You can buy publicity like that


A restaurant that hadn’t advertised with my newspaper in a long time recently began advertising again through a coupon campaign. Two of the coupons promised a free buffet if you bought a 99 cent soft drink.

Not surprisingly, the campaign seems to be a hit. I redeemed one of the coupons Monday, and the cashier said people had lined up outside the restaurant on Sunday with those coupons.

Obviously the restaurant is losing money. You may ask how can the restaurant lose money this way? The restaurant is basically treating its losses on the food inventory as a promotional expense to draw new customers in.

One downside of dropping prices is you attract disloyal customers. You may be drawing new people into your store/restaurant hoping to enlarge your client base, but not all of them will return at future dates. These disloyal customers will run to your cheaper competitors when your price discount ends. Also, if you drop prices too often or too dramatically, you run a large risk of customers always expecting you to offer very low prices. That can be death on some brands.

This restaurant’s gamble on price discounting illustrates the difficulty in setting prices, whether you’re selling a meal or an automobile.

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