Tuesday

More Frequency in Reverse

An article in the Wall Street Journal (Friday, 3/14/08) highlights a long-term trend with negative effects on local restaurants: Stay at home moms are staying at home.

The article notes that the percentage of women in the workforce is at 59.2%, down from 60% at its peak. Not much change, huh? Why worry about that small of a gap? In 2001, 211 meals (per person) were purchased outside the home, last year that fell to 207. What does that do to sales?

To keep math easy, let's assume you have 3,000 unique customers, each visiting every other week (1,500 transactions per week). Now figure that each customer eats out 4 fewer times per year, for 12,000 fewer transactions per year. Multiply that times a $10 ticket average and you're down $120,000 per year. Sounds about right in terms of your decline, doesn't it?

As more women are staying home, and with the rise in home cooking shows, they're preparing more meals in the home. Just as getting 2 more visits per year is important to your Frequency of Visit, so is losing 2 visits per year dangerous to your bottom line.

But what can be done? First, take care of your guest. One in 10 people is willing to never visit a restaurant again if they have a bad experience. You can't be mayor of your village unless you're the mayor of your store first. Taking care of what you have will help retain as much as 10% of your base, decrease costs of gaining new customers, and help to increase frequency of visit.

Next, focus some energies on out of store products. Carry-out, family meals, healthier on-the-go offerings. Then use your current customer base to promote these items. Frequency of visit comes when you satisfy more than one buying decision. Feeding a family at home is a different buying decision than stopping for lunch with a friend.

Lastly, view this trend as an opportunity. People still eat out an average of 207 times per year. Clearly customers don't frequent your restaurant all 207 times, but what if you could get them 4 more times? What if your fantastic, over the top customer service, coupled with a clear objective to introduce customers to the rest of your menu, resulted in increased share of wallet?

How's $120,000 extra dollars per year sound?

Monday

Bounce-Back Coupon Offers

I get a lot of questions about how to match your offers to your objective. What makes a good Trial offer? What about Frequency, Ticket Average, and Party Size. Below are some guidelines for determining this yourself (each unit is different), as well as some general offers.

1. Think like a customer. If you have never tried a restaurant, would you be tempted by a 10% off coupon? Me neither.

2. Use coupons / offers to modify behavior, not to discount existing behavior. $1 off on your next visit: BAD (and a little needy). $1 off our Chicken Club Quesadilla on your next visit: GOOD. Leads to Frequency of Visit.

3. Keep the strings to a minimum. "BOGO with purchase of 2 drinks" is what you want, but people see the strings and it doesn't feel like as good a deal. "BOGO between 11 am and 2 pm" works even better, modifies behavior, and people purchase the drinks anyway.

4. For Trial - make it an incredible offer. It only costs you money if it's redeemed (which is the point) and you've gained a new customer.

5. Frequency of Visit is a factor of menu trial: they more they've tried, the more reasons they have to love you. Bounce-back (with 10 day expiration date) to get customers to try something new.

6. Forego the discount, add value. Free upsize. Free side with purchase. Free dessert when purchasing our limited time offer. Use the value-add to modify behavior.

7. Match the offer to the audience. Lunch offers for lunch customers; dinner offers to dinner customers; catering offer to existing customers (not to a new audience, it's a hard sell).

These are the basics. Remember to think like the customer and give a great offer to modify behavior. Then you won't have to entice people to visit, it will be a habit.

Thursday

Frequency in Reverse

If your average customer frequency of visit is every 2 weeks (26 visits per year), and you change that to every 10 days (36 visits), your sales increase by 41%.

If frequency of visit is every 3 weeks (17 visits per year) and you convince customers to visit 2 more times per year, your sales increase by about 12%. (Think about that: can you get a customer to visit 2 more times in the remaining 348 days of the year?)

Thus is the power of frequency of visit. Right now, however, you're probably experiencing frequency in reverse - people are eating out less often.

Your goal is twofold:
1. Give existing customers more reasons to love you. Lunch and dinner; carry-out; catering; different menu items; fundraisers for their schools/churches/Little League (which are also struggling for cash).

2. Gain share of wallet from other restaurants who are cutting back on their service. When we're strapped for cash, we tend to hold service providers more accountable - we're choosier with our hard earned money. Since 1 in 10 Americans say that they are willing to never go back to a restaurant with poor service, there is opportunity in all of the people looking for new places to eat.

Of course, hidden in there is the key: outstanding customer service will help you to keep that 10% of customers who might leave, and enable you to gain and keep new customers.

Monday

Community Banks

Local Store Marketing has always been the domain of small business, but recently large companies are recognizing the value of community building. A great example of this is Bank of America's program to donate $100 to a customer's charity of choice just for opening an account with them.

Here's why you should take notice:
* B of A is willing to pay a customer $100 to gain their business. Restaurants can gain customers by giving away $2 worth of food, yet many still balk at the idea. What does B of A know that you don't?

* B of A is supporting what their customers support, decreasing the number of times they need to deliver the message (and saving them money on advertising).

* This program has a higher potential for word of mouth than any traditional advertising they could have done. It also promotes instant referrals. Imagine if a school promotes the program for the bank, in hopes that 100 parents open accounts that donate $100 each to the school for a playground.

This is a great example of a Trial generating offer from a big company. They aren't afraid to give away more upfront because their cost per customer gained will be lower in the long-run, customer loyalty will be higher, and word of mouth will be stronger.

If a bank can do this, surely a restaurant that is food rich and cash poor can achieve even better results.