Better Business Decisions Come From Better Information

Understanding the power of data is critical for growth. Decisions based on instinct can have merit, but they are not always as reliable and valuable as decisions based on trusted data and information. Customer trend reports, benchmarking data and comment management programs enable restaurateurs to obtain diner feedback, while comprehensive reporting and in-depth analytics provide restaurateurs with insight into their market potential. This knowledge is essential to formulate solid business decisions that positively impact restaurant growth and development.

Why Is Data Important?

Restaurateurs understand that data offers an objective view of their businesses. Yet, when it comes to marketing strategy and tactics, many forget about the data available, which could facilitate fact-based decision-making. It is the proper analysis and mapping of the data that can enable restaurateurs to identify opportunities, provide insight into customer attitudes and behavior, understand trends and ultimately alter decisions with a greater propensity of success. Additionally, data provides stability for measuring the effectiveness of any change, as well as immediate feedback regarding the return on the investment.

There is extensive information that restaurateurs measure from a profit and loss point of view. They know how much yield a head of lettuce provides, what every plate costs and if they are spending too much on their paper products. However, when it comes to understanding how marketing effects sales, many restaurateurs neglect to analyze and measure this investment. As long as the marketing plan brings in more customers, the restaurateurs are happy. Unfortunately, some diners may not be profitable customers. They may be at the restaurant only because of a discount or coupon, and without that same incentive they will not return. Or, they may ignore the data indicating that some menu items, some parts of the day or some days of the week simply are more profitable than the others. By using a variety of data sources, including those related to customer experiences, customer purchase behavior and Recency Frequency Monetary Value (RFM) analysis, restaurants will have a strong data set, providing the opportunity to detail the cause and effect of operations, as well as the ability to develop comprehensive data-driven strategies.

Data Sources:

Daily Tickets: A vast amount of data flows through restaurants daily. One of the most robust data points for restaurateurs is the ability to examine daily tickets. Daily tickets can provide insight into overall sales and daypart trends. Future decisions based on this information include the number of staff members needed, whether to add or eliminate menu items and hours of operation. For instance, if the restaurant has a goal of increasing lunch sales, the daily tickets for lunch items can be examined to determine the popular selections, how they are positioned on the menu and the serving approach.

In addition, daily ticket data is used to generate sales trends. An effective use of sales trends means breaking down the data into succinct, time-based segments such as hour, day, week and month in order to examine overall peaks and valleys. For example, a restaurateur might notice from the sales trends that there was an increase in the number of daily tickets (customers) from the hours of 2 p.m. to 4 p.m. The restaurateur can examine purchasing and staffing reports to clarify if these areas require modifications to meet the demand. When accurate data is available, sound decision-making is a natural by-product and implementation becomes more effective.

Customer Comments/Reviews: Comments and reviews from customers are also important, but many times overlooked, sources of data. When the comments are overtly negative, it is easy for restaurateurs to become defensive and make excuses for the problems. Instead, a more effective solution is to use this data to implement improvements. Customers’ comments also educate the restaurateurs about the effectiveness of specials and promotions, seating capacity and arrangements, menu changes and other particulars of the restaurant business. In one restaurant, customers left comments about the average wait time. They were told it would be about 40 minutes, but instead the wait was one hour. Rather than ignoring these comments, the restaurateur examined the relationship between the time these customers were in the restaurant and the restaurant’s seating arrangement. The problem was the restaurant had too many 4-top and round tables for large parties, and the waiting customers were in parties of two. The solution was to replace the round and larger tables with 2-top tables that can be pushed together for larger parties.

Not all restaurants choose to use a customer comment system. Without one, however, it is unlikely that restaurateurs will be able to hear and respond to their customers’ needs and concerns. And, of course, most dissatisfied customers will not return to the restaurant. But by obtaining customer response data and understanding how to use it, restaurateurs can turn unhappy customers into loyal ones.

Customer Loyalty/Rewards Programs: Some restaurants work with companies or use programs, such as customer loyalty or rewards programs that provide analytics of data points to make daily business decisions and focus strategic direction. For example, a review of a survey from one rewards program showed that diners who engage in loyalty programs spend five times more money at restaurants, and they also frequent program restaurants 10 times more often than an non-engaged customer (Source: Rewards Network data). This type of data aids restaurateurs in making decisions about practices and promotions by targeting particular customers.

RFM Analysis: One of the most valuable data points is the use of RFM analysis in helping to identify the customers of greatest value to the restaurant. This analysis allows restaurateurs to determine how recently customers visited the restaurant, how frequently they purchase meals or drinks at the restaurant and how much they spend. Understanding the characteristics of diners and their RFM scores strengthens the restaurants’ abilities to optimize marketing efforts, improve customer loyalty and garner the most profitable customers.

Data as a Competitive Advantage

Ultimately, data offers insight into the restaurant’s revenue and guides restaurateurs towards improving profitability. These data points can be combined to create a proactive behavioral marketing strategy to attract the highest valued customers and encourage them to dine more often. The result is a greater return on the restaurant’s marketing spend and an increase in revenue growth. Using data to drive decisions allows restaurateurs to better position their restaurants to survive and thrive in today’s uncertain economic climate.