I would like to end my pricing series with a case study on how a successful pricing strategy tripled a company’s profits in just 2 months. Not only was this pricing strategy effective, but it was also creative and different from the majority of businesses in the industry. The business I’m referring to is a restaurant called Bar Marco.
Bar Marco is a restaurant located in the city of Pittsburg. This restaurant opened its door in 2011 and was founded by Bobby Fry. After a few years in the business, Bobby was not happy with the tipping model and restructured his business to eliminate tips. He advised his staff that they would no longer be at minimum wage and bonuses and benefits would be introduced.
After one month of implementing this tactic, Bar Marco’s revenues exceeded expectations by 26 percent. Overhead costs dropped from 40 percent to 32 percent.
Let’s look further into the reasons for this.
1. No Tips
The idea of not having to pay tips attracted a lot of customers to the restaurant. North Americans are used to paying approximately 10%-15% after each meal they eat, and now without the pressure to leave a tip, this model becomes quite attractive.
2. Better Servers
Since employees are now rewarded based on their performance on a long run, and not on a per client basis, they are incented to perform well at all levels. A month after introducing this system, Bar Marco finds that the staff has improved teamwork by 50%. They share tasks and help all customers (as opposed to the ones assigned to them). In return, customers are happier and visit the restaurant more often.
3. Lower Overhead Costs
Bar Marco also gives all their staff benefits and weekly updates on the restaurant strategy. This has definitely improved the loyalty, as demonstrated by the improved process across all departments. The water bill was cut in half, the linen bill was cut in half, and the liquor inventory was lean – all thanks to the new employees recognition system.