeper and more complex relationship with the brand on a social basis other than price.

These are the guests who desire more perceived real value from the guest experience. They are more social in nature and require that the brands with which they interact offer some degree of social relevance to their lives in order to maintain their patronage and loyalty. The idea being that if you can insert your brand into a guest's life and make it a habit for them to visit you due to a unique social interacti0on or situation that can cement them to your brand, it will increase not only frequency but derive true loyalty that leads to increased positive word-of-mouth, buzz and ultimately guest referrals.

Examples of these types of social interactions can be cooking classes, wine tastings, social gatherings (Tweetups) , networking or business group meetings, entertainment, family outings, civic events, cause marketing efforts, etc…

Relationship Based Marketing is relatively inexpensive compared to the heavy transaction costs and lower margins associated with TBM and has a much higher ROI. Instead, the focus is on creating a perceived value in the mind of the guest which correlates to similar social preferences or values that the guest holds. No items are discounted and segmentation of the brand's messages is more natural and more aligned with guest social preferences and values. While a great example of this is Social Media Marketing efforts, individual efforts can include promoting local and organic ingredients, healthy menu items, green efforts, a more highly defined food culture or culinary experiences, high profile chef's, premium or unique wines or beverages, greater levels of hospitality, more meaningful personal interactions between guests and staff or operators, community causes or connections, business associations or partnerships, etc…

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