A Rose by any Other Name
by CRP Partner Gene Baldwin as published in Franchise Times
When sales are soft, it is very tempting to reach out and try some new things to stimulate customer counts, sales and cash flow. Every good manager wants to be proactive and not passive in the face of these troubling issues. Sometimes you never know whether to embrace the old adage to “look before you leap” or heed the warning that “he who hesitates is lost”. Before you start down a path of radically changing key attributes of your concept in the name of a sales turnaround, you should first understand that “you are who you are”.
Most multi-unit concept managers understand that the customer perceives your company in a certain way. You have a niche in the market that has been purchased at a high cost of both time and capital. This profile is front and center in the minds of customers who are constantly being bombarded with more and more advertising messages while their attention spans are getting shorter and shorter.
Let’s explore the key elements of any retail concept and the probabilities of changing those attributes to improve sales results. These key elements are:
- Location
- Service
- Product offerings and prices
Location is the hardest attribute of your concept to change in the short run to improve sales. Most likely you are either located in a freestanding building or occupy shared space in either a strip or traditional mall. Given development times and capital expenditure requirements, it is unlikely that sales can be impacted in the short run with diversifying the location of your concept. Starbucks seems to defy conventional wisdom here. It seems new outlets for the premium coffee spring up every day.
Service and service systems can be somewhat less difficult to change in the short run. In the restaurant business, service systems seem to be divided among table service, buffet and order-counter systems. Changing any of these systems would be unlikely to drive short-term sales gains. I consider day of week, daypart, and hours of operation as part of your service system. Promoting specials on the lowest volume days of the week is a good way to increase sales in the short run. Implementing kid’s night promotions or two dinners for a lower price on Monday or Tuesday night has traditionally been successful. Also, keeping drive-thrus open later has been successful in many QSR concepts. Adding dayparts to the service system mix has been very unsuccessful in many concepts. I recently worked for an Italian restaurant chain that experimented with breakfast offerings. No matter how hard I tried I could not reconcile Italian food with breakfast offerings. Another successful modification of service systems for many restaurant concepts has been the addition of delivery, carryout and catering to dine-in offerings. The problem I see with adding these new service systems is that they are completely separate lines of business, and in many cases, conflict with good dine-in service. A good delivery operation requires a substantial investment in technology and the hiring of a proven manager who can run the new business profitably. Catering is also a separate business. A proven outside sales person is needed. You must attract a person who is willing to make cold calls and “knock on doors”. This is a skill set which is completely different from the skills of the traditional restaurant manager.
The easiest and most successful means of increasing sales in the short term is with product offerings and prices. On the product side, you must keep the “new news” coming through LTOs (limited time offers), daily or weekly specials, and new menu introductions. For large national chains, Taco Bell has done the best with new product offerings. It consistently develops new products that seem to be only loosely associated with Mexican food. After all, how many people in Mexico grew up eating a “Crunch Wrap”? On the price side, it is really tempting to discount. Deep discounts such as AYCE (all you can eat) and BOGO (buy one get one free) can be just like heroine to the retailer. Sales can increase dramatically during these promotions. The problem is that if these promotions are run too often, they will train consumers to wait until the next deep discount promotion to frequent the store. Jos. A. Bank trains its customers to only shop during sale periods (which are seemingly every week).
The bottom line is that while it is important to stem a sales decline in the short term, those fixes should not change the customer’s perception of your concept and the key attributes that have made your business successful.