What’s the deal with bank credit card promotions?
Credit card promotions at restaurants are rife in Singapore. I never noticed such promotions in the US, but here every restaurant has a tie-up with a bank where users of that bank’s credit card will get some type of benefit – be it a percentage off the bill, free food based on a certain amount you spend, 1 for 1 deals, etc.
Before Standing Sushi Bar even opened, banks were approaching to talk about tie-ups. I wish I had known more about how to deal with them.
Their value proposition is that they will increase awareness of your restaurant by including the restaurant in their collateral – primarily booklets and web sites that list all the venues that have deals with them and what the promotion is.
Since I was a soon-to-open restaurant, I figured that any awareness would be good. UOB is the bank best known for their restaurant tie-ups so when they approached me I signed on – offering discounts and a 1 for 1 omakase promotion to stimulate the dinner crowd.
The 1 for 1 omakase promotion was popular. It helped bring new people to the restaurant that would normally not eat dinner in the Raffles Place area. However a 1 for 1 promotion is hard to stomach, financially.
One of the awareness vehicles that the banks tout is that they will create banners and table tents with the credit card promotion that you’re supposed to place all over the restaurant. They pitch this to you as if it’s a good thing.
To me, a bank / credit card promotion should bring in customers from outside the immediate area. One of the advantages of a restaurant in Raffles Place is that the foot traffic is incredible – people will discover you and try you out regardless of promotions.
So a promotion should convince people that aren’t in the Raffles Place area to venture into the CBD and try out the restaurant. If a customer is already in the restaurant and has come of their own accord, the bank tie-up hasn’t contributed anything but the customer still gets the discount and then the restaurant makes less money without getting the benefit of the increased awareness by the bank promotion.
Tips on dealing with the banks:
– ASK FOR COMPENSATION
As a restaurant owner you’re losing money with every discount that you give. The bank is trying to increase the amount of times a customer will use their credit card (thus putting money into the bank’s pocket) by your restaurant’s promotion.
When negotiating with the bank, they should give you something tangible in return. While there is value in being included with their collateral and advertisements, you need to ask for money, subsidy, or an actual item. For example you could say to the bank, “I will do this 1 for 1 promotion with you if you subsidize the promotion by giving us 2,000 SGD.”
– TIE UP WITH THE BANK THAT PROCESSES YOUR CREDIT CARDS
You may be paying 2.5% of the total bill for every Visa transaction. If you partner with the bank that handles your credit card transactions they may be able to adjust the percentage rate to something lower.
– SET DEADLINES ON THE PROMOTIONS
Open-ended promotions are confusing for everyone. Make it clear when promotions will expire.
– EXAMINE THE BANK’S CUSTOMER DEMOGRAPHICS
Ask for the demographics of the bank’s credit card holders. Are they the right market for your restaurant? If a bank’s credit card is popular with students and you’re targeting professionals, you’re not going to want to promote to that bank’s credit card base.
– MEET WITH A FEW BANKS BEFORE COMMITTING
In the opening weeks, a flood of banks will meet with you and try to sign you to exclusive (i.e. can only sign with them or must give them the best deal) contracts. Make sure you’re getting a good deal from the bank (i.e. what they will subsidize) before committing.
– TARGET YOUR PROMOTION
Wait a couple weeks and see where you think you need help. For example, at the sushi bar we get a healthy lunch crowd – there’s no need for me to run a promotion to increase customers during lunch time. However we get few customers during the late afternoon and happy hour times. So with Standard Chartered I created a promotion that targets the happy hour crowd.