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How to Respond to Increased Competition to your Bar, Café or Restaurant

A clear head goes a long way in a tough hospitality market.

Come rain or shine, it always seems like the food service sectors are perennially competitive. But right now barriers to entry are low, demand for quality food and beverage experiences are high, and thanks to a thriving local food culture there’s never a lack of enthusiasm for entering the market.

Recent growth forecasts for non-institutional commercial food service sectors in Australia back this up.

 

Top growth food service sectors forecast 2018

• Hotels/Motels: 3%
• Cafes/Fast Food Independents: 2%
• Restaurants/Pubs/Fast Food Chains: 1.5%
• Clubs: 0.5%
• Functions Centres/Caterers: 0.3%

Source: Food Industry Foresights (2017)


So times are good, but it does also mean your food service business is more likely to face unexpected competition at the drop of a chef’s hat.

However, you don’t have to be a marketing maven to help guard against the impact of new competition and give yourself some peace of mind in the process.

It’s all about taking a step back and taking a cold hard look at where your business stands in the local marketplace.

 

Clem Onojeghuo/Unsplash
Clem Onojeghuo/Unsplash

Carve out time to conduct research and market your business

When it comes to working on the business rather than in the business, food service entrepreneurs are notorious. Opening a café or restaurant is often a decision driven by a burning desire to deliver a satisfying and unique service experience, and spending time on anything else in comparison can seem like wasted time.

The problem is that if you’re constantly in the trenches there is little chance of seeing the big picture. So you have to step away from the frontline, delegate duties or just plainly put up a do not disturb sign for a few hours every week to give yourself the time to think.

 

1. Create time by cutting out low return tasks

If this first step seems daunting in itself, consider the 80/20 rule (or Pareto Principle). 20% of your customers will be driving 80% of your business and vice versa. That means 80% of your customers will be driving just 20% of your business.

Analyse the returns and identify these low value segments you’re spending time trying to service and reduce the time you spend on them. Whether that means stopping a special offer or even closing on a day that brings in little business - the time you save to devote to working on your business could represent a much better return.

 

2. Improve time management by identifying inefficiencies

Also look at how you’re spending your own time when not on the front line. If you’re a typical café, bar or restaurant owner you probably prefer to do things yourself to make sure they get done. There’s nothing wrong with that, but delegating arduous tasks and outsourcing to professionals duties that see you burn the candle at both ends can be a life – and business – saver.

 

Tips:
  • Start working on your business, not just in your business
  • Identify low value activities that you can cut without adversely effecting returns
  • Book out the time you’ve found to start regularly researching and marketing your business

 

mnm.all/Unsplash
mnm.all/Unsplash

Look at exactly who you’re competing for

Lots of business owners instinctively feel the need to pivot when faced with new competition. But it’s much harder to reinvent the wheel than improve competitiveness in a pursuit you already have knowledge of. There’s no shame – but a lot of smarts – in focusing on the low hanging fruit.

 

1. Build a picture of your most high value customers

Start by identifying your most high value customers – the 20% that drive your business. Talk to them, they are your regulars after all. Find out why they return, what makes them tick, and what they love about what you provide and what they’re not so hot on.

You’ll probably find the picture is a little more complex than expected. There may be different types of customers who find value in different things you offer. Whatever the case - try to separate these high value customers into types.

Marketers call this “segmenting” and they build fictional “personas” around each type of target customer so they can compare likes and dislikes, and what motivates each type of person. Don’t worry if a lot of your conclusions seem instinctive or like guesswork, you’ll improve your picture of your customers over time.

Just try to be objective and recognize when you’re making an assumption based on your own biases and experiences. If in doubt, remember that no questions are stupid and the source of your knowledge is sitting right over there on the other side of the bar or kitchen.

Once you’ve segmented your high value customers into types, compare them to find the common ground of what they’re responding positively to in your business. This may work to confirm assumptions you already had or present some surprising answers, but either way it’s a worthwhile exercise that will give you evidence to base your decisions on.

 

2. Analyse your options for marketing your business

Next, look at your businesses strengths and weaknesses. You may have conducted a SWOT analysis for your business plan. If so, dust it off. If not, don’t worry a SWOT analysis is at its heart just a list of Strengths, Weaknesses, Opportunities and Threats.

By comparing them you can take a helicopter view of how to improve your business by, for example, using an Opportunity to improve or negate a Weakness.

In this instance you’re looking to apply a Strength to tackle a Threat – the new competition.

Now revisit your high value customer segments and your conclusions about what they loved about your offering and what they thought could be improved. Include them in your Strengths and Weaknesses lists, and then look for how you can maximize your strengths or minimize your weaknesses.

For example, if high value customers love your seafood but are indifferent about your main burger menu, you could add a few more margin-friendly seafood dishes to the menu and promote them with a special offer. You could also apply an Opportunity to the identified Weakness by changing up the ingredients and recipes of the burgers based on current trends.

This isn’t pivoting to suddenly become a seafood restaurant. Just identifying how you can become more competitive in increments by doing more of what you already do well to attract more people just like your high value customers.

It’s about taking measured risks, because you don’t want to rush in and make wholesale changes that might be overkill or completely miss the pain points of your customers.

 

Tips:
  • Resist the urge to pivot or rush into action to respond to a competitor
  • Identify who your most high value customers are and what they like
  • Feed your findings into a SWOT analysis to help you decide on a good course of action

 

Scott Warman/Unsplash
Scott Warman/Unsplash

Aim for measurable success

Once you have an idea of what you should do it’s time to look at how you can execute a promotion in a way that maximises the return for your business.

And you can’t do that without being able to accurately measure success.

 

1. Make sure you reach the right people

It might be tempting to think promoting is about brand awareness and simply getting the word out as much as possible, but without knowing you reached the right people there’s no way to tell if a marketing campaign is money well spent.

An online or paper survey can be a great tool for measuring this. It doesn’t have to be long, but just cover a few questions to find out why the new customer visited and what they liked and didn’t like.

Think about incentivising the survey with a small prize or gift that doesn’t cost you a lot – like a meal discount or voucher – and don’t be afraid to ask for people’s emails when they pay the bill. You can then send them a link to an online survey and make this touchpoint the beginning of a customer database you can cost-effectively email market to later.

 

2. Make sure you’re getting a good return

When it comes to measuring return, aim to define the cost per acquisition on every new customer you attract. That may sound scary but it just entails knowing the total cost of your promotion and dividing that figure by the number of new customers.

The important thing is to be ruthlessly objective when it comes to assigning costs to the campaign – be as thorough as you can, going right down to estimating the value of all the time you put into the project from the moment you started your research.

You can then compare it to the profits from your new customers and see where you can improve things next time out.

 

3. Get into the habit of marketing your café, restaurant or bar

Remember, marketing your business needs to be a regular occurrence. Achieving that in any small business can be challenging, let alone one operating in an intense hospitality sector. But the more you do it the more efficient you’ll get at it, improving your return on investment as you learn.

Talk to your local hospitality association about marketing support in your area or even look at business mentors with marketing or hospitality experience. The key thing to remember is that you don’t – and shouldn’t - try to do it all yourself.

There are also great resources for all small businesses at the state level courtesy of business.gov.au and business.govt.nz.

But if nothing else, learn to be comfortable delegating and outsourcing to give yourself the time to think and create some peace of mind.

 

Tips:
  • Measure marketing success by the cost of acquisition of each new customer you attract
  • Be honest about all the time and costs that go into each marketing campaign
  • Afterwards, learn from the experience to do it again with improved efficiency and returns

 

*While SKOPE uses reasonable efforts to include accurate and up to date information on the website, it makes no warranties or representations as to its accuracy or completeness. SKOPE is not responsible for any errors or omissions or for the results obtained from the use of such information. The information does not constitute any form of advice, recommendation or arrangement by SKOPE or its affiliates or any other party involved in the website and is not intended to be relied upon by users in making (or refraining from making) any decisions based on such information. You must make your own decisions on whether or not to rely on any information posted on the website.
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