A client was looking to develop their revenue in the Café area of their business. They had tried a number of offer mechanics themselves, but these had received little buy in by customers, so they had seen no revenue gain.
The restaurant served hot and cold drinks, hot and cold plated meals and cakes. Hot drinks were the category that most customers purchased, by a significant margin, and it therefore it was also the highest revenue generator.
We discussed the café menu product groups with our client and looked to see where we could add the most incremental revenue. Hot Drinks had potential, due to the high number of transactions. We then analysed the time of day that Hot Drinks were sold and what was purchased with them in hourly slots. The opportunity we uncovered was only visible through the in depth analysis we did.
We found an opportunity in the afternoons, where a large number of the hot drinks were sold. We also found that the most popular item purchased with a hot drink at this time, was another drink (indicating there was more than one diner). Cake was the second most popular combination, but cake lines were only in around 20% all transactions with a hot drink and many transactions with both, had multiple hot drinks and a single slice of cake.
Both cake and hot drinks were high margin lines and both are easy to serve by unskilled staff. The normal price for a hot drink and slice of cake was £5.55
The recommendation was to “piggy back” on the peak of hot drinks sales seen in the afternoon with a cake and hot drink bundle offer, to try and encourage incremental purchases.
We also set specific afternoon timings for the offer to ensure it didn’t take away from lunchtime sales
- In the first month of the offer, transactions containing Cake increased by 34% (year on year), netting an 18% increase in Cake revenue – the offer was geared to discount the cake, keeping the Hot drinks sales at full margin. Cake wastage was reduced as a result.
- At the same time, we also saw a 22% increase in transactions containing a hot drink, leading to a 30% increase in revenue – meaning customers had increased their average spend, so not only did the offer get more people to buy cake, but it also attracted more custom to the café and customers bought more hot drinks, in each transaction and at full margin.
- The combination led to an increase in revenue of £2k that month in the café, so the offer was extended, netting on average £2k-3.5k per month in incremental revenue – the bulk coming from full margin sales of hot drinks.