Podcast Summary

RESTAURANT STRATEGY

Host: Chip Klose

Episode: The Death of Discounts (ENCORE)

Release Date: October 16, 2025

Episode Overview

This episode centers on why restaurants should move away from relying on discounts to attract customers. Host Chip Klose argues that discounting is an unsustainable and ineffective tactic, especially for independent operators. Instead, he urges listeners to cultivate urgency and scarcity in authentic, meaningful ways to drive profitability while building a stronger brand and ensuring long-term sustainability.

Key Discussion Points & Insights

Why Discounting Is the Wrong Approach

• Consumer Decision-Making:

  • Chip opens by framing three key questions every consumer asks:
    • Why would someone buy this product?
    • Why would they buy it from you?
    • Why do they need to buy it now?
  • These questions create urgency, but restaurants often respond incorrectly by defaulting to discounts.
  • Memorable Quote:

    “Price is the last refuge of a marketer who doesn’t know what else to do.”
    — Chip quoting Seth Godin (09:08)

• Discounting’s Flawed Assumption:

  • The assumption behind discounting is that price is the top deciding factor—Chip challenges this.
  • Factors like vibe, location, convenience, consensus, quality, accolades, and word of mouth matter more. (13:04)
    • Example: No amount of discount will get most people to walk an extra half mile for a bagel if it's inconvenient.
  • Memorable Quote:

    “You have to win in those other areas. You have to win on those merits in the, at the opportunity when it matters.”
    — Chip Klose (19:43)

• Competitive Context:

  • Independents can’t beat the purchasing power of chains.
  • Competing on price means entering a race to the bottom with giants like McDonald’s or Costco, which is unwinnable. (45:35)

What to Do Instead: Authentic Scarcity and Urgency

• Real Scarcity & Urgency (Not Manufactured):

  • Avoid artificial techniques (e.g., “doors are closing!”) that feel inauthentic.
  • Create genuine urgency by offering limited products, special experiences, or time-bound events. (29:35)
  • Memorable Quote:

    “The urgency, at least the way I see it when I work with restaurant owners, is that you are tired of the way things are going. And it’s a matter of enough is enough, that’s the urgency.”
    — Chip Klose (32:53)

• Tactics to Inject Scarcity and Urgency:

  • Limited-Time Offerings:
    • Seasonal ingredients (e.g., morel mushrooms, ramps) drive urgency because supply is genuinely limited. (36:25)
  • Special Events & Days:
    • Exceptionally curated experiences on set days/times build anticipation and exclusivity.
      • Example 1: Derby Day Party at Eleven Madison Park—expensive tickets, sold out within minutes, only on Derby Day. (39:11)
      • Example 2: Goth Prom at Pasta Supply Company, San Francisco—anti-Valentine’s event, sells out fast, tapping into a niche. (41:10)
      • Example 3: Flambéed Chicken at Hutong, NYC—must pre-order and prepay, serves up to six, non-refundable if canceled, leverages exclusivity. (42:19)
      • Example 4: Saucy Sunday at a Madison, WI restaurant—spaghetti and meatballs only on Sunday nights; high margin, drives business on slow nights. (38:19)
  • Pre-Selling & Prepayment:
    • Require advance booking and prepayment to ensure commitment and build anticipation.
  • Pricing Premium Experiences Appropriately:
    • Special items should command higher prices or at least healthier margins.

The Value Proposition Beyond Price

• Identifying Strengths Other Than Price:

  • Cleanliness, quality, uniqueness, personality, and convenience are all valid reasons for customer loyalty.
  • Understand that not all things are equal—each establishment offers something unique by default.

• Customer Psychology:

  • Customers have already weighed in on budget when deciding to eat out; final restaurant choice is typically based on more than just price.

Actionable Advice for Restaurants

• Move Beyond Discount-Driven Promotions:

  • Replace Taco Tuesdays or Half-Price Wine Wednesdays with innovative, experiential events like a pig roast, high-end tasting menu, or themed nights. (47:38)
  • Don’t try to “out-discount” the competition—offer something unique that people can’t get elsewhere.

• Adapt to a Shifting Market:

  • Rising labor and ingredient costs make unsustainable discounting especially risky for independent restaurants.

Notable Quotes & Memorable Moments

• On Discounting:

  “Price is the last refuge of a marketer who doesn’t know what else to do.”
  — Chip citing Seth Godin (09:08)

• On Authentic Urgency:

  “People see through that. That’s false. It’s disingenuous. And I didn’t like it... There’s no reason to push them. The urgency is that they’re already tired of the way things are.”
  — Chip on ethical marketing (32:32)

• On Independent Restaurant Competition:

  “We can’t beat Burger King or Taco Bell or McDonald’s... Just like any big retailer can’t beat Walmart or Costco. You can’t. The purchasing power they have and their ability to undercut just about all of the competition forces you out of that market. You can’t compete. So don’t even try.”
  — Chip (45:35)

• On Experiences Over Discounts:

  “Why don’t you do something fun and something exciting? Why don’t you do a pig roast every Sunday night? ... Do something that will actually entice people, something that people will go out of their way to have.”
  — Chip (47:37)

Important Timestamps

• 00:01–03:20 – The big three consumer questions; why you need to be intentional
• 09:08 – “Price is the last refuge…” (Seth Godin quote)
• 13:04–18:40 – Factors that actually influence customer decision-making (vibe, consensus, etc.)
• 29:35 – Creating real urgency and scarcity (not artificial approaches)
• 32:53–33:34 – The real urgency for restaurateurs (authentic need for change)
• 36:25–43:00 – Examples of scarcity and urgency done right (Seasonal items, events, pre-orders)
• 45:35–46:43 – You can’t compete with big chains on price
• 47:37 – Instead of discounting, create enticing, unique experiences

Takeaways for Restaurant Owners

• Discounts are rarely the most compelling motivators; focus on other, higher-value factors to attract and retain guests.
• Build urgency and scarcity using limited-time menus, signature events, and exclusivity rather than temporary price reductions.
• Deliver experiences people will seek out and remember—this builds lasting loyalty and a stronger bottom line.
• Accept that you can’t win by being the cheapest; win by being the most remarkable in other ways.