Cracking the Secrets of Restaurant Tipping Policies
How are restauranteurs Danny Meyer and Bob Merritt like canaries in a coal mine? Coal miners, as you probably know, used to take canaries down into the mines with them to test the air. If the birds died, it meant that the air was unsafe for the miners. Meyer and Merritt have recently provided a similar service to small business restaurant owners. Toward the end of 2015, each decided to experiment with no-tipping policies in their restaurants. Expensive vs moderately priced restaurants It’s important to put this in perspective. Danny Meyer operates some very high-end restaurants in New York City as part of the Union Square Hospitality Group. These are five-star restaurants – not only in the quality of the food but in the price as well. Bob Merritt, chief executive officer of Ignite Restaurant Group, runs the Joe’s Crab Shack chain of seafood restaurants. Any restaurant that has “Joe’s” in the name serves solid food at reasonable prices. This background is necessary to understand because we’ve been treated to public experiments in which two very different types of restaurants tried the same radical change in policy by eliminating tipping. And, as perhaps we should have suspected, these experiments seem to have produced very different results. Potential benefits of no tipping There are some very good ideas and principles behind the no-tipping policy. First, as Shep Hyken wrote here at the time, good service is every employee’s responsibility, not just those who get the tips. Second, eliminating tipping allowed for a slight rise in prices, which would be used to increase wages across the board. The hope was to improve pay for everyone, acknowledge their roles in customer service, and encourage their commitment to great customer service. The early results are in: In Meyer’s restaurants the change seems to be working, but Merritt has already dropped the policy. Meyer first implemented the policy in The Modern back in November and he reported that the restaurant had its biggest December ever. However, as Meyer himself noted in an interview with New York Eater, The Modern enjoyed a lot of press coverage prior to the policy change and that would have contributed to some of the restaurant’s traffic. As he implements the policy in other restaurants, they won’t have that advantage. It’s a no-go at Joe’s The experiment with no tipping at Joe’s Crab Shack didn’t last very long; it quickly dropped the policy at 14 of its 18 trial locations. “Our customers and staff spoke very loudly, and a lot of them voted with their feet,” Merritt said. While experimenting with changes like these can be worthwhile, I’m glad that these two well-heeled restaurant companies went first and were willing to be very public about their results. They have saved many small business people who own independent restaurants a lot of trouble. If you’re operating at the top end of the pricing spectrum, you might want to try no tipping. However, if you’re battling it out among moderately priced restaurants, don’t bother. (I think it’s interesting to note that no-tipping seems to work at both ends of the pricing spectrum: fast food restaurants are generally no-tip eateries, and high-end restaurants can go that route if they so desire.) There’s one more lesson to be learned here: Keep an eye on...
read moreThe Two Big Keys to Online Small Business Success
In years gone by – and this holds true for many small business owners still today – the keys to success were often relatively few and could be mastered by a single person. Let me give you a very simple example. Individuals starting a small business that revolved around outside sales could pack up their samples in their cars and then go around and make sales calls. They already had the knowledge to drive the car, so if they were good at engaging prospects, and they had the right solutions, success would usually follow. Two elements of success Today, however, a lot of small business success – even for non-ecommerce companies – depends on strategies carried out in the online environment. And, there are two major components to achieving online business success: Properly working with the realities of the Internet, and Properly understanding and addressing the psychology of your prospects. Although the Internet is a beast made up of bits and bytes and powered by flowing electrons, I like to think about this technical side of small business success today as almost “mechanical.” You have to set up various pipelines, feed search engines the right fuel, boost the speed of your website, hook up an auto-answering service for customer inquiries, etc. It’s really like one huge, digital Rube Goldberg machine that needs to be running smoothly – with everything happening in the right order at the right time – for you to be successful. The other part of this, the psychology, presents entirely different challenges, and these can be quite subtle. You need to understand what motivates your prospects. You need to be able to think like they think so you can engage them in ways that will make them respond in the manner you need them to respond. This understanding is critical no matter what your end goals are. It’s important whether you want to ultimately make a sale, or whether you just need to collect email addresses. Personal contact required By the way, this gets to one of the reasons why I always encourage founders to continue making direct contact with customers. The small business owners I referred to at the top – those who drove from client to client, engaging each one – had a built-in advantage: Their personal contact helped them understand their customers better and build relationships. Let’s pull this together now. Considering the two big keys to online small business success that I’ve outlined here, how many of those keys do you personally hold? If we can be honest with ourselves, I think most of us would say that we had much better command of one compared to the other. Where is your strength? Are you an Internet guru who knows how to magically weave all the elements of on-page SEO, off-page SEO, website user experience (UX) design, landing pages, pop-up boxes and all of the other online elements? Or do you have a complete grasp of your prospects and what it is about your solution that makes them fall in love with your product or service? Who completes you? Unless you’re that one-in-a-thousand individual who is incredibly competent on both the technical side and the people side of your business, you need to bolster your weaker area with either a partner, employees or...
read moreWhat Is the barbell effect and how does It work?
Do you work out with free weights? If you do, where do you grab the barbells? In the middle, right? In business, as in barbells, it’s the middle that gets squeezed and this has given rise to the phenomenon known as “the barbell effect.” The idea is that businesses on either extreme in a given niche will survive; it’s the poor guys in the middle who get squeezed out of business. And for further clarification, usually the extremes are the lowest cost providers and the highest costs providers. Writing for Gigaom not long ago, Mathew Ingram pointed to troubles SAY Media was having. One side of the online advertising barbell, Ingram pointed out, is being dominated by the super low-cost, high-volume providers, such as Google’s AdWords. On the other side are companies that specialize in custom-content, low-volume, high-cost advertising campaigns. Companies in the middle are “neither fish nor fowl” and are having a hard time making it. Get on the profitable side of the barbell The barbell effect applies to virtually every industry and for most small businesses, the challenge is to find a way to differentiate themselves so they can occupy a spot on the side of the barbell that commands higher prices. This is very important to consider as you initially plan your small business or begin to reevaluate your plans to boost your level of success. Ask yourself this question, “Am I trying to do business in the middle?” If you aren’t the low price leader and don’t have some attributes that clearly set you above your competition, you have allowed yourself to slide into the murky middle. In this article, I give some tips on how you can set yourself apart from your competitors. And remember, your customers must be able to associate your differentiating attributes to your business. This means that you need to clearly communicate and model these factors. Your marketing, advertising, and employees must all highlight the qualities that make your product or service distinctive, the best in its niche, and worth a premium price. Low cost = living dangerously If you’re striving to be the low-cost leader, know that you’re living on the edge. A well-financed competitor who is willing to lose money for a while can show up at any time and exert unbearable price pressure on you. Then it becomes a war of attrition. If you want to survive on the low-price side of the barbell, you need to be the most efficient operator and have the lowest overhead costs. This will often involve leveraging overseas contract workers and automation. There’s a good chance you’ll need to pay developers for software and that can cost a lot of money up front. I referenced Google’s AdWords program above. Why is it successful for Google? It’s huge. It was essentially the first of its kind. And, Google has invested millions of dollars developing it. Your assignment is to grab a sheet of paper or open a Word document and list the qualities that qualify you to charge higher prices. If you’re on the low-cost side of this discussion, then your assignment is to list ways you can further decrease your...
read moreHow to find allies and create marketing partnerships
We have discussed and published articles here before on forming alliances with other small business owners. One simple way to support each other is to do business with each other. But today I want to introduce you to a very simple way to start down the road toward creating some powerful content and social media marketing alliances with other businesses. If you don’t have a fairly aggressive social media marketing program now, this won’t help you very much. The first step is to establish your voice on the best social media platforms for your product or service. A healthy number of social media followers and friends will help you successfully pull off this strategy. With that said, you need to analyze who has a “share of the voice” within your area of publishing on your social media platforms. Let’s use me as an example. The main area where I publish could be easily categorized as “small business.” Therefore, I would want to take an “inventory” of others who publish social media content within the small business category. There are a number of ways to do this. Let me give you two websites where you can start your research for Twitter. Twazzup Followerwonk When you use Twazzup, the best strategy is to search for the hashtags or keywords that you most often use in your Tweets or other social media posts. On Followerwonk you can search Twitter bios by keyword to find those who are in the same niche as you are. You’re conducting this research to form a picture of the people or companies that have a share of the voice in your market niche. The next step is to find those who are not direct competitors with you. Continuing with using me as an example, I would find that all kinds of service providers publish to the small business community in the social media. CPAs, crowdfunding websites, even healthy snack food providers are sending their social media messages out to the small business market. I can then contact these companies directly and propose alliances in social media and content marketing. This strategy costs nothing but a small amount of time it takes to do the research, communicate with the other business and come up with the best ways to share marketing content with one another. ...
read moreThis Week in Small Business: Cash in on the extensive research of others…
Ride on the shoulders of others! Read what Archana Madhavan learned during four years of non-stop data analysis. Discover what Zz Twainy found when he reviewed some 600 pitch decks! Leadership, management and productivity Don’t fly blind. Connect with a mentor ASAP – technology makes it easy. Be sure you include these seven operational details whenever you write a business plan. Find out how Airbnb scales its organizational culture and customer experience. Both free and paid accounting software is available. Read this so you can make the right choice for your small business. More than a fourth of all websites are powered by WordPress. Find out how to prevent your WordPress site from getting hacked. Check out these three social media customer service tips to keep your customers smiling. Let Archana Madhavan do your data analysis for you. Here’s what he learned from four years of pouring over the numbers. Marketing and sales The web is getting crowded with content and marketers wanting to push people to a landing page. Find out why your strategy isn’t effective. With the right social media automation, you can multiply yourself. Rebekah Radice offers five smart ways to do it. Since almost everyone is on Facebook, these tips to increase your reach can be quite valuable. And while you’re at it, be sure you aren’t making the top five Facebook marketing mistakes. If you’re marketing to women, remember that age is just a number. Wharton professor David Bell gives tips on marketing your small business using Facebook, geofencing, and eBay in this Philly-dot-com article. Here are 17 simple growth tactics you can try implementing next month to fuel growth at your ecommerce business. Don’t miss these 10 Snapchat secrets every small business marketer should know. Do you get writer’s block when you sit down to knock out a blog? These six strategies will help you pump variety into your blog. Have you ever considered that split testing could help boost the performance of your content marketing campaigns? Need to know how to do it? Read this. Entrepreneurship, startups and innovation It looks like women entrepreneurs may be on the forefront of gender equality in the business world. Read this Venture Beat piece to see what Zz Twainy learned from reviewing 600 pitch decks. Politics, government and the economy It’s not every day you get to tell Congress about the problems facing small business owners. Here’s what I said when I had my...
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