Granite City Food & Brewery’s Mug Club boasts some 75,000 members. When brewers want to promote a new beer, they use an e-news- letter. As many as 1,500 people show up to sample the suds, says founder and CEO Steven Wagenheim.

You might wonder what they were smoking. As of press time in mid-March, their business was getting markedly worse, particularly for those in casual-dining. A recent consumer survey of 1,200 people, for example, showed nearly a quarter of respondents saying they had visited full-service restaurants “less often” in the past 90 days vs. the 14 percent claiming “more often,” according to market research firm Technomic Inc.

The results wouldn't surprise anyone who heard casual-dining executives at Bear Stearns' investor conference in New York in March, lamenting declines in same-store sales and guest counts—and, inevitably, profits. “We have lost existing guests and frequency is down,” fretted Ruby Tuesday founder and CEO Sandy Beall.

NPD Group Vice President Harry Balzer, who tracks restaurant sales and guest-count data weekly, feels their pain. “It's a very difficult time for market share gains,” he says. The big question today, he adds, is, “Can you give me a reason to come to your place?”

Granite City Food & Brewery founder and CEO Steve Wagenheim is all over that one. “Just last week someone wanted to know what our frequency rate was. I had him go through some of our stores and ask the managers. They told him 70 percent of the customers they see come multiple times a week,” he boasts.

His secret: “It has a lot to do with price points, which average about $14. Our value proposition is very strong.”

To find out whether full-service chains are providing similar hooks, Chain Leader recently spoke to executives at seven casual-dining chains. We wondered if the consumer pullback had caused them to re-assess their marketing philosophy and, if so, how.

Marketing ploys at Abuelo’s Mexican Embassy include photo-rich menu inserts, which highlight the concept’s specialty dishes with colorful photography but without mentioning price.

Don't Discount

One thing is for sure: These executives haven't changed their minds about discounting, a tactic that they say boosts guest counts but also pressures margins and weakens image. “We will never try to improve sales with a discount. It's a kiss of death,” declares Randy DeWitt, founder and CEO of 13-unit Rockfish Seafood Grill and five-unit Twin Peaks, both headquartered in Dallas, who has successfully used e-mail newsletters to maintain sales.

“From everything we know about short-term changes like discounting, it isn't the way to go. It digs you into a hole,” says California Pizza Kitchen Senior Vice President of Marketing Sarah Grover, who is managing the chain's database “more aggressively” than in the past.

“Discounting is a marketer's nightmare and never a sign of a healthy organization,” maintains Kendra Sartor, vice president of brand development for Tampa, Fla.-based The Melting Pot, where sales and guest traffic remain flat. Instead, she adds, “we have to find price-point opportunities.”

For example, company restaurants and some franchisees are now using direct mail to promote a $29 four-course meal, about $10 less than the regular price. “But we're not saying $10 off [so] customers see it as perk for those who have expressed an interest in the brand,” Sartor explains.

Every month Twin Peaks reminds Friends of the Peaks club members there’s always a reason to return. On St. Valentine’s Day, for example, servers replaced their uniforms with lingerie. The call to action: “Don’t forget to visit your other sweetheart.”

“It is a deal, plus it's fun and interesting because of the experiential part of it,” she says.

“Conveying a value perception and discounting are two very different things,” insists Renee Underwood, vice president of marketing for Food Concepts International, the Lubbock, Texas-based parent company of Abuelo's Mexican Food Embassy restaurants. “If you think the only way of achieving value is through discounting, you're shortchanging yourself.”

She cautions against using a “$6.99 loss leader” dinner when you're able to provide a “relaxed meal and cater to every whim” for $14.99, something Abuelo's attempts to do, she adds.

Still, lower prices can drive traffic counts. To date, several large chains are bundling meals to add value while avoiding the semblance of discounting. Chili's Sizzle & Spice deal lets customers pick two entrees and two sides from a long list of menu items for about $15 per person, substantially less than if they ordered the items separately.

That kind of deal makes sense, according to the Technomic survey, which shows 57 percent of respondents mentioning “lower price” when asked to pick a reason for purchasing a combo meal at a full-service restaurant. What's more, 42 percent acknowledged combo meals were a “good value for the money.”

Chili's didn't return calls and e-mails seeking comment on the success of the program, but SMH Capital restaurant analyst William Hamilton wrote after a February meeting with Chili's that he “got the sense that…efforts to refresh the Chili's brand with a new menu, new marketing strategy and store re-images are receiving a positive response from customers in the form of sales and traffic.”

To blunt the perception of high prices at The Melting Pot, Vice President of Brand Development Kendra Sartor cooked up a direct-mail deal offer that features dinner for two for $67—considerably less than the $80 regular customers might otherwise spend.

Although prices depend on wines, meals that include dishes on the present menu are discounted, says Vice President of Marketing Sherri Van Saxon. “At other times we may bring in special products and wines that are paired and the price is a great value but not necessarily discounted,” she adds. Bottom line: With sales softening, the new program gives interested customers a reason to make an extra visit.

E-mail newsletters, often promoted as clubs, can boost frequency if used judiciously. “An e-mail program makes it easier to build a network with existing customers and gives them one more reason to come to your restaurant,” says Karen Willison, a former restaurant marketing executive and now a vice president for Fishbowl Marketing, an Internet marketing company specializing in restaurants.

True, says DeWitt, a Fishbowl customer, except when calls to action are missing from the newsletter. He says few newsletters include anything more than a deal. “They send out e-mail that's so generic,” he gripes. “I'm not looking for a coupon but a reason to go. It's the only thing that absolutely works.”

He says he practices what he preaches. Although sales are “flattening out” this year at Twin Peaks, they follow two years of double-digit growth, DeWitt claims, driven largely by the casual-dining chain's Friends of the Peaks club. It reminds members of events like St. Valentine's Day, when the restaurants' scantily clad servers dress up in lingerie. “We remind [members] to visit your other sweetheart and show a picture of a girl in lingerie,” he explains.

New and unusual product introductions like Miso Salad remain a mainstay of marketing at California Pizza Kitchen. Says Vice President of Marketing Sarah Grover: “Our marketing strategy and menu development plan hasn’t changed at all.”

Her goal is building guest counts, which Piper Jaffray senior research analyst Nicole Miller Regan predicts will be down 7.2 percent for the first quarter of '08.

“We're finding if we step up communications [about new products and store openings] with these people, they are more likely to come in more often,” Grover says.

Wagenheim remains convinced that the best marketing programs remain within the four walls. “I don't think traditional marketing is the only way to go,” he offers. Yet like other chains, St. Louis Park, Minn.-based Granite City communicates events like specialty-beer offerings via the Mug Club, which boasts a membership of 75,000, according to Wagenheim.

“Perhaps the most important marketing we do is to spend a lot of money on training managers to take care of guests,” he explains. “Our No. 1 goal is to turn guests into advocates.” That they come more often doesn't hurt either.