Why do so many restaurants resort to using price coupons to drive traffic-sacrificing profits without increasing loyalty or differentiating themselves from their competition?

I cannot fathom why nearly every pizza restaurant in my town is offering money-saving coupons-Buy One, Get One Free, Free Breadsticks with Pizza, $2 off, $3 Off, $5 Off, etc. It isn’t just pizza restaurants guilty of this cash draining promotion. In my Valpak mailing I just received, there is a $2 off coupon for a Soup/Salad restaurant, $2.50 off a Mexican dinner from Sunday-Thursday, $2 off a dozen bagels, $3 off a dozen cupcakes and $1 off at a burger joint on my way home.

What is a hungry person supposed to do-gather all the coupons and see who is offering the best deal tonight?

Stop encouraging your customers to hold out for a lower price and start getting full-price for your food immediately by maximizing the customer value.

I know the economy is tight and people want to save money. However, actually, people want greater value, which does not necessarily mean lowest price. More bang for the buck will take you much further.

There are several ways to increase sales without cutting prices. The first is a Frequent Customer Program, or Loyalty Card Promotion. This does not have to be fancy or high tech-a simple hole punch will work. There are many companies that can provide a uniquely designed hole puncher. You can also initial and date the cards-though that is often going overboard.

Offer your customers something different than a free sub, free dessert, etc. Giving away something you will want to sell in the future has a negative effect on that discounted or free item, making it very difficult to command full price for it again.

Instead of free food, offer them a unique free gift-whether it be a limited edition T-Shirt that is designed for your restaurant by a local graphic artist, a set of imprinted beer mugs, a nice tote bag, duffel bag or messenger bag, an imprinted sports bottle, etc. – something that is lasting, has a high perceived value, and will not be easily copied. Many restaurateurs have offered T-shirts that they have graphic artists design – and they “retire” the designs every month or so-making them collectibles – while they are advertising for your restaurant.

Another way to increase sales is through a free gift promotion. Offer a low-cost, high perceived value gift free with a dessert and soft drink — so that the extra profits from the dessert will offset the cost of the gift. For under $1.50, you can offer such custom imprinted gifts as a music download card, a tote bag, a calendar during the holidays, sports bottles, ceramic coffee mug, imprinted pizza cutter, etc.

Some of the benefits of a gift with purchase promotion include:

1) Since nobody can buy cash at wholesale prices, buying merchandise at wholesale gives the appearance of a greater value. A $1.00 ceramic coffee mug with your logo and nice artwork on it – -may have a $2-$3 perceived value-which helps to stretch your budget.

2) Your program will be profitable as the dessert should pay for the cost of the gift and the large soft drink will be the added profit that you would not necessarily have gotten.

3) Your coupon will look different than all the others in your weekly shopper or website-which should drive incremental sales.

4) Because you are not discounting price, you will help train your customers not to look in the newspaper or on the web for a better deal elsewhere. Cutting price is not a good strategy-neither in long or short term.

5) You are creating excitement-while also branding your logo. Every person who gets your Free tote bag, beer mug, sports bottles, etc will be carrying around a miniature billboard promoting your restaurant.

6) Your promotion becomes a news event-worthy of favorable press in your local newspaper.

7) Your promotion will be talked about, where a dollar-off coupon never would be.

8) You can stop these programs occasionally before starting another-without any external pressure.

9) You will be differentiating your restaurant from the others.

Next time you are thinking of a dollars-off coupon, take a moment to reflect. Be creative and have fun with your next promotion – and stand out from the crowd. You will make higher profits, create more excitement and be the best value in your neighborhood.

Happy Promoting.