Catering to the New Affluent Consumer

In the last blog, Spending Patterns of Affluent Consumers, we discussed how spending patterns of affluent consumers have changed as well as why they have remained lower than they were before the recession. Mostly, the reasons pointed to the tendency for affluent consumers to enjoy the thriftiness that they developed as a necessity during the recession. Although most seem more optimistic about the general economic condition of the country, their spending habits remain conservative.

Some of the observations surrounding these tendencies could be viewed negatively for the restaurant industry, but with some careful planning and understanding of the ramifications of affluent frugality, many restaurants can retain their popularity with affluent customers and their families.

Popular Promotions

One surprising fact that we discovered in the preceding blog was that 64% of affluent households regularly use coupons. This supports the idea that these consumers are looking for the best possible deals that they can find. Thankfully, restaurants that are already catering to consumers at lower income levels by offering budget-friendly bargains will find that more affluent consumers are drawn to the same types of deals.

Promotions thought to only attract those on the tightest budgets will likely draw in business from unexpected sources at the highest income levels. During the recession, the affluent who learned to look for deals found that they enjoyed the feeling of being more frugal and, therefore, have continued their bargain hunting habits even in the midst of post-recession optimism.

Dwindling Desire for Sophistication

In the first installment of this blog, we also discovered that affluent consumers are reevaluating their priorities, especially when it comes to spending. They are seeing less value in doing things to impress others and are really focusing more on the things that are more important to them like family and friends.

For many, this means that instead of eating in more sophisticated restaurants, many are opting for more comfortable establishments. This affords the opportunity to enjoy a pleasant dinner with family or friends without all the pressure that comes with frequenting fine dining establishments.

True Value

Because affluent consumers are looking for better value, restaurants should be looking for ways to give their customers the best bang for their buck. The easiest way to accomplish this is probably to simply reduce prices, but that is not the wisest choice. For one thing, a drop in price indicates a drop in quality for most consumers. Generally, people believe that you get what you pay for, so they do not trust when prices are reduced. Because of this perceived diminishment of quality, the brand image will likely suffer.

A moderately priced, respected brand that suddenly drops their prices will possibly be viewed as substandard. Consumers may actually assume that an overhaul of the brand has occurred in which previously satisfactory products were exchanged for substandard substitutes. Also, lowering prices will make it incredibly difficult to raise prices later. The best way to appeal to smart affluent consumers is to serve higher quality products for a comparable price and, therefore, simply increase the value of the purchase.

Spending Patterns of Affluent Consumers

In the wake of the recent recession, consumer spending patterns are being watched very closely by analysts from every industry. One thing that has been observed consistently is that expenditures by affluent consumers have taken over an even larger segment of overall consumer spending (an “affluent” household is generally defined as one with at least $100,000 of disposable income per year).

As opposed to controlling about 25% of all consumer spending before the recession, individuals in the top 5% in regards to net worth now account for about 37% of all consumer spending. Restaurants should be aware of consumer thinking in order to gain the largest possible portion of this spending group.

Changing Attitudes

During the recession, affluent consumers were hit with financial difficulties just like everyone else. They had to reign in their spending and find ways to do without some of the luxuries to which they were accustomed. Spending had decreased across the board and it was no different for those who historically spent more, even in difficult economic times.

Thankfully, in recent months, consumers have become somewhat more optimistic about the economy and relaxed, in part, when it comes to spending. This includes affluent consumers who are gradually loosening their grip on their outgoing cash flow, but still maintaining a sense of frugality that is somewhat novel to that demographic segment.

Affluent Frugality

Although consumers on the higher end of the income spectrum have begun to show more optimism toward the economy, they have not returned to the rate of spending that they exhibited before the recession. One reason for this is that affluent consumers have come to view their newfound thriftiness as something to be proud of rather than something depriving them of luxuries. They have come to enjoy their ability to find the best deals and seek out the highest quality products at the lowest prices. A surprising 64% of affluent households are reported as regularly using coupons, which is an exponentially higher percentage than before the recession.

Also, another reason that affluent consumers may be maintaining their more frugal lifestyles is that cutting back has brought them closer to the things in life that matter more to them: family and friends. Therefore, they feel empowered to make decisions based on their families rather than how they appear when compared to other outside influences. This causes much less importance to be placed on appearing sophisticated which, in turn, causes them to make decisions based on needs rather than wants.

Adapting to Changing Attitudes

For those in the restaurant industry, some of these developments could be discouraging, but there is still good news to be found. Even in the midst of spending patterns that have yet to reach pre-recession levels, there are still ways to profit from the changing attitudes of the new frugal affluent consumer. To find some tips and tricks for gaining a share of the slowly increasing spending of top earners in the country, see the next installment of this blog series: Catering to the New Affluent Consumer.

Keys to Acquiring the Best Seafood

Serving the best seafood around does not result only from actions in the kitchen, but from buying seafood from the best possible sources. Today, most restaurants are planning their seafood menus using sustainable seafood lists, but to create really superb dishes, there is more to be done than to simply order your fish from the most popular producer and hope it ships on time. To have the best chance of getting quality, fresh seafood that is sustainable and in season, restaurant owners and chefs should invest in relationships with suppliers that understand their needs and are willing to work with the restaurant consistently. This kind of relationship results in opportunities to make truly special dishes that are unique and can really tell a story for your guests.

Trusted Suppliers

When you work with a seafood supplier, whether it is a small fishing operation or a large-scale fishery, a close relationship with a representative can give a restaurant many benefits. One of these is the peace of mind that they are working with a trusted business acquaintance, and that relationship helps to ensure that each piece of product that they use is of the highest quality. No supplier wants to lose a long-standing customer that gives them consistent business, so the motivation to ensure that all seafood is fresh and fit for preparation is incredibly high. To lose a restaurant as a customer would be too high a cost, especially for small, independently owned fishing operations.

Education and Information

Another reason for restaurant owners and chefs to maintain a relationship with their seafood suppliers is that the suppliers should be able to share valuable information about the products that they are supplying, or could supply, to the restaurant. Suppliers are an invaluable source of information about seasonality, sustainability, and many other factors that may help owners and chefs make pertinent decisions about their menus and ingredients. Chefs rarely have time to research this type of information for themselves so they value a close relationship with a supplier that will keep the buyer up-to-date on seafood-related news and developments.

Many restaurants have struggled with this aspect of finding the right supplier, even stating that while a supplier may have good products, the restaurant may still move on to another supplier because they did not receive the kind of communication and information that they needed.

To Each His Own

Cultivating relationships with seafood suppliers can be time consuming and difficult. This is why some restaurants opt for using just one trusted supplier for all of their seafood needs. Others prefer to diversify and use many different suppliers based on specialties or certain preferences.  For instance, a restaurant may use one supplier for all of their shellfish needs, but turn to a different operation for fish. Still others may have a different supplier for each type of fish they serve. In any case, the goal is to create a relationship (or relationships) in which restaurant owners and chefs can learn new things and create the best possible dishes with the best product available.

2012 Third Quarter Brings Mixed Reviews

As the third quarter of 2012 comes to a close, restaurateurs and analysts alike are looking at financial reports and coming up with mixed conclusions. This is perfectly normal, especially in such an uncertain economic period, but thankfully much of the news is encouraging, if a little cautious in its optimism. Although there are still some concerns about how this quarter has gone for the restaurant industry in general, there is widespread understanding about the reasons for some slow growth. As the end of the year approaches, however, expectations are somewhat skeptical for how the year will close out.

Third Quarter Difficulties

One of the main challenges that restaurants have faced this quarter is one that has been ongoing for the past few years. Restaurants are consistently forced to reevaluate their menu pricing in order to make up for rising overhead costs without driving away costumers. This is a delicate balance that is increasingly difficult to maintain as the cost of commodities, labor, and taxes all continue to rise and consumers continue to seek out the best value for the lowest price. Consumer spending is still at an all-time low, so restaurants are looking for ways to bring in new business and retain their regular customers with promotions and good value.

Also, some of the skepticism contributing to this quarter’s reviews comes from how the quarter compares to the previous quarter as well as how 2012 as a whole compares to 2011. Sales in the second quarter of 2012 were strong, making third quarter sales seem rather pale by comparison. For the same reason, the upswing in sales during 2011 makes sales for 2012 appear weak.

Consumer and Investor Hesitance

There are many factors influencing the hesitance of both consumers and investors when it comes to the restaurant industry. (Predictions and assessments of the restaurant industry as a whole are based on both restaurant performance and stock market trends). First of all, the fact that the presidential election is near, but as yet undecided, keeps economic conditions uncertain. The election creates uncertainty about commodities, consumer demand, and even healthcare, all of which make investors question the stability of the restaurant industry. Also, there are global economic concerns that have dominated the financial spotlight for much of 2012, which also contribute to more careful investing.

Positive Outcomes

Even with all these obstacles, there is still evidence that the restaurant industry has shown remarkable stability. For one thing, despite the rise in cost of many commodities essential to the restaurant industry, surveys of restaurant owners show that sales remain positive. Also, on average, restaurant stocks in the third quarter have still managed to consistently outperform other markets by .2%. The values of restaurant stocks are actually at an historical high, despite the comparatively low numbers shown by some analysts this quarter.

In other words, even though some of the data seems to paint a bleak outlook on the restaurant industry as a whole for this quarter, there are still some redeeming numbers that should be encouraging to restaurateurs and investors alike.

Selling More in a Tough Economy

In today’s economy, consumers are viewed as being much more frugal than in past years, so the idea of selling someone more than what they want may seem daunting. In times like this, however, it is especially important for restaurants to find ways to maximize their sales even when dealing with the most frugal of guests. The traditional approach to maximizing sales in a food service environment is to “upsell.”

Unfortunately, while this worked extremely well thirty years ago, consumers have become very aware of when someone is trying to sell them something more than what they asked for, and tend to say no immediately. The problem with upselling is that once you ask someone if they want something else, they’ve already made their decision. The key is to make relevant suggestions that will help your guests make their own decisions.

Situational Selling

Situational selling is a term used to describe the practice of assessing a guest or group of guests and making suggestions for their order based on that assessment. Rather than using the scripted questions that are so common for upselling, a server engaging in situational selling needs to be able to start a conversation with his or her table. This type of service demands that the server be comfortable with showing some personality and creating a kind of relationship with the guests. This allows the server to guide the decision making process rather than simply making suggestions after the decision has already been made.

Servers may still make suggestions to complement their guests’ orders, but it is best to keep the suggestions tailored to whatever they’ve already decided upon. For instance, offer a specific side that will pair well with the dish they have chosen, but do not try to persuade them to convert an order of grilled chicken to lobster which would likely only be offensive to the guest. Either way, the server needs to be able to read his or her table well in order to anticipate and guide their decisions, as well as when making suggestions after the fact.

Anticipate and Adapt

One of the most important things for servers to recognize is that their service should not be a one size fits all approach. Different groups of people will have different needs and different expectations. A server should first make a mental note of who is at the table. If it is a family with children, chances are they will want to order, eat, and leave fairly quickly without lingering for much conversation. A group of friends, on the other hand, may not be in so much of a hurry.

Then, the server should find out if his guests have been to the restaurant before. If not, they may require more time and may appreciate the server explaining the menu or specific menu items. If the guests have been there a few times, however, they might find that kind of behavior on the part of the server irritating. The server may also ask what brings the party to the restaurant in order to establish what kind of time table they are on. All of this will allow the server to better help his or her guests as well as giving them a chance to start a conversation that will open the door for the server to make suggestions.