Article

How to cultivate a loyal guest at your restaurant

Loyal guests don’t just randomly happen: they are cultivated through good food and great experiences.

September 26, 2014

By Howard L. Lax, PhD, SVP, Brand & Customer Experience, GfK

Customer relationships in the restaurant space are not monogamous. Most consumers have one mobile phone carrier, have their car serviced by one repair shop and use one pharmacy. When they split their business, as often is the case with supermarkets, banking and gas stations, people invariably have a “primary” provider typically capturing the large majority of their business.  

Almost by definition casual dining is different. Consumers are far more likely to eat and drink at multiple casual dining restaurants than they are to concentrate their business with one. While consumers may hit the same spot for coffee and breakfast in the morning and frequent a limited number of fast food places for lunch or when they are on-the-go, those who eat out are far more inclined to spread their business across multiple restaurants. From a practical perspective, it’s quite difficult to capture more than 20-30 percent of a household’s restaurant spend.

The value of a repeat (READ: loyal) guest is huge. Let’s focus only on dinner for the moment. On average, American consumers eat dinner at a restaurant 1.4 times each week or some 70 times over the course of a year. (The actual incidence for any given household is highly correlated with income.) The direct math is relatively straightforward: if an average casual dining entrée is about $15, a couple might be expected to spend some $35 with soft drinks (excluding tax and tip). If you capture them once every other month, that represents just under 9 percent of their restaurant dinner trips and they will be worth approximately $210 annually. Move the couple to eat at your place once a month, and their value doubles to $420.

But that’s only the direct math. The indirect math reminds us that the more loyal diner at your restaurant also is more likely to add in an appetizer and desert – even if just to share – and, of course, alcohol. An $8 appetizer, $6 desert, and two drinks at $5 each (let’s assume the couple decides to keep it modest), and that $35 tab jumps more than 50 percent to $54 (I backed out $5 from the average tab for two non-booze drinks before adding in the extras). If this couple splurges every other visit, their value climbs to $534 per year. The marginal impact of those more loyal guests extending beyond entrees and indulging in higher margin (appetizer and desert) and highest margin (booze) items has an even greater impact on the bottom line than the top line.

Oh, and is there any activity more social than eating out? Loyal guests bring friends and family along – not all of the time, but sufficiently often to further swell the value of loyal customers. The friends they bring or recommend are, of course, another opportunity to cultivate additional loyal guests.

These numbers are very conservative. Some 12 years ago Long John Silver’s, the quick-service seafood chain, reported that a heavy, loyal customer spent an average of $8,500 with the chain over their lifetime, more than four times the spend of a light user (see Quirks, October 2001). That was EIGHT THOUSAND, FIVE HUNDRED DOLLARS of fried-and-breaded everything.  Sure, people hit the drive-thru more frequently than they have a sit-down meal, but that drive-thru dollar volume comes in chunks averaging under $10 each.

So why does loyalty matter in casual dining? Because the more loyal the guest, the more likely they are to:

• Dine with you instead of elsewhere (more repeat business generating more volume)
• Indulge in higher-margin extras (leading both to larger tabs and even larger margins)
• Bring and recommend others (more customers and more business).

Consumers express their loyalty with their feet, and their stomachs and wallets follow in tandem. People tend to eat in relatively close proximity to where they live and work. So unless you have a restaurant totally serving a transient population and that isn’t affiliated with a branded chain, guest loyalty is critical to the bottom line in more ways than one.

Loyal guests don’t just randomly happen: they are cultivated. Good food, of course, is a must. But what people tend to remember – and want to repeat – is having a good time. Great experiences are the key to customer loyalty; so make this your mission statement:

Our goal is to make certain that our guests have an enjoyable and memorable time (while eating and drinking)

Want to know if they’re coming back? Check to see if they linger and if they leave with a smile. Think of it as dinner theater in a way.  The restaurant is the stage, the menu the playbill, the décor and ambiance the setting. The meal and chef are the main attractions; the server is the warm-up; shift manager is Master of Ceremonies. E-v-e-r-y-t-h-i-n-g you do should have one objective: making sure your guests enjoy themselves. So pamper them. Pay attention. Get to know them. Make recommendations that are personal.  Intervene if they look at their watch, look around for their server or just frown.

And if you play it right, they’ll come back again and again for a repeat performance. Then you’ll know you have been successful at cultivating a loyal guest.

Howard Lax is SVP, Consulting, for GfK’s Brand and Customer Experience team. Lax has presented at dozens of conferences and been published in a variety of publications, including Marketing News, Loyalty360, and the CMO Council’s Peersphere. GfK’s Brand & Customer Experience practice fuses brand experience and customer experience to give clients more insights and develop more effective strategies. He can be reached at howard.lax@gfk.com.

^{Photo provided by Opal Bar.}