What Brick and Mortar Business Can Learn from SaaS Success

Now, after twenty years of working for software companies — some in the hospitality space — It’s clear to me that the restaurant industry could learn a thing or two from software businesses’ success.

Here are my top five takeaways for all restaurants looking to supercharge their growth and make more money:

How Restaurants Can Supercharge Growth

1. Make data-based decisions

Product managers at technology companies spend time doing market research in order to build the best product for the market the company serves. They survey prospects and customers, conduct interviews and pour through backend analytics for insights. They use data to inform their decision making and direct their resources in a way that generates the most bang for their buck.

While data analysts have been prevalent at the largest restaurant brands for decades, many multi-location businesses are not using data in any meaningful way. Even when the infrastructure exists to capture this valuable customer data, restaurateurs often pass up the chance due to lack of time and resources.

A perfect example is a traditional frequency-based loyalty program that simply rewards a customer for visiting, but doesn’t capture data around the visit such as time and day of visit, spend, days since last visit, etc. With this data, restaurateurs can develop marketing programs and make operational improvements that drive revenue.

2. Customer feedback is critical for success

Every B2B software company today has a customer success team. This team is tasked with, you guessed it, customer success. They are constantly asking for feedback about not just the product, but also the support they receive from the company after having technical support questions.

Feedback about restaurants is all over the web. Review sites, like Yelp and TripAdvisor, are powerful channels for customers to share their experiences with peers and the merchants they frequent. While owners and managers should be very conscientious about reading and responding to this feedback, they should also have a program in place to capture feedback right after purchase. Because customers have their mobile phones with them 24×7, mobile serves as the perfect channel to solicit customer feedback and provides the merchant with the opportunity to correct any grievances before the user leaves and goes to a public forum.

3. Success is measured by revenue… and churn

A few years ago I noticed a trend in how software companies measure success. In addition to looking at top line revenue and new customer logos, they also began looking closely at customer churn. Recognizing how much more expensive it is to acquire a new customer versus keep or upsell an existing customer, the goal became net negative churn.

Restaurateurs too often forget that keeping a customer happy and coming back is far more cost effective than bringing in a new customer —It’s typically 7x more expensive to acquire a new customer than to retain an existing one! They focus their budgets on advertising campaigns and digital marketing programs to drive in new visitors, versus focusing on keeping their existing customer base happy and loyal.

4. The 80/20 rule is true — Know and love your VIPs

Every software company has a prioritized list of customers. Often, the customers at the top of the list represent the biggest deal size or the companies that can open the door to other companies in their markets. These companies are all treated with kid gloves and often have access to executives and top-tier support.

Most restaurants that I talk to are not able to articulate who their best customers are, how often they visit, and what their average check size is. Restaurants need to know who their top customers are so they can not only keep them happy but also ensure that they are sharing their brand loyalty with their friends. Many restaurants without VIP programs are at risk of losing revenue because their top customers don’t feel appreciated. VIPs should be supported by acknowledgment or special promotions just for them— access to exclusive events, privileges, and gifts will keep them loyal long-term.

5. Behavior can be studied and changed

A few years ago I was managing a website design project and used heat mapping to understand how people interacted with our site. Our goal was to get people to watch a video, so we wanted to understand the optimal place to put the video in order to drive the most engagement. By understanding website visitor behavior, and with the right tools in place, we were able to maximize video plays.

Restaurants have the same ability to study customer behavior and drive better outcomes, often without the same reliance on highly technical tools. For example, Lou Malnati’s in Chicago suffers from what other businesses would kill for — long wait times on the weekend. In order to shift some of this traffic to weekdays, they used rewards through their loyalty program to drive traffic in Monday through Thursday versus on the weekend.