Restaurant CFOs always pour over data, but with the surge in digital transactions during the coronovirus pandemic, they're seeing a lot more data flow into customer relationship management portals. They're also finding new, effective ways to utilize all that data to push the business further.
During a Restaurant Finance Week session, two CFOs shared some useful ways to use they use the CRM to enhance their respective businesses.
Both tactics require a little work to calculate the lifetime value of a customer, or LTV, which is basically the lifetime sales connected to a consumer. This is a common metric in ecommerce. By quantifying LTV, companies can look at sales and engagement patterns and focus their efforts on what makes a higher-value user or buyer.
"Facebook knows that if you get to 10 friends, you'll be on for life. They’ve figured that out and optimized for it," said Mike Vichich, CEO of Wisely, a restaurant software company. "You have Amazon, they saw that one of the things that was friction in their process was paying for delivery every time. By understanding that, they were able to create Amazon Prime and they engineer everything around Prime because that drives your order volume up."
As the restaurant industry digitizes, it's becoming a key starting point for a lot of decisions in a business. Vichich, who helps restaurant companies calculate LTV, said a tapas restaurant he worked with saw LTV that was far greater (i.e. from a regular) if first-time visitors ordered an entrée.
For Jon Howie, CFO at the franchised Tex-Mex casual diner Chuy's, said the company has gotten serious about understanding metrics like LTV lately, and COVID accelerated that education. He said above all, he wants to understand what the very top consumers with the highest LTV are doing and who they are.
"We think we know who our customer is, but being a CFO, I like the data to tell us who exactly our customer is," said Howie.
He said taking a close look at the top 5 percent of customers that drive 20 percent of sales makes it easier to deploy resources without as much of a gut check.
"If you're just focused on volume, you might get the wrong answer. If you can tie it into lifetime value and focus on the 5 percent, maybe you're looking at a smaller population of people that you want to get in. If you have the others, that’s great but you want to focus on that 5 percent," said Howie.
That helps with a lot, from the table-stakes of a CRM program—targeted marketing—to major capital expenditures like where to put a new restaurant. His latest trick is using that data to identify potential trade areas for the next Chuy's. If he sees a lot of routine COVID-era pickup and delivery sales going to a specific ZIP code, they're probably lacking some good Tex-Mex.
"When you're looking at it from a real estate and marketing perspective, in my mind you're looking at the same thing. You're trying to target customers to come in and target them for a store," said Howie.
Paul Potvin, CFO of fast-casual California Fish Grill, said he routinely talks about LTV in the boardroom and in store-level training. If you walk into one of his restaurants, there's a good chance the employee taking your order will suggest something their top customers like.
"If you ask them if they've been here and they say, 'no,' maybe we can steer cashiers to suggest one of these three items since that’s what our top consumers like," said Potvin.
By connecting that suggestion to LTV, the message that this is just the first $15 order of hopefully many tends to stick, especially for managers thinking about their bonus. In a recent meeting, he said each operator got a list of their top customers. That helps achieve personal touchpoints like a personal hello when someone picks up their order. But one of his favorite tricks is pushing that top customer a little further.
"If I see they're always ordering salmon and a couple sides, maybe we throw in a premium upsell and get that from them in the future or a beverage or our special juices we make here," said Potvin. "It's about how can we better use the data to reward the guest but also increase their spend in the future."
Watch the full session in the Restaurant Finance Week portal. Register and watch for free.