Restaurants are suffering. Data can save them.

How restaurants can use data to stay competitive

We’ve seen the same ominous headlines for the last few years — restaurant sales continue to slump as consumers shift their buying habits away from dining out.  This past July, restaurant brands reported same-store sales decreases of 2.8% according to data from TDn2K, which represents a continuous and significant downturn. The last time restaurant same-store sales were positive was February 2016, but this downward trend at large has been in effect since mid-2015.

Major brands like Applebees and IHOP are closing the doors of many of their locations, and the future looks bleak for other fast-casual and QSR restaurant brands, especially as delivery and pre-made options gain steam among consumers. In the face of increasing competition and slowing sales, brands can survive by leaning on the strengths they already have — namely, their loyal customers.

The good news? Every brand has VIP customers who are responsible for driving a huge portion of their revenue. After analyzing years of restaurant data, we’ve found that one thing is consistent: your top 25% of customers make up nearly 70% of your revenue. This relationship between loyal customers and revenue exists across nearly every industry: restaurants, retailers, car washes… you name it. What does that mean for brands facing the downward trend of the restaurant industry at large? If you can identify and retain your VIP customers, you might just make it out okay. Focus on these three things in order to protect the most significant chunk of your revenue:

1. Identify your top spenders

The first step in retaining your best customers is knowing exactly who they are. What this requires is transactional data, allowing you to see your customers in terms of revenue contribution. Why does it pay to know who’s driving the dollars at your business? Just as your top 25% of customers are responsible for nearly 70% of customers, we’ve also seen many cases where the top 10% of customers (your VIPs, for all intents and purposes) drive nearly 50% of revenue. With a single-location restaurant, you might know exactly who your best customers are — they’re the ones you see every day! However, with multi-location restaurants, tracking customer behavior by “eyeballing it” isn’t feasible. In order to know who your best customers are, it’s crucial to collect customer transaction data and tie it to specific customers.

2. Hold onto VIPs for dear life

Once you have customer data, it’s time to start using it. If you want some ideas as to how VIP customers should be treated, take some advice from enterprise software companies and airlines, who understand how meaningful top customers are to their business and reward them accordingly (in fact, most of the world’s top brands have loyalty programs that do just that). Roll out the red carpet for your top spenders, whether it is providing them with unique experiences (like access to special restaurant events) or giving them perks that nobody else gets (free side of fries with every meal for being a VIP!). Collecting transaction data empowers brands to invest in their customer base in a targeted way that is proven to drive ROI (it’s not all about the warm, fuzzy feelings — these programs drive real revenue). VIP programs, in particular, have a record of encouraging “overspend” from already loyal customers — For example, at Project Juice, their VIP members spent 18% more when redeeming VIP rewards (read the entire case study here). The point is — people value experiences. Curating experiences for your most important customers is a great way to retain them, driving incremental revenue and locking in long-term loyalty. The point is — people want to be recognized for their loyalty, and recognizing loyalty has a high ROI. Curating experiences for your most important customers is a great way to retain them, driving incremental revenue and locking in long-term loyalty.

3. Focus on delivering an outstanding experience

Creating outstanding experiences for your customers is about excelling at food and service. But how do you know when you’re getting it right — or wrong? Brands must monitor customer satisfaction around these key elements of success, which entails providing customers with a way to deliver feedback. From store managers to c-level executives, the company can benefit from receiving and interpreting feedback directly from customers. Restaurant data shouldn’t be limited to tracking things like spend and LTV;  Brands like Tomatina use Net Promoter Score and Feedback to gain a quantitative view of customer satisfaction across all of their locations, while also identifying issues in real-time from customers’ written feedback.

The bottom line is this: Collecting and using customer data to drive customer retention is easy with a digital loyalty program that does the heavy lifting for you. With a data-centric loyalty program, restaurants can swim against the tide of industry trends and focus on retaining their best customers automatically. With Thanx, restaurants leverage data collected from their loyalty program to launch data-driven campaigns like VIP, in addition to collecting priceless customer feedback directly through the app. When it comes to staying competitive in the increasingly challenging restaurant space, having actionable customer data can give brands the edge they need to keep their customers happy, loyal, and as a result, keep operations profitable.