- WHITE PAPERS
By Megan Flynn, Rewards Network
Restaurateurs have long recognized the importance of customization when growing their businesses. The ability to identify each customer as an individual and meet that person's dining preferences is one of the best ways to garner a large customer base. Today's consumers want food prepared to suit their individual tastes. "Have it your way" is no longer a slogan for one restaurant chain. Rather, it has become a mantra for the entire restaurant industry.
The need to engage customers on a consistent and, in most cases, a daily basis, has changed the focus and approach of restaurant marketing. The use of social networks such as Facebook to build awareness and help influence an increase in the number of visits and amount spent has certainly earned the attention of restaurateurs. Owners/managers are leveraging these new channels, but those who focus solely on social media are making a mistake. Restaurateurs are quickly discovering that it takes far more than having someone "like" you on Facebook to grow a restaurant business.
The fact is that social media is just one component of an effective marketing mix. In many cases, social networks can be difficult for quantifying ROI. In spite of this limitation, their value still exists, especially when leveraged in conjunction with other tools that engage customers. One tool for customer outreach and engagement is transactional data and analysis—the modeling of customer behavior to create individualized communications with customers based on their actual consumption or spending, not just on their "likes."
Recognize customers as individuals
The concept of individualizing the dining experience is a response to the growing demand by each customer to be recognized as unique. While mass marketing is necessary for brand awareness, its audience is broad-based and communications are somewhat generic. That is not always effective with today's consumers who prefer—and have become accustomed to expect—a personal acknowledgement of their individual preferences. These needs have been influenced by today's ultra-connectivity through technology, which includes social media and mobile apps.
Customers in general (and Millennials in particular) expect flexibility and choice when it comes to dining options. They want a personalized experience that is tailored for them. The same approach naturally applies to the design and structure of rewards and loyalty programs. The more impactful and subsequently successful program allows for individual customization with the ultimate goal of influencing customer engagement. A generic social media post about a general reward is not likely to have the same results as communications that have been individually targeted based on habits, needs and rewards of choice.
A recent Time Magazine cover story profiled what it referred to as "The Me Me Me Generation." Although this was a reference to Millennials, much of the article's emphasis focused on the expectation and often the demand of personalizing experiences. The approach of creating a one-to-one interaction also resonates with older customers.
Transactional data and RFM
The best way to reach customers is through incentivized communications that motivate visits and spending. One way to accomplish this goal is through an RFM (Recency, Frequency, Monetary Value) scoring system, which leverages transactional data for customer modeling and communications development. RFM organizes customers into segments for effective marketing. The output of its scoring system can help the restaurant determine the best customer outreach designed to encourage more visits and/or spending based on those customers' actual consumption habits. RFM is fundamental to developing motivational communications that can influence and perhaps change a customer's behavior. The idea is to make the communications targeted and individually relevant.
RFM is a statistically sound way to incentivize and modify customer behavior through targeted rewards. To be most effective, communications have to be ongoing and not limited to when a customer dines. Why is this so important? Because in today's world of 24/7 communications, it is imperative for restaurants to engage in consistent and reliable dialogue with customers on- and off-line. Diners need (and want) to know that the effort to meet individual preferences is ongoing. Social media, personalized opt-in e-mails with customized offers, surveys and mobile apps should all work together to help optimize success for restaurants. At the same time, it is important not to overlook traditional necessities, such as good and consistent customer service, and responding to feedback. Together, all of these touch points provide an opportunity to be relevant and personal.
Leveraging marketing programs and technology tools helps keep customers engaged with the brand whether they are in or away from the restaurant. Transactional data compiled by Rewards Network has found that engaged loyalty program members spend five times more and visit the restaurant 10 more times than non-engaged members. The 2012 data reported that incentive and relevant programs targeted to specific engaged customers increased their spending by 14 percent.
Such statistics illustrate the rapidly growing acceptance and effectiveness of customizing communications through transactional data as a primary tool for customer engagement. The data takes the restaurant beyond the awareness of social media and provides it with actionable insight that customers will find compelling because it has been customized for them. The success realized by combining RFM scoring and transactional data analysis demonstrates significant benefit and opportunity for all involved—customers and restaurateurs alike. Customers not only accept such personalized communications, they demand them.
Restaurants now have an opportunity to take advantage of this trend by using actual data to facilitate outreach, particularly with loyalty programs that are designed to reach their customers on a personal level. After all, it's more than just having people "like" you. It's influencing their actions because they feel liked themselves.
Megan Flynn is senior vice president, loyalty and business development, for Rewards Network, Chicago, Ill. Rewards Network, with 3.2 million active members, offers dining rewards programs at thousands of participating restaurants based on targeted marketing, incentives and business intelligence.