Hotels have long since become accustomed to complaining about the OTAs, but now it’s the turn of restaurants to deal with online distribution channels that have the power to bring in the customers while squeezing the bottom line. I’ve just been reading about Eatigo – an online reservation platform offering discounted dining at establishments in Bangkok, Pattaya, and Singapore.
As a notorious skinflint, I’ve used the service a number of times. The business model allows restaurants to offer discounts to diners who show up at specified off-peak times. This delivers the benefit of extra customers when the restaurant would otherwise not be busy, and can also entice customers away from peak time reservations, thus reducing waiting times and improving the overall experience for those who choose to visit during the busiest periods. For me, it means I can justify the price of eating at places I wouldn’t normally consider.
Looking through the report*, it seems that the average discount is 30%, and there are currently over 700 participating restaurants. The strengths of the model are listed as described above, while the weaknesses include the fact that “the focus on discounts attracts price-sensitive users, which could be off-putting to high-end merchants such as five-star hotels”.
“Price-sensitive users.” That’s me in a nutshell. Short arms and deep pockets. If it’s cheap enough I’ll be there. That’s not to say I’m wholly undiscerning – I’m not one of those gullible fools who’ll buy anything if it’s half price – but there are plenty of hotels and restaurants I’d love to visit, just not at their regular prices.
According to the report though, I’m persona non grata when it comes to high-end restaurants. Personally, however, I’d beg to differ. There are certainly a number of good reasons why you don’t want me and my ilk in your restaurant, but the biggest problem is assuredly not that I might show up when you cut your prices from 1,000 baht to 500 baht, because at least I represent an extra customer.
I wasn’t coming at 1,000 baht, but at 500 I’m here, so as long as you haven’t priced things to make a loss, I’m actually a marginal gain. No, your biggest problem is all the people who were happy to pay 1,000 baht but now get a discount. When they take advantage of your offer you are simply losing the money they would have willingly paid. You’re not even creating goodwill – because you’re effectively drawing attention to the idea that the food was overpriced in the first place. Those customers will actually be less likely to return – the brand and the experience has been devalued in their eyes.
So, having driven away your existing customers by devaluing the brand, you are now left with the new customers who were attracted by your offer – the people like me. The bad news is that many restaurants profit handsomely from the extras, such as drinks, but price-sensitive customers aren’t so willing to shell out, so you won’t be making as much via this route. There’s no point hoping that a low price to get me through the door will then see me spending freely once inside – I can promise that won’t happen.
Nassim Taleb made the point that “the rich have their preferences constructed for them.” When your customers are rich, it is your job to find something to sell them, at a price high enough to extract as much of that money as possible. This takes imagination (since all their basic needs are already met), followed by marketing and persuasion so the rich will understand what it is that they are supposed to want. The last thing you want to do is give them a discount for showing up slightly earlier or later. The best advice we can therefore offer is to keep your prices high and protect your brand.