Customer feedback is the lifeblood of many businesses and how you respond can impact if you have a customer for life or if they choose to walk away and never come back again.
We analyzed thousands of table service restaurant customer feedback responses over the last two years and learned some very interesting things including:
1) Your best customers matter
2) Every customer experience counts
3) Replying to feedback grows sales +22%
That last stat is powerful as who knew that simply responding to customer feedback could have an impact on your bottom line? In this post, and the related infographic we’ll explore those stats in detail so you can understand how to put them to use for your restaurant.
Responding to Customer Feedback Grows Revenue
We launched NPS customer feedback as part of our customer engagement platform for multi-unit businesses back in September 2013. Why? We believe the most effective marketing is exceptional customer experiences, every single day. A number of years have passed and we’ve got thousands and thousands of feedback responses that we can connect back to customers and their spending over time. It’s a great opportunity to learn how customer feedback influences real customer behavior.
We analyzed thousands of Thanx feedback data points to find the answer to three big questions:
- What’s the value of a customer who gives you great feedback?
- What happens when a great customer has a bad experience?
- Does responding to or rewarding feedback have an impact on whether a customer revisits your store?
What we discovered was eye-opening. Our research demonstrates that restaurateurs can grow revenue and improve customer satisfaction by:
- Focusing their efforts on their best customers;
- Getting ahead of service issues – particularly if they impact a VIP customer
- Responding to and rewarding feedback in real time to improve customer engagement
Check out the infographic in this post for a visual representation of the data.
Focus on Customer Feedback
Our research focused on six multi-location restaurants who’ve partnered with Thanx for at least a year. We had a lot of data from these restaurants. More importantly, customer feedback is invaluable in the highly competitive restaurant industry. There are 631K restaurants in the U.S., with overall sales projected to grow in the small single digits.
In the restaurant industry, paying attention to customer feedback isn’t optional, it’s essential. Our data proves it.
Using Net Promoter Score To Manage Customer Satisfaction
We use the Net Promoter Score (NPS) to measure and track customer satisfaction. It’s a proven and powerful metric developed by Bain & Company. NPS begins with a simple question that divides customers into three groups:
You calculate Net Promoter Score by taking the percentage of promoters less your percentage of detractors. Why does this matter? Bain experience shows that businesses with the highest NPS outgrow their competitors by 2x.
In other words, businesses that prioritize great customer experiences consistently win.
Finding #1: Promoters outspend and outlast all other customers
Our first step was to divvy up and analyze each restaurant’s promoters, passives, and neutrals. Across all restaurants surveyed, promoters consistently spent 5-70% more each month than any other customer. Each year, promoters were 5-21% less likely to defect from a restaurant.
So, customers who love their restaurant experience spend more, visit more often, and are less like to leave. Your immediate instinct may be, “…that seems obvious…”
Well, yes. It’s obvious. But– here’s the nuance: promoters don’t only spend more, but they cost less to serve (lower advertising and marketing costs), and they’re less price sensitive. They also bring new business to your restaurant through word of mouth referrals. A promoter is many times more valuable than a detractor.
You need to take care of your promoters. Make them feel valued. Invest in changes that create more promoters. That’s one secret to growth.
Finding #2: Every Customer Experience Counts
Even the best restaurant in the world slips up every now and then. We wanted to know: what’s the impact of a negative experience on a promoter’s behavior?
Here’s where it gets interesting: like a true relationship, promoters give their favorite restaurant the benefit of the doubt after a one-off negative experience. After years of friendship, you wouldn’t drop a friend for forgetting a weekend plan. Promoters show that same loyalty to you. Our analysis showed no difference between a customer who had one bad experience vs. a customer who had consistently great experiences.
Now, love may be forgiving, but it isn’t blind. After repeat bad experiences, a once-promoter becomes a detractor and visits 45% less over 5 months. These customers keep visiting restaurants, of course, but they’re starting to take their business elsewhere.
What this means for your business: Consistency is key. Survey your customers to keep on top of service issues. Have a system in place, like Thanx, that helps you quickly flag promoters who’ve had a recent bad experience. Proactively reach out to understand what went wrong and learn how you can improve. Share that feedback with your front-of-house staff. As appropriate, send customers a reward to invite them back.
Don’t miss out on this opportunity to course correct, or you risk losing an important customer to your competition.
Finding #3: Reply to Customer Feedback to Grow Sales
After customers rate their restaurant experiences, we give them an opportunity to leave feedback to explain their rating (if they wish). About 1 in 6 customers left feedback in addition to their NPS rating.
Feedback is invaluable: not only does it surface real restaurant issues, but we found that customers who take the time and effort to write feedback (of any length) spend more.
A customer who provides written feedback spends 1.4x more over the course of their lifetime than a customer who just rates their experience. This is huge.
Which begs the question, what’s the impact of responding to or rewarding feedback?
When analyzing this question, we split our data into four groups:
- Transactions that didn’t have a customer satisfaction survey at all
- Transactions where a customer completed a survey
- Transactions where a customer got a response to their feedback from a restaurant manager
- Transactions where a customer got both a response to their feedback and a reward
For the four groups, we looked at how likely a customer was to return in the two months after their transaction. Customers who got a reply to their feedback were 14% more likely to return. This impact was even stronger when a customer got a reward as thanx for their feedback.
Why? Customers feel valued when someone takes the time to read their feedback and respond to. Just the act of responding to feedback can help customers feel more connected to your brand. Feedback is a way to engage customers in a conversation, thereby solidifying their commitment to your brand.
A simple equation to remember: replying to feedback = more revenue.
What this means for your business: Responding to customer feedback can have a substantial positive impact on your bottom line.
We’re more convinced than ever that all restaurants need a way to manage and respond to feedback. The Net Promoter Score is a great option: it’s easy to implement and delivers powerful results.
The three most important insights to take away from our analysis:
- Your promoters are the secret to sales growth. The most important thing you can do is make sure they feel valued (e.g., a VIP program)
- You can’t take your promoters for granted. Set up a system that helps you quickly identify and respond to valuable customers who’ve had a bad experience.
- Reply to and reward feedback liberally. You’ll have a real impact on your bottom line
What it all comes down to is this, feedback isn’t a one-way street but a “loop.” Feedback is an opportunity to begin a conversation that’ll solidify a customer’s commitment to your brand.
Learn how Thanx can grow your business.