Bar Management Tips: The Power of Perceived Value

I wasn’t aware of this very important concept during my years as a bar manager. It wasn’t until I started Bar Patrol that I started really analyzing the balance between controlling costs and providing a fair value to the guest, because as an owner we want both.

You can’t give away the house just to get people to come in, but we can’t be stingy either. We want the guests to be excited about what they’re getting for their hard-earned dollar.

CORPORATE MANSLAUGHTER

The light bulb went on in my head one day when I was working with a corporate restaurant chain that shall remain nameless. To this day I think the beverage director should be fired for profit manslaughter.

However, it makes a perfect case study for this blog post to demonstrate to you the detrimental effects managerial manslaughter practices can have on your establishment.

Where to begin. I was able to work with this particular establishment because I knew one of the GM’s in my area. I had worked with him for a couple years, and so when I asked him if he’d like some help, he jumped at the chance.

I spent an hour meeting with him at the restaurant while observing the bartenders and discovering their policies. You’d think that a corporate place that had been around for decades would have it figured out by now, but you’d be wrong, as was I. Here’s what I found out.

For starters, this particular establishment has HUGE martini glasses, and when they come out to the tables, they are filled to the rim. There must be 4 oz. of liquor in them. But over-pouring can easily be fixed. Glassware can be changed (though at a corporate level, any change is like wading through drying cement).

But that was only the start of the problem. Many of their cocktails (created by the ignorant beverage director) called for 3 oz. of liquor and yet they were only charging $8 – $9 for many of them, and when happy hour rolled around they were only $6.

Then the corporate leaders would send out emails to the operating partners, scolding them for their horrible pour costs. Buffoonery at the highest level.

But the worst part was their pricing policies. Most people don’t realize that ordering a straight martini is the best deal in the house. Because the martini glasses are big with no ice put in them to take up space, the bartenders feel the need to fill them up, so whereas a Grey Goose/Soda is traditionally 1.5 oz., a martini will often be twice that at 3 oz. and the most popular up-charge is only $2.

I recommend 2.5 oz. martini pours and even then the guest is still getting a good deal.

Like I said, this place was pouring 4 oz., so the guest was getting an extra 2.5 oz. for $2. But it gets worse. If the guest orders a Grey Goose on the rocks, the bartenders are instructed to pour them 3 oz. and charge $2 extra for it. Same with doubles.

Now here’s where the perceived value conversation comes in, and this was when the light went on for me, because when a guest orders a Grey Goose on the rocks, he has no idea that he is getting a double pour for only $2 more. It isn’t advertised. The bartender isn’t telling him/her, “Hey, by the way, you just got an extra shot of Grey Goose, normally $9, for only $2.”

So the guest sips his liquor, and when the check comes, all he/she thinks is, “Wow, Grey Goose is $11 here. It’s $9 across the street.”

There is no perception that they got rewarded with great value for their dollar, and in fact they might even think the prices are higher here since it shows up as $2 more than the place across the street. What a waste!

Same with the 3 oz. cocktails on the menu for $8. The guest has no idea they are getting 3 oz. They just want a great tasting beverage. You could easily pour 2 oz., controlling your costs in the process and not lose a single ounce (pun intended) of perceived value.

Owners have always asked me if happy hour is worth the cost, because it’s very difficult to quantify it. However, in this day and age, EVERYONE has a happy hour, so unless you care to close your doors from 3:00 – 6:00 pm every day, you have to develop a happy hour program or your bar/restaurant will be empty.

Beyond that, here’s my view of happy hour: it’s definitely worth it. Even though it’s tough to measure the financial effect quantitatively, and even though you are discounting your prices, it raises the perceived value of your establishment.

You are basically paying for marketing, word-of-mouth. When you have a great happy hour, people talk to others about it and they come back again and again, bringing others with them in the process.

Perception is everything. If you have 14 oz. bucket glasses, you can forget about your 1.5 oz. pours tasting strong. People care less about the size of the drink as they do about the strength of taste.

I’ve found while using 10 oz. bucket glasses that about 1 in 50 people will complain that their drink tastes weak. The rest of them are happy as labradors riding in the back of a pick-up truck.

Look around your bar and determine what it is that your guests REALLY care about. If you can offer something that SEEMS like their getting a lot for a reasonable price on your end, you’ve hit a sweet spot.

Here are a couple easy ways you can raise the perceived value of your place without it costing you your business.

COCKTAIL MENU

One area to do this is on your cocktail menu where you can provide ingredients that taste good but don’t cost you an arm and a leg, but since they’re featured, you can move the price up a bit.

Remember, unless you are an upscale place, you don’t need to put the highest quality liquor in your cocktails on the menu. I don’t mean that you should throw in Relska Vodka for your lemondrop, but instead of using Chopin at $42 per bottle, use Absolut or Stoli at $22 – $24 per bottle. They are still recognizable names.

Taking it one step further, if you are a “dive bar” or even a sports bar, you could have a cocktail menu with lower quality products and the clientele could care less because they don’t expect premium liquor to be in those drinks at a more casual-fun place.

GIANT NOVELTY DRINKS

Anything that provides novelty is a good thing for your business. I have a video on this called 7 Reasons You Should Get a Novelty Drink For Your Bar that you can check out here.

These novelty drinks can come in the form of a punch or tiki bowl, giant martini glass, pitchers of mojitos or anything along these lines.

Just like the flights, price out the portion that is going into these drinks and raise the price just a bit. Again, you are charging for the experience, because the bartenders will not be very excited about creating large, time-consuming drinks when they print up in the well, but it creates great buzz and helps your bottom line at the same time.

Price out some giant drinks and see if it isn’t something you can implement right away.

What it comes down to is that you don’t always have to give more portions or higher priced products to make the guest happy. You simply have to give the perception that the product they are receiving is a fair value to the amount they spending. And remember, it’s more about the experience than the product itself.

Cheers, until next time,

Dave

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