Chipotle gained a guest for life the first time I tried its burrito. I was visiting friends in Chicago in 2004, and I stopped into Chipotle hoping for an inexpensive, filling lunch. Maybe the manager could tell I was working at a nonprofit at the time, because as he handed me the burrito he said, “This one’s on me.”
I felt such an incredible goodwill toward Chipotle because of that free burrito. It tasted more delicious. It got me to love the brand, and I wanted to have another burrito in the future that I would pay full price for. I wanted to tell all my friends they needed to try this brand.
If I had gotten my order at a discount, it would not have inspired the same level of devotion. And it turns out, this is a textbook case for why restaurants should consider offering freebies rather than discounts.
The psychological effects of free
In his book, Predictably Irrational, Dr. Dan Ariely explains that offering something for free has a powerful effect on human behavior:
“Most transactions have an upside and a downside, but when something is FREE! we forget the downside. FREE! gives us such an emotional charge that we perceive what is being offered as immensely more valuable than it really is.”
For free things, we wait in long lines. We take swag from an event booth. We will go out of our way to acquire items we don’t really need because the perceived value of free is so high.
However, the same isn’t generally true for discounts. When we receive a discount on an item, it affects our perceived value of the item and the brand. If Chipotle offered half off burritos, a guest might think the brand is still making a profit off the discounted burrito and expect that it should always cost less. Discounts change the expectations of the price of a burrito in a way that a free offering does not — I certainly don’t expect free food every time I visit a restaurant, so it feels special when it does happen.
Personally, I also have to respect the confidence of giving away your food for free — you are saying your food is so good that someone will come back and pay full price.
How can free offers work for restaurants?
Giving away your entire menu for free to anyone is not exactly a good business model. But identifying the right guest candidates and sacrificing a few dollars in food cost for loyalty will likely be worth it down the line. There are several tried-and-true methods to leverage free food in exchange for valuable customer data: free fries for signing up for a loyalty program, a free drink for leaving an online review, or a free dessert for agreeing to receive text offers.
When your brand uses Olo Engage you already have robust guest profiles you can use for personalization. What are some creative ways to tap into that psychological appeal of free to increase business without giving your whole menu away every week?
- Free lunch for introducing a friend: Let’s say a brand is expanding to a new market. It could identify previous guests who live in that area and are clearly fans of the brand: high likelihood to come in and high lifetime value guests. Send those guests an offer for free food if they brought a friend to try the brand for the first time. The brand could verify the friend was a new customer by having the friend sign up for rewards with a phone number, and give one or both people free lunch. Everybody wins: the friend gets to try the restaurant for the first time, the previous guest gets free food, and the brand gets new customers and customer data. You could have fun with the offer, creating a swanky VIP invite, and even create a separate reward, like swag or high-ticket items, for bringing in a certain number of friends. Wouldn't that be a much more powerful way of entering a market than just doing spray and pray marketing?
- Free for guest recovery programs: Free offers can be powerful ways to entice previously loyal guests to come back in. These win-back campaigns offer brands an opportunity to get creative and make guests feel truly valued. Think: clever, enticing emails, personalized offers based on what the guest frequently orders, or beautifully designed direct mail campaigns. (The “golden ticket” from Charlie and the Chocolate Factory is memorable for a reason!) The brand could use Engage to identify these high-value guests who haven’t visited in a while, and the offer could contain a one-time-use coupon code.
- A no-wait pass: One restaurant told me about an interesting strategy to make valued guests feel special without giving away actual food: a card that prevents guests from having to wait. After reaching a certain tier in the loyalty program, VIP guests can present this card at the host stand of the restaurant and be bumped to the front of the wait list. This makes the guest feel special and valued without the associated food costs.
The bottom line
Given the tight margins in the restaurant industry, it may feel daunting to give food away for free — it may feel like money is walking out the door. However, you are in control of the free offer: what to offer, how long it lasts, and who can receive it. Keep it to a value you feel comfortable with — I imagine very few restaurants are giving away free steaks.
Remember that free is a powerful tool. In return for the free item, you are gaining guest insights that can help you run your business better. And, you might even gain a guest for life.
