These companies are leveraging one of the hottest trends in business today — partnering IT and Marketing. The playbook starts with foundational investments in technology, used to assemble customer data, followed by guest-centric marketing strategies that utilize that data.
Data-driven marketing grew out of the direct response and catalog industries of the ’60’s and ’70’s. Today, the best in class is represented by ecommerce juggernauts, like Zappos and Amazon. The underlying concept is simple: identify who your customers are, segment them by value or demographic characteristics, execute tailored marketing to these segments, and measure the results. Then use those results to refine and improve marketing tactics. It’s a strategy that has worked across every industry, from books and travel to craft supplies.
So why not restaurants? The biggest obstacle has been that restaurants lack the data infrastructure — they simply don’t know who their customers are. Larger chains survey guests regularly, so they know their respondents, but they don’t know who actually came in. That was okay when marketing was TV. Just knowing what type of guest you had was good enough for placing media, but this is no longer true in the digital age.
Fortunately, new technology lets restaurants adopt some of ecommerce’s best practices. From an IT perspective, this requires four key elements:
- A system to close the loop at the guest level on promotional offers. It’s not enough to have a POS discount key for “Father’s Day promo” anymore. You need to know which dad (or mom!) responded to that offer, what they bought, and who they brought in with them.
- The ability (either directly or through your credit card processor) to access payment data in order to identify individual guests when they return. This data set is essential – it’s the lifeblood of ecommerce. Fortunately, the ecommerce players have pioneered safe, secure ways to get at data without compromising PCI safeguards.
- A guest-centric data warehouse to store all the key data sets — check level POS data, payment data, marketing data, loyalty program data if available, reservations, online ordering, guest responses, and third party data such as Prizm or Mosaic.
- An analytics layer. The requirements here go way beyond static or standardized reporting. Marketing needs to be able to cut data in an ever-changing variety of ways to identify key patterns and segments.
Marketing, in turn, must partner with IT on determining goals. What is the restaurant trying to accomplish and what can be left out? Take joint meetings with IT to look at vendors to help give a sense of what’s possible. But then let IT do their job. Next, build the business case. Moving to a data driven marketing strategy will require shifting budget from other media, or finding new budget dollars. Determine appropriate metrics and the desired payoff. Setting up high level, high visibility “report cards” is critical. For example, “Our 2015 goal is to grow the annual spend of our top three customer groups by 4%, thereby delivering $17.5M of incremental sales.” That will get the CFO’s attention and the goal is doable. Finally, design and execute the marketing plan. That will likely require a trained data and analytics expert, and/or a close partnership with a company that analyzes data 24/7. Either way, it’s important to not over-reach in the beginning. Year one is about becoming familiar with the data, drawing insights, and learning a new language—segments, deciles, annual spend, customer acquisition costs, and lifetime value. The good news is there is usually a great deal of quick wins, such as offer optimization.
Introducing data-driven marketing may seem like a daunting task, but the ability to predictably drive sales should incent even the most cautious. The benefits of bringing an early mover are huge. These restaurants will have more data to work with two to three years out. More data, gathered over a longer period of time, becomes its own competitive advantage. Just ask Amazon.