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In the past few months at SpeedLine, we have interviewed dozens of pizzeria owners about their coupon mailing strategies. Initially, I had thought that we might gain some insights into couponing that we could share with other customers-and we have. But we certainly found no magic bullet. In fact, there seem to be nearly as many ideas out there about what coupon offers work best as there are people operating pizzerias.
- An area developer for a growing pizza chain in Wisconsin, for instance, mailed the same two coupon offers into two different trade areas in May. At one store, the "$2 Off a Large Pizza" coupon out-performed the "Free Breadsticks" coupon by more than two-to-one. At the second store, the reverse was true.
- Similarly, the results can vary month to month: a New York area operator mailed the same offer to his 60-day lazy customers a few months apart. The first mailing returned a 75 percent redemption rate; the second pulled less than 30 percent.
- A Greater Vancouver area pizzeria owner uses the same coupons all the time - but sees huge differences in redemptions based on the way that he distributes the coupons. His coupon in the Yellow Pages outperforms the same offer in a coupon book by more than 10 to one, even after accounting for circulation differences.
So how do restaurant owners make decisions about whether to offer coupons, which ones, and how to distribute them?
What Works in Lacombe
Wayne Rempel's story shares some similarities with the process of trial and error and trial again that many of the owners we interviewed described.
Wayne, owner of Just Pizza (JP's) in Lacombe, Alberta, credits coupon advertising as a major reason for his restaurant's growth from $300,000 to $500,000 in annual sales in a town of just 5,000 households.
The cornerstone of JP's couponing strategy is a monthly Val-Pak offer. Wayne runs 10,000 coupons per month (two coupons to every house in town) in each monthly mailing. The full-color, glossy coupon averages 5 percent redemption-and as much as 10 percent some months. He changes the coupons every third month, and changes the expiration date each time.
Another key to his marketing strategy is combining coupon offers with programs that help the community where he makes his living. He participates regularly in a program sponsored by the Canadian Paraplegic Association. The Association produces a reusable plastic coupon that costs him nothing. Wayne just has to agree to honor the fundraiser card coupon offer for a period of three to six months. Because of the deep discount on the card, it doesn't make him a lot of money, but Wayne sees the value in sheer goodwill, and in introducing new customers to his pizza.
He extends that philosophy into more community-based coupon programs with churches, sports teams, and other groups. He will sell the groups coupons for a free two-topping pizza and two-liter pop for $10 each, and the groups sell the coupons for $20 each and keep the profit.
"When those coupons come in, I track them closely because I'm not really making any money on them," he says. But, he adds, "it promotes my business, and people see the goodwill."
And the result is more business for his busy pizzeria. "It works just unbelievably," he adds. The high school football team sold about 250 in a matter of a month. That coupon is redeemed about 98 percent of the time. In fact, Wayne adds, many people will buy five or six of them. One woman bought 10 of them and gave them away as gifts. "They figure they're going to come here anyway. Why not support a good cause?" Wayne says.
In addition to general awareness-building and community support, JP's uses coupons to promote new products. For example, when they recently added Friteu Chicken to the menu, they used a special coupon in their Val-Pak mailing for a couple of months to build awareness. As a result, chicken sales have taken off.
The Numbers Tell the Story…or Part of the Story
For Wayne, and for every one of the pizzeria owners we have interviewed in the last few months, tracking the number of coupons redeemed is essential to making good decisions about which promotions to keep.
With Val-Pak in particular, the 30-day expiration date is the key to Wayne's coupon tracking system. Today, he tracks coupon redemptions manually, collecting the coupons in a separate envelope for each month. He has an envelope for each month going back six years to when he first purchased the restaurant. But accurate tracking is a challenge for most restaurant owners.
When he first began his Canadian Paraplegic Association coupon program, Wayne tracked usage by manually reviewing his order slips and counting them. His staff keeps track of redemptions by marking "CP" on the order slips.
Does he continue to track "CP" redemptions? Wayne laughs, "As I've grown from $300,000 to $500,000 in sales, you can imagine how many more slips I have now. So…not a chance. Being able to track coupons more easily is one of the things I'm looking forward to with my new POS," he adds.
Richard Siemens, owner of Ricardo's Pizza in Abbotsford, B.C., depends on his POS system to control how coupons are used and to track coupon usage. But he insists that you can't see the full effect of a coupon or advertising in the usage numbers.
"The system can't track people's rationale," Richard says. "There are some things about advertising that you can't measure. If every customer tells 10 people, there's no way of tracking that."
"The spin-off of advertising and coupons is word of mouth," he concludes. People talk about word of mouth being the best advertising, but Richard sees that as a bit misleading. "They go together," he insists. "You can't have word of mouth if you don't get the word out first."
Evolution of a Coupon Strategy
In the six years that Wayne has owned JP's, he's done some re-thinking of his marketing ideas as he has refined his coupon strategy to make it more profitable.
"Originally, when I started sending out coupons," he says. "I thought I had to have an offer that was really attractive on the price-point." Initially, he designed his coupons based on a four-dollar savings - usually giving away an order of flat bread and a couple cans of pop.
Wayne adds, "I was giving away an order of flat bread and a couple of cans of pop with two 2-topping 10-inch pizzas, which only came to $15.50. But the same offer will work just as well on a pair of 14-inch pizzas where they're paying $25."
With six years of coupon tracking numbers under his belt, Wayne's coupon promotions are more profitable today than in the early days. "I have adjusted my coupons to meet our customers' buying requirements," he says. "The more they spend, the better the offer is ($ value) - but percentage-wise, I make it about the same. If they're going to spend $20, I'm going to give them an offer that's worth, say, two dollars. But if they're going to spend $30, I'll give them an offer that's a little better."
Testing and tracking are the keys to finding out not only what coupons and distribution methods work, but also which ones don't.
With Val-Pak already working well for him, Wayne decided to try running a coupon in the paper. As a test, he made it a really good offer, a free 12-inch pizza with no purchase necessary and a two-week expiration date. "They didn't have to buy anything, just bring the coupon in," he says. He saw a total of three redeemed.
"The reason I did it was to see if the newspaper was working for me," he explains. "So, you can imagine how much I use the newspaper. For me, coupons don't work in the paper."
The Best Offers are the Most Profitable Offers
So what does work? When it comes to coupons, there are nearly as many answers to that question as there are pizzerias.
For Richard, the most successful coupon offers are package deals. For Wayne, free items. These two types of offers were among the most common responses we heard from pizzeria owners across Canada and the U.S.
But there were many others as well:
- Two Medium Pizzas for $17.99
- Free Breadsticks
- Three Large Pizzas Special
- Pizza & Pasta Combo
- Family Feast
- $3 Off an Extra Large
The distribution methods that work best seem to vary just as widely. From Val-Pak to Yellow Pages to door hangers to coupon books, the only "secret" seems to be to try something new, track the results and stick with what works for your area.
In six years of monthly couponing, Wayne has tried just about everything. But he remains adamant that free items are the smart way to coupon. A frequent participant in PMQ's Tuesday Night Chats, Wayne has argued this point multiple times with other operators who tell him that a two or three-dollar discount works better for them.
"What works best is when I give something away for free," he says. "Instead of 'Save $2 or $5,' the main heading of my coupon is 'Free Breadsticks,' 'Free 2-Liter Pop,' or 'Free Whatever.'"
Wayne's best-performing coupons are for free breadsticks or a couple of cans of pop with two large pizzas. The perceived value of these offers is between two to three dollars or up to $6.50 (when he offers a free small cheese pizza). The cost, however, is minimal. An order of breadsticks only costs him 15 cents.
"Why give away three dollars? Why not offer something worth $3.50 that only costs you a dollar?" A coupon for two dollars off might draw more redemptions than a coupon for free breadsticks in some areas. "But at the same time," Wayne insists, "even if you only get half the people redeeming the free breadstick coupon, and it only costs you 15 cents an order, you're making more money."
Bottom line, a coupon strategy is designed to build up sales. A coupon strategy that builds awareness, brings in new business and builds profits at the same time? Sounds like a recipe for success.
- PMQ -
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