Frequent Diner Software - by Michael L. Kasavana, Ph.D., CHTP (HFTP Bottomline Magazine)

Historically, restaurants have used a variety of marketing strategies to influence market share, including daily specials, advertising fliers, discount coupons and in-store promotions. More recently, technology savvy eateries have implemented frequent diner software as a means to chart, monitor and honor patronage.

Many industry practitioners claim that gaining a competitive advantage has become increasingly difficult since customers are more demanding and are less brand loyal. Historically, restaurants have used a variety of marketing strategies to influence market share, including daily specials, advertising fliers, discount coupons and in-store promotions. More recently, technology savvy eateries have implemented frequent diner software as a means to chart, monitor and honor patronage. A direct descendant of the airline industry's mileage clubs, frequent diner software allows a restaurant to gain valuable marketing insight while rewarding brand loyalty.

A frequent diner program, if structured properly, can provide management with insightful information relative to what, when and how frequently customers make purchases. In turn, the creation of a reliable customer database provides direction for more targeted marketing programs that can result in reduced promotional costs and strengthened customer relations. Frequent diner software plays a major role in customer relationship management (CRM) and is a logical extension of point-of-sale (POS) technology. Coupling POS hardware with frequent diner software can lead to efficient transaction postings and reward notification while building future sales.

An effective frequent diner program can be automated to promote customer loyalty and provide a basis for marketing intelligence. Typically there are two critical questions that must be addressed early in the process:

First, what method of data capture will be implemented?

• Point-of-sale (POS)-based entry
• Electronic data capture (EDC) entry
• Stand-alone application entry

Second, will the program be administered locally (at each unit or outlet) or centrally?

• Type of operation (independent, franchise or chain)
• Size of operation (number of units)
• Number of enrolled members (participant volume)
• Volume of transactions (database content)
• Nature of award offerings (cash discount, trade-out or prize)

A POS-based data entry application relies upon sales data collection and internal settlement tracking capabilities to designate and qualify transactions for postings to participant accounts. There are both local and remote options for POS-based programs. In a local application, the hardware and software components of the system reside on the restaurant's premises. Normally installed on an interfaced PC, POS-based frequent diner software can be used to poll detailed customer transactional information — captured at the time of sale — and then posted to the proper account. It is important to note that

some vendors offer frequent diner software as a built-in POS feature thereby facilitating more efficient data interchange. In a remote POS-based application, data is captured at local POS terminals and then either polled or downloaded (i.e. exported) to a centralized, distant site for aggregation and account posting. This centralized collection of frequent diner transactions can be used to form a powerful marketing data storage area commonly termed a data warehouse. Therefore, centralized administration of frequent diner software can prove especially critical to multi-unit operators.

An EDC-based application relies upon the data processing features of an external credit, debit or smart card banking service to be able to recognize, sort and apply qualified transactional data to member accounts. The external company, or its intermediary, employs software capable of separating transactions by enrolled member and qualified award criteria. Several companies are beginning to offer this service (e.g. Nova/Perks). Similar in design to a POS-based application, stand-alone software solutions can operate as local or remote processing systems. In a local application, management basically applies a specialty software package to a set of transactional data to sort and record appropriate transactional account activity. Alternatively, some vendors are considering a smart card as a component of a frequent diner program since it possesses the capability to store transactions on an imbedded chip. Several industry experts believe that migration to a smart card format will revolutionize the way frequent diner programs are operated, managed and reconciled. In a remote stand-alone application, a centralized entity receives transactional data from a foodservice operation and processes it according to the frequent diner program of the host operation. It is important to note that some frequent diner software packages can either be interfaced to a POS system or be operated as a standalone product.

A summary of these three types of automated frequent diner software applications is shown below.

POS-Based

• Local tracking
• Remote polling
• Remote downloading

EDC-Based

• Credit card transactions
• Debit card transactions

Stand-alone Based

• In-house program
• Shared program
• Outsourced program

Regardless of data capture method, automated frequent diner software relies on a database against which marketing or operation questions (i.e. number of visits, dollars spent, purchase patterns, etc.) can be posed. For example, one restaurant queries the database to identify customers who always order wine with their dinner for a special wine promotion. Another programs the software to send a gift certificate for a complimentary appetizer or dessert item to customers after their 10th visit. Yet another multi-unit operation generates a list of its frequent customers who live within a 10-mile driving radius of its new restaurant. It plans to mail them invitations for a special "VIP soft opening."

While system designs vary, many applications employ Open DataBase Connectivity (ODBC) drivers as a tool to mine captured data and thereby identify relevant customer activity for posting. ODBC is designed to access a variety of data regardless of which database management system is handling the data. It works by inserting a middle layer, termed a database driver, between application software and the program's database management system (DBMS). The purpose of the driver is to translate the application's data queries into commands that the DBMS understands. In order for this to occur, both the application software (frequent diner program) and the database system must be ODBC-compliant. Several popular frequent diner programs employ an Oracle database and ODBC drivers as a means of effective frequent diner data mining.

Implementation

A restaurant that desires to reach, reward and retain its customers through an automated frequent diner program should consider the following six step process:

1. Enrollment of Members — With an automated system, customers are able to register in-person, over the phone, by mail or fax, via e-mail or online. During the registration process, restaurants should seek the following data: customer name, addresses (home and work), demographic profile (marital status, family, birthday, etc.), special interests, and frequent dining plan (if options exist). Some restaurants charge a monetary enrollment fee that can be credited back against future purchases. Others charge a fee but return it in the form of discount incentives or redeemable points. A few restaurants apply a handling fee to cover administrative costs. In general, the more participation the better.
2. File Creation —Following registration, an electronic customer file is created. This electronic file is assigned a unique account number for transaction processing. The file is designed to monitor visit frequency and purchase behavior. The customer may be issued a cardboard identity card or a magnetic strip plastic card or an imbedded chip smart card. At the point of purchase, the member completes a purchase by presenting the card and the transaction is posted to the database. The customer thereby accrues awards — points, discounts, game tokens, merchandise and/or retail coupons — based on number of visits and value of transactions.
3. Transaction Posting — Transaction processing technology (TPT) systems, capable of handling credit, debit and smart card authorization are also capable of supporting frequent diner programs. As restaurateurs strive to reduce marketing costs, while simultaneously improving effectiveness, an installed TPT system may serve as a valuable tool. In essence, TPT offers restaurateurs an effective POS database marketing strategy that is hard to otherwise obtain. Restaurants often issue frequent diners magnetic strip cards to identify and monitor customer buying patterns and to track customer transactions. A magnetic strip card reader can be attached to an electronic payment platform to enable simultaneous online settlement processing and frequent diner monitoring. The fact that discounts and meal promotions can be reflected at the point of purchase may also represent cost containment and competitive advantage in the marketplace.
4. Account Tracking —Account balances can be maintained in a database (in-house, regionally or nationally) or stored on a customercarried smart card. A current account balance is simply the accumulation of the points attained through participation in award-eligible activities and transactions minus the number of points used to redeem appropriate awards. An important concern is customer account access be it by POS terminal, PC or web site. Frequent diner information is oriented toward customer equity and therefore should be account holder friendly.
5. Participation IncentivesSimilar to the experiences of expansive airline frequent flyer programs, there is a continuous search for ways to enhance member loyalty rewards. Although frequent diner programs vary widely among both independent and multi-unit operators, there is a growing push to develop innovative niches that establish competitive advantage and build frequent diner visits.
6. Outcome ReportingFrequent diner applications are capable of producing an array of reports based upon database capacity, report-writing software and management's information needs. Depending on database formatting, restaurants may be able to pose complex queries by searching multiple databases containing transactional data, accrued points, issued vouchers and redemption activity. Most frequent diner systems can identify and generate information in these categories:

• Best customers
• Customer frequency (number of visits)
• Popularity of menu items
• Purchase patterns
• Bundled purchases
• Promotion items
• Redemption points
• Success of marketing or advertising campaign
• Effectiveness of special promotions

Accompanying frequent diner software is a growing business trend toward customer relationship management (CRM). CRM is typically defined as a one-to-one marketing approach in which the individual customer becomes the focal point of activity. One-to-one marketing involves knowing customers as individuals, having a customer interaction mechanism and possessing the ability to customize business transactions to individual market segments. In other words, an attempt at seamlessly combining product quality and service delivery with marketing and sales activities. The major benefit of relationship marketing is gaining customer loyalty since each time there is an interaction, the business is perceived as changing its mode of operation to accommodate the needs of an individual customer. For example, a return visit to a web site or company property can lead to suggested products and services customized to the interaction. This strategy in turn increases the perceived value of the restaurant to the customer. And, of course, capturing more data about each customer enables the business to continuously get smarter with each transaction. There are three important criteria associated with relationship marketing. First, there must be an easy way to communicate with the customer (design interface). Second, there must be a learning process, for both the business and the customer, built upon prior interactions. Finally, the interface and feedback must be integrated into a customer relationship. Customers must find it easy to communicate what they need/want to the firm. When shopping for frequent diner application software,restaurant management will be wise to keep these criteria in mind. Given the recent advances in technology, an effective relationship management program built on frequent diner software clearly represents a marketing opportunity for restaurants.

Finding the web page you are seeking can be a chore, and having your hospitality company's web site prominently listed in search engines and directories can be an even larger one. Estimates vary, but between half and two-thirds of all web sites are found through search engines and directories. It takes research and diligence, not luck, to be well placed on these portals. Herein are suggestions on how to succeed with this marketing goal.

The number of search engines and web sites is staggering and growing quickly. Currently there are over 2,000 search engines and almost one billion web pages on about three million servers. VeriSign, which acquired Network Solutions in 2000, ended that year with more than 28 million active domain names in its registry. With all of these web sites, it is challenging to have one's company be found by surfers, much less rank highly amongst the given choices.

The concept is simple — users want to intuitively and successfully find desired sites and hoteliers want them to find their sites. Success does not require investing lots of money, but instead requires an understanding of how search engine ranking algorithms work and change over time. A few hints help too.

Online businesses are constantly inventing new search engines or improving existing ones. Microsoft and America Online have both announced revamping of their search sites. GoogleTM replaced Inktomi as the supporting search engine technology behind Yahoo!®. The goal is to balance total pages indexed with an intuitive way of showing search results.

Programmers are constantly trying to outsmart the search engines, in order to get their pages at the top of search results. Years ago it involved tricks like hiding certain keywords in the same color as the background. Today engines attempt to discern and disqualify pages like this, while the ongoing pursuit for high placement continues. New tricks, some of them unethical, are constantly appearing. To ethically gain high placement is possible, but it takes a combination of factors.

There are several types of indexing sites. The first uses web "spiders" or "crawlers" that visit submitted sites and subsequently add links to the search engine, such as Entireweb.comTM. The second method, increasingly common, uses human editors to evaluate submitted sites and then place them into specific subject categories, a technique used by Yahoo!. This latter method uses the science of ontology (the study of the essence of things) to determine how to catalog things. Take Carnegie Hall for example. Should it be categorized in a directory under arts, architecture, New York, Andrew Carnegie, or classical music? It is in fact found in one Yahoo category, New York > New York > Carnegie Hall. Only humans can make these decisions consistently.

Submitting web sites to either of these types of sites is usually free and requires little training. Like always, however, the devil is in the details. Most sites take several months before submitted sites appear. The correct category and relative placement within that category require specialized knowledge and ongoing homework, which is discussed shortly.

There are also sites that sell relative placement, the best example being OvertureTM (formerly GOTOTM). There one selects search terms (keywords) believed to be relevant to a web site. One then bids competitively for those words, ranging from a few cents to several dollars for every person who would subsequently find the site. The higher the bid on words, the higher an individual site appears on a search query. Clients pay only for those people who then select (click through) to their sites. This highly targeted method is more expensive and takes only a few days to setup. Presently there are few, but increasing, search engines that use this method.

One twist on this is the sale of keywords. In Microsoft and Netscape's newer Web browsers there are built-in keyword navigation features, turned on by default, that allow users to type in plain words instead of longer Web addresses (URLs). Although this method is easier on users, it puts the control of keywords into the hands of the database owners. In the case of Microsoft Internet Explorer, for example, this owner is RealNames. That company sells examinations, recommendations and placements using keyword-driven visits for a few hundred dollars or more annually. The company will not necessarily sell words that are common or industry-related, but will sell specific names, such as a unique company name. For example, Netscape manages its own keyword database comprised of strong brands and trademarks, also selling keywords.

There are disaster stories for web sites. One foodservice company found through a search of its company name only returned results pointing to a competitor. The foodservice company had no strategy, while the competitor used META tags containing the first company's name.

Recently a hotel chain found a protester's site showing up very high on searches of its name, due to the protester's prominent use of the company's name on his web site.

A third hotel found that only its competitors showed up when its name was entered as a keyword. This was due to the competitor having purchased the company's initials as a keyword. The lesson is simple: if a company wants to build its brand, it needs to research how to be well placed on the Web.

Methods vary depending upon how and where the site is to be listed. Search engines are constantly changing the algorithms by which they index pages. The bottom line is that it depends on a changing and often undisclosed number of variables. Link density (how many sites link to a site), link popularity, cross-linking, page length, word frequency and word placement all influence the algorithms.

Options for high placement are to hire a professional (be extremely wary of fly-by-night search engine submission services) or learn the techniques yourself. Regardless of the choice, ensure that your technologists/programmers understand your desires. Should you do the programming yourself, the following suggestions are examples of what should lead to improved search engine placement.

• Use the TITLE html (hypertext markup language) tag wisely. Choose between four and eight concise words that name your company and its fundamental purpose.
• Use META description and keyword html tags for every page and subpage (although a decreasing number of search engines are keying from them). Include your title as the first keyword and ensure that words are not repeated. Be sure to use relevant words that are in your text.
• Use the description tag wisely but specifically, without repeating the title, and with no more than 25 words. Avoid unnecessary capitalization.
• Use NOINDEX and NOFOLLOW html tags to keep undesired pages from being indexed. Most sites only want to steer customers into its front or other specific portals, but not directly into deep content that may not provide context.
• Use ALT html tags with all graphic images. If your company name is only found in a graphic, do not expect search engines to parse them.
• Place the title of your page in a html tag on the main page.
• The actual content of your pages is crucial. Ensure your lead paragraph includes relevant words and phrases on which you want viewers to search.
• Name your individual html files judiciously. The search engines will also look to the actual URL and file names for site placement.

Realizing the importance of active, descriptive, and high-return web site links in search engines is crucial to hotels and clubs. As more surfers use the Web, a hotel's ability to be easily found is absolutely essential. After realizing the importance, companies need to take action. This is a process, not a destination. A hotel needs to constantly check and recheck how it appears to users. Vigilance and awareness will help keep a site in front of the right customers.

Michael V. Mitchell, M.M.H. is a manager with Andersen's technology integration services group in Boston. He is the North American program manager for that group of specialists.

The Bottomline, published bimonthly, is the official publication of HFTP, and is received by HFTP members as a member benefit. The editorial content of The Bottomline is determined by a team of experts. Members of the HFTP Communications Committee represent a variety of industry segments and areas of expertise in accounting, finance and technology. Besides the magazine's six regular issues, two special issues are published yearly. The Bottomline is an HFTP member benefit and is only received regularly by members. Go to www.hftp.org to get more information on HFTP membership.

Based in Austin, Texas, HFTP is the professional association for financial and IT personnel working in hotels, resorts, clubs, casinos, restaurants, and other hospitality-related businesses. The association provides continuing education and networking opportunities to more than 4,300 members around the world. HFTP also administers the examination and awards the certification for the Certified Hospitality Accountant Executive (CHAE) and the Certified Hospitality Technology Professional (CHTP) designations. HFTP was founded in 1952 as the National Association of Hospitality Accountants.