Stop Spending Marketing and Promotional Dollars You Can't Measure

Why restaurant marketing should begin with a clear objective, a plan to measure results and a strategy to turn first-time customers into repeat guests.

By Jamie Galler | Restaurant Advisor

Restaurant operators are constantly looking for ways to increase sales.

Social media advertising. Email campaigns. Flyers. Community sponsorships. Discounts for local businesses. School promotions. Loyalty incentives. Special offers.

There is certainly no shortage of ways to spend money trying to attract customers.

But here's a question I think more restaurant operators should ask:

How do you know whether your marketing and promotional dollars are actually making you money?

Not generating clicks.

Not producing likes.

Not distributing coupons.

Not even necessarily increasing sales.

Actually making you money.

I recently worked with a restaurant operator who provided a particularly good example of why this distinction matters.

Plenty of Marketing. Almost No Measurement.

This operator was doing what many restaurant owners believe they should be doing.

They were marketing their business.

Online advertising, social media, flyers, discounts for local businesses and schools. There were multiple initiatives underway, each designed, presumably, to attract more customers.

On the surface, that sounded encouraging.

But as we began reviewing the business, I asked some basic questions.

What was the objective of each promotion?

How were we tracking the results?

Which promotions were producing the most business?

Which were generating the best financial return?

The answers were troubling.

There was no meaningful tracking in the POS system or anywhere else.

And when I asked about the objective of the promotions, the answer was essentially:

“Increase sales.”

Meanwhile, food cost had increased significantly.

We had no reliable way to determine how much of that increase was related to promotional activity, which promotions were contributing incremental revenue or whether the additional business justified the expense.

The restaurant was spending money on marketing without knowing what it was getting in return.

To be clear, I wasn't suggesting that the operator stop marketing.

Quite the opposite.

I wanted them to become better at it.

And that begins long before the first advertisement runs or the first coupon is redeemed.

1. Start With an Objective, Not a Promotion

One of the most common mistakes I see is operators beginning with a marketing tactic rather than a business objective.

Let's offer 15% off.

Let's run a social media campaign.

Let's distribute flyers to nearby offices.

Let's sponsor the local school.

Those may all be worthwhile ideas.

But before choosing the tactic, ask:

What exactly are we trying to accomplish?

There are several legitimate objectives for restaurant marketing, and they aren't interchangeable.

Attract new customers. Introduce the restaurant to people who haven't visited before.

Increase frequency. Encourage existing customers to visit more often.

Increase average check. Generate more revenue from each transaction through additional items, upgrades or higher-value purchases.

Build business during slower periods. Attract incremental customers during underutilized dayparts.

Introduce a new product. Encourage trial of a new menu item or category.

Reengage lapsed customers. Bring back guests who haven't visited recently.

Each objective requires a somewhat different strategy.

And, importantly, each requires a different way to measure success.

A promotion designed to introduce new customers to your restaurant shouldn't be evaluated solely by total sales.

A promotion designed to increase frequency should tell you whether customers are visiting more often.

And a promotion intended to increase average check should be evaluated against what customers were spending before the promotion.

“More sales” isn't a sufficiently specific objective.

It's a desired outcome.

2. Build the Measurement Into the Promotion Before It Launches

This was one of the most important recommendations I made to my client.

If we're going to spend money on a promotion, let's determine how we're going to measure it before we spend the first dollar.

In many restaurants, the POS system already provides much of the infrastructure needed.

For example, if we're offering a discount to employees of nearby businesses, create a unique promotion code or POS button specifically for that initiative.

Do the same for a school promotion.

And for a flyer campaign.

And for an email offer.

At a minimum, we should be able to identify:

• How many transactions used the promotion?

• How much revenue was associated with those transactions?

• What was the average check?

• How much did we give away in discounts or complimentary products?

• What did the promotion cost to advertise and administer?

• Were the customers new or existing, where that information is available?

These measurements won't necessarily establish true incremental sales or return on investment by themselves.

A customer who redeems a coupon may have visited and paid full price anyway.

But without even basic tracking, we're operating almost entirely on assumptions.

You can't meaningfully evaluate something you haven't planned to measure.

And if you can't evaluate it, how do you know whether to repeat it, improve it or stop doing it?

3. More Sales Don't Necessarily Mean More Profit

This is where restaurant operators need to be particularly careful.

A promotion can generate additional transactions and still be a poor financial decision.

Let's look at a simplified example: A Promotion That Generates $2,000 in Additional Sales:

- Incremental revenue: $2,000

- Food and packaging costs: $700

- Discounts and giveaways: $400

- Additional labor: $200

- Advertising expense: $400

Total incremental costs: $1,700

Incremental contribution: $300

In this example, the restaurant generated $2,000 in additional revenue but retained only $300 after the incremental costs.

That may still be a worthwhile investment, particularly if it attracted new customers who subsequently become regular guests.

But now we can make an informed decision.

And if the promotion primarily discounted purchases that customers would have made anyway, the actual economics could be considerably worse.

Note: This simplified example assumes the $2,000 in sales is incremental and the discounts have not already been deducted from reported revenue.

Revenue is not the same as contribution margin. And contribution margin is not the same as return on investment.

Marketing should ultimately improve the economics of the business, not simply make the sales report look better.

4. Don't Forget the Second Visit

This is the part of restaurant marketing that I believe is too often overlooked.

For years, I've thought about the restaurant business in terms of two fundamental concepts:

Trial and repeat.

Marketing can be very effective at creating trial.

A customer sees an advertisement, receives a flyer, notices a special offer or hears about a promotion and decides to visit.

Great.

We've accomplished something important.

But what happens next?

If we attract a first-time customer with a discount and never see that customer again, the economics of that promotion may be disappointing.

On the other hand, if that first visit leads to five, ten or twenty additional visits, the value of the original promotion can change dramatically.

That's why I advised my client to think about the next visit before launching the first promotion.

For example:

Suppose we're distributing an offer to nearby businesses to encourage first-time visits.

The offer might generate trial.

But while that customer is in the restaurant, we should have a plan to encourage a return visit.

Perhaps we invite the customer to join our loyalty program and offer a complimentary side with their next purchase.

Now we've connected the original promotion to a second transaction.

And, if our loyalty system allows it, we can begin measuring whether those promotional customers return, how frequently they visit and what they spend.

Of course, the incentive itself needs to be costed and evaluated.

Giving something away isn't automatically a good idea just because it encourages another visit.

But the underlying strategy is sound:

Don't just plan how to get a customer in the door. Plan how to earn the next visit.

Marketing creates trial.

The guest experience, operational consistency and thoughtful follow-up help create repeat business.

And repeat business is fundamental to building a profitable restaurant.

5. Three Questions Every Promotion Should Eventually Answer

Once the promotion has run and you've collected the results, there are three questions I believe every restaurant operator should be able to answer.

1: Did it work?

Did the promotion accomplish its stated objective?

If the objective was new customer trial, how many new customers did we attract?

If it was frequency, did guests actually visit more often?

If it was average check, did average spending increase?

2: Was it profitable?

Did the incremental contribution justify the discounts, food costs, labor and marketing expense?

Sometimes a promotion can meet its sales objective and still fail financially.

And sometimes a promotion with a modest immediate return may be valuable if it attracts customers who become regular guests.

3: What happens next?

Should we repeat the promotion?

Modify the offer?

Target a different audience?

Stop spending money on it and invest in something more productive?

And how do we encourage the customers we attracted to return?

Notice that these are questions we evaluate after the promotion, not questions we can definitively answer before launching it.

Before launching, we need a plan that will allow us to answer them.

That's the discipline.

6. Sometimes the Best Marketing Decision Is to Stop

Here's another problem I frequently see.

Restaurants continue running promotions because they've always run them.

The same discount.

The same sponsorship.

The same advertisement.

The same special offer.

Nobody can clearly explain what it's producing, but nobody wants to stop.

Perhaps the owner likes the promotion.

Perhaps a vendor recommended it.

Perhaps the marketing company reports impressive impressions or engagement.

Perhaps the restaurant simply feels obligated to keep doing something.

But marketing budgets are finite.

Every dollar spent on an ineffective initiative is a dollar that can't be invested somewhere more productive.

That's why measurement matters.

It allows us to make decisions based on results rather than habit, enthusiasm or assumptions.

Sometimes the right answer is to invest more.

Sometimes it's to change the offer.

Sometimes it's to target a different audience.

And sometimes the smartest thing we can do is stop.

The objective isn't to do more marketing. It's to do more effective marketing.

7. Build a Simple Marketing Scorecard

You don't need a sophisticated marketing department or expensive analytics platform to begin managing this better.

A simple spreadsheet, supported by your POS and loyalty data, can provide a useful starting point.

Your Marketing Scorecard Should Include:

- Promotion: Name, dates and target audience.

- Objective: New customer trial, increased frequency, higher average check or another measurable goal.

- Investment: Advertising expenses, discounts, giveaways and other promotional costs.

- Activity: Number of redemptions and associated transactions.

- Sales Impact: Estimated incremental revenue generated.

- Financial Result: Incremental contribution and return on investment.

- Repeat Behavior: Subsequent visits by promotional customers, where measurable.

- Decision: Repeat, revise or discontinue the initiative.

Review the results shortly after each promotion ends, and again later if repeat customer behavior is part of the objective.

Over time, you'll develop a much clearer understanding of which initiatives actually work for your restaurant.

And that's when marketing becomes more than an expense. It becomes a managed investment.

The Operator Challenge

Think about the last three marketing or promotional initiatives your restaurant ran.

For each one, ask yourself:

What was the objective?

How did we measure the results?

Did the financial return justify the investment?

Did we have a plan to encourage customers to return?

What did we learn, and what will we do differently next time?

If you can't answer those questions, don't simply launch another promotion and hope for a better outcome.

Start by putting the measurement in place.

Define the objective.

Establish the tracking.

Understand the economics.

Plan for the second visit.

And when the promotion is over, evaluate what happened.

Because ultimately, marketing activity isn't the same as marketing effectiveness.

The objective isn't to spend more money attracting customers.

It's to spend your marketing and promotional dollars in ways that build a stronger, more profitable restaurant.

Jamie Galler

Restaurant Advisor

The Practical Creative

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