Loyalty Truth

From the Editor: Loyalty Truth values its select group of guest contributors and is proud to share thoughts from this week’s National Restaurant Association (NRA) show from David Slavick. David is a long time colleague, and has worked with several national retail brands to develop complex marketing and 1:1 customer initiatives over recent years.

Attending the show this week, David participated in discussions about how restaurants can best leverage collective buying sites (a/k/a Deal of the Day) such as: Groupon, Living Social, Facebook Deals, Scoutmob and the myriad of copycats that have recently emerged.

Here’s his take:

A top priority focus for restaurant operators from the small café owner to the CMO at a national restaurant chain and all in between is to fight for every customer, generate repeat traffic, and do it all profitably. Every business day these professionals work hard to optimize square footage between front and back of house, improve food prep efficiency while reducing waste, and apply technology to manage customer relationships.

It’s a big challenge.

These were all key themes at the NRA, but what really intrigues both the sophisticated as well as the neophyte marketer in the consumer restaurant category is to evaluate the role virtual coupons should play in their plans for 2011, and to determine a logical approach to leverage the collective buying sites mentioned. If you plan to dive into the pool of collective buying, you better be prepared to swim in the deep end, because the risk – reward equation is decidedly high.

Even in a business environment where new customer acquisition costs are on the increase, few firms are willing to give away $50 in sales for a $25 purchase in the name of “experience”. The adoption of “deal of the day” offers has been over simplified in the press, mostly due to the pervasive adoption of the tactic by restaurants and other retailers.

To properly evaluate “deal of the day” for your business, it takes pre-planning discipline, operational coordination, a vision for what you hope to accomplish, plus the tools in place to evaluate and sustain the momentum, post-campaign. It is commonly accepted by those who have learned to swim in these waters that your restaurant or hospitality operation must jump out of the starting blocks smartly and be able to answer the following questions in the affirmative, and without hesitation:

1. Can we afford to take a loss, even a big-time loss in order to gain new customers?
2. Do we have the capacity to handle the volume that an offer, even with limitations, may generate – including being able to staff optimally, take reservations, and accommodate surprise “drop-ins” with equal grace and warm smiles?
3. Are there other services we can sell during the redemption event, or which are complimentary to the customer experience that will generate incremental revenue?
4. Do we have seasonal peaks and valleys in our business, and are we willing to fulfill on an offer over an extended time period – up to 3 months – knowing that there may be overlap with the high season?
5. If fulfillment does cross into a peak season, how will we handle operational pressure and accommodate customers, including satisfying the offer post-expiration?
6. Do we have the systems in place to leverage on-boarding of new customers – either through the “old fashioned way” with personal information captured on a comment card, or through sign-up in a rewards program already in place?
7. Are we willing to support a double-dip, i.e. redemption of a deep discount coupon, while funding rewards per program rules of our existing loyalty program?
8. Do we have the capability to execute campaigns post-coupon event to thank the customer for their visit and encourage repeat business?
9. Are we willing to accept the risk of “Hit N’ Run” customers – those who redeem and never return, for the benefit of acquiring new ones?

From the list of questions above, it’s clear that the foundational considerations for the restaurant or hospitality marketer to consider before moving forward with collective couponing campaigns are anything but simple. Importantly, the vendors who facilitate delivery of the offer should be providing the client (your brand) with both planning and post-campaign services.

To date, these providers seem to talk a good game about measurement, but don’t go much further than offering upfront metrics for tracking coupon views and on-page advertising impressions delivered to the interested browser. Site/page metrics, broad customer demographics, and customer tracking through reservations systems like OpenTable help, but still don’t provide an adequate picture for the brand.

In a white paper to be published by the WiseMarketer shortly and thereafter by Hanifin Loyalty, I’ll provide a more comprehensive guide to optimize your social couponing efforts. If you just can’t wait, give Hanifin Loyalty a call to get the “rest of the story”.