An ROI Model for Restaurant Foot Traffic

Restaurant ROI

Restaurants have long struggled with the wax and wane of discretionary consumer spending which directly impacts how often people eat out.

What if you had a predictable ROI model for foot traffic that would enable you to shorten the time between consumer visits and bring your very best customers back again and again?

Data is power

If the words “loyalty program” make you cringe you’re not alone. Many table service restaurants have fallen victim to loyalty programs that use the “spray and pray” model, offering deep discounts to everyone which can erode margin and attract discount-driven customers. Usually, it’s a losing proposition. A smarter approach is to use data to gain insight into your customers including things like spend, frequency of visits, day and time information, all the way down to what they order most frequently. Data like that is incredibly powerful in being able to shorten the time between visits, reward the right people at the right time, and drive dependable foot traffic to your restaurant.

Using an ROI model to make better decisions

Now that you understand how data can help you make smart business decisions, let’s take a look at how using the information in an ROI model can help.

Using an ROI model to learn more about your best customers can help you better impact foot traffic, drive incremental visits, and increase both spend and frequency, resulting in gains in revenue and margin. A total win-win.

ROI Model for Restaurant Foot Traffic

So how does it work and how can it directly improve your business right now? Let’s look at an example to learn more:

Growler House Brewery (a company we’ve created for this example) tracks customer data. Using that data, they have insight into average check size, visit frequency, and customer value (found by multiplying the avg check and the frequency), as well as the revenue generated and how much revenue each of their customer “buckets” make up.

In this example, Growler House has segmented their customers into Light, Medium, and Heavy. We can see from the model below that customers in the Light segment visit twice per year and spend an average of $50. Mediums visit four times per year (or once a quarter) and spend $78, while Heavys visit twelve times per year (or once a month) and spend $78.

ROI calculator

Using the model, Growler House is able to quickly and easily see that focusing their efforts on their Heavy segment will yield the best ROI given these customers spend and visit the most. These Heavy segment customers generate nearly $1K per customer for a total of $109 million in revenue per year and make up 65 percent of Growler House’s revenue. By increasing the number of visits by just 1-2 visits per year in this segment, Growler House could generate an extra $18M in revenue annually. In order to realize a positive ROI, Growler House would ensure they spend less on the reward or incentive to get these customers back than the revenue generated.

Since Growler House’s Heavy users are spending and visiting the most, it’s easy to understand that encouraging a few more incremental visits from these customers is a no-brainer. Since Growler House has data about their audience from Thanx, they can use this information to determine which offers would be most attractive to these customers.

3 tips to drive incremental visits to your restaurant

Keeping Growler House’s data in mind, let’s imagine that many of their customers come in for their infamous 2-for-1 Growler Hour each month. If Growler House provided these customers an offer for a free appetizer to stay for dinner, think about how that could drive incremental foot traffic, visits, and increase the average check size. Here are three tips you can try today to do the same for your business:

1. Know your customers

In today’s fast-paced environment knowing all your customers can feel like a pipe dream but customer engagement platforms like Thanx enable you to know your customers like never before. Having access to data down to the SKU level about all of your customers will enable you to reward the right people, at the right time, maintain your margins and increase revenue.

2. Offer the right rewards to the right people

You no longer have to subscribe to programs that cast a wide net and force you to offer discounts to everyone. You can now harness the power of your best customers and amplify their behavior to drive the results you want. In our example from Growler House, we saw that by providing their Heavy segment customers an offer for a free appetizer, they could motivate them to visit and spend more resulting in an increase in revenue that would cover the cost of the reward. This would ensure they have a positive ROI.  Another example of this is SusieCakes who rewards customers who spend $100 with $10 off a 9″ specialty cake or a dozen regular cupcakes. The reward is more than covered by the revenue generated ensuring a positive ROI.

3. Learn and optimize

With any offer, it’s a solid best practice to test it on a portion of your audience and learn from the results and optimize. Growler House could test the offer on a portion of their Heavy segment, see what results they get and then make any tweaks before they offer it to all the members of the segment. Always learn and optimize.

Wrap up

In this post, you’ve learned how ROI model data can help you drive incremental visits from your best customers. You also got three actionable tips you can use to start driving more foot traffic to your restaurant.