We talk to many restaurant operators. All of them are suffering from sales pitch fatigue. The steady flood of daily deals solicitations, loyalty program offerings, and social/local/mobile ad listing opportunities has taken a terrible toll. The problem is that there are some pretty good services on the market; tools that can really help a restaurant attract, engage, and retain customers. The key is moving quickly to separate the worthwhile from the worthless.
There are three numbers every restaurant operator should know cold. In combination, these three numbers make for fast and fairly accurate assessments. Adopt this quick analysis technique for restaurant sales tool decisionmaking, and I bet 95% of sales pitches can be cut off in 5 minutes or less. The three metrics are:
- Trial Volume (the number of new customers generated by a program)
- Retention rate (percent of new customers who become loyal)
- Frequency of purchase (number of times a loyal customer dines with you)
Since you already know your gross margin per customer (right?) and you can apply your sniff test to the sale person’s assumptions, you can easily compute the value of a program.
Gross Margin x Trial Volume x Retention rate x Frequency of spend.
If this number looks great relative to the program cost and other things you can do, you have a winner. If not, move along fast.