Gift certificates are one of my favorite ways to build sales and market a restaurant. While lot’s of restaurants use gift certificates in-house to build sales during holidays, I would like to share with you a great way to use gift certificate all year round to build sales, and improve public relations.
Gift Certificates and Charities
This is a very simple program, and doesn’t require a lot of work, so it won’t take long to explain it to you. It involves using charitable organizations to sell your gift certificates while raising funds for themselves. With this program, you can offer these organizations a larger contribution than their traditional fund raising methods, while you benefit from increased sales. You also don’t have to worry about ruining the perceived value of your product by discounting it, as you do with coupons, because these charities will be offering your coupons at full price. The discount that you would normally be giving the customer instead goes to the charity. Organizations such as schools, churches, the Boy Scouts and the Girl Scouts have children sell their fund raising goods, and they are much more effective than most adults. How hard is it to say no to a child who is offering gift certificates that contribute such a large amount to their cause?
How large an amount you ask? I suggest offering the charity 20% of gift certificate sales, and only offering certificates in either $20 or $50 denominations. Here’s how it works. You sell numbered gift certificate books to the charity at a 20% discount. The certificates should be signed and ready to be used. They sell the certificates at full price, while telling customers what a large portion you are contributing to their cause. Any remaining gift certificates they do not sell are sold back to you at the price you sold to them. This way, they have no wasted product, and only pay for what they sell.
Here’s how you make money on it. On the average nationally, 15% of gift certificates sold are never redeemed. This already brings your discount down to 5%. You’ll have to pay for printing certificate booklets, but by the time you figure in your tax write-off for a charitable contribution, and the normal percentage of your sales you direct toward marketing expense, the cost could be a wash. By keeping the certificates in larger denominations, you also increase the chance of the certificate holder bringing in friends, with everyone dining at full price so they see what a great value your restaurant is on an everyday basis. You’ll avoid the “coupon clippers” who just dine when they have coupons, and you’ll have a great way to build sales and gain new customers for your database!
Brandon O’Dell is an independent foodservice consultant who specializes in teaching owners and managers how to use emotion marketing and price by gross profit. He can be reached on the web at www.bodellconsulting.com.
Here you encourage discounting gift certificates to “increase sales,” but elsewhere you harp on discounting with coupons as disparaging to a restaurant’s “brand image.” I guess the charitable PR aspect offsets the reputational damage… And your statement about 15% of GCs never getting redeemed was true for paper certificates, but most decent places offer magnetic stripe cards these days. Redemption rates are much higher for them because people treat them like credit cards.
BTW, most charities end up selling GCs at a discount or, even more frequently, giving then away as raffle prizes or auctioning them off. Attempting to sell them at full price takes far too long!
“Discounting” hurts the perceived value of your food. This promotion does not encourage discounting to the customer who is using the gift certificate. They are paying full price so they see your product at its real value, not a discounted value. That is a big difference. The charity is getting the discount and reselling at full price.
This type of promotion isn’t right for all charities as all charities don’t have an avenue to sell gift certificates, and they would see no reward for giving away or discounting gift certificates they have to buy so that isn’t a concern.