Industry Update
Opinion Article10 July 2020

The Digital Recipe For Guaranteed Success In 2020

By Tiziano Nessi, Product Manager at HOSPITALITY.digital

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Technology is not a consequence businesses need to adapt to, but rather an opportunity that businesses can take advantage of. Having worked in the digital world of hospitality for four years, I have a long list of success stories thanks to basic technology adaption of restaurants in the industry. Last year, a customer increased their profit by +50.000€ (6% of their total revenue) thanks to a digital F&B cost control tool. More examples follow in this article.

A winning framework for securing your clientele

Technology in restaurants is widely used for back-of-house, mainly for improving operational tasks like inventory management or accounting. Going digital for the core restaurant processes is no longer a nice-to-have for restaurant owners, but a must-have. Restaurants using technology can increase their annual growth 3 x more than restaurants lagging behind in the adoption curve.

Improving the operational side of the business comes in second to acquiring and retaining paying customers. Customers are key. Every restaurant owner (RO) needs to be fully aware and in control of the guest journey, if not, competition will win. The right way to own the customer lifecycle is to be aware of AARRR (Awareness, Activation, Retention, Revenue, Referral). AARRR is a winning framework created by Dave McClure, an angel investor and serial entrepreneur from the San Francisco bay. This framework, borrowed by the digital world, is the secret sauce for providing restaurant owners with a competitive advantage in 2020 during and post the COVID-19 lockdown. By being in control of the customer journey from A to Z, growth is assured.

How to best use AARRR

The AARRR framework, also known as the Pirate Funnel, is an easy and actionable flow that helps sustainable customer growth. This is how it works:

For 2020, forget about back-of-the-house software. What will make the RO an overachiever is in the following action points:

Awareness

How do you create awareness of your restaurant in the local community? The next two points provide a checklist of how to better understand where your customers are coming from and how to create a stronger awareness of your business.

  • Digital presence (website, relevant social media)
    • At Hospitality.digital in the last 3 years we have created more than 200.000 websites for the F&B industry, and with that we have been able to obtain the following results: by inserting the menu, opening hours and a Google my business claim, website traffic has increased by 18% - 22%. Therefore make sure you add as much information about your business as possible when creating your website and registering on Google.
  • Local PR
    • As you can't live only off of tourists, be listed in a local newspaper & influential blog post once a year. Every F&B concept has a story to tell and every story has an audience who could then become customers.

Activation

In the software world we call this the "Aha Moment", Ritz-Carlton calls it the "WOW Factor". This is when the first experience with the service or product delivers a clear added value for the customer. Take the well-known proverb, You never have a second chance to make a first impression,the same counts for a website. On average, after 10 seconds a user decides whether to leave the site or browse further[ii]. A restaurant functions in the same way, the initial experience is fundamental for future success. Reservation software with a CRM (Customer Relationship Management) like OpenTable, Zenchef or Quandoo allows the RO to greet the customer by name. This adds personalisation to the first experience and opens the gateway to the WOW Factor. Generally, personalisation increases customer satisfaction by 30% and the opportunity for Word-of-Mouth marketing by 35%[iii]. - which is the best kind.

Revenue

Regardless of the experience, the guest will have to pay the bill at the end of their meal. As an RO, you want to be in charge of this step and make sure to use techniques that increase the revenue per guest.

Let's focus on small steps. A full service restaurant with 80 guests per day is able to increase the spending per guest by €1, meaning €80 more a day. €80 * 6 days = €480 a week. €480 * 51 weeks (in a year) = €24.480 more a year. Just by focusing on €1 more per customer (see calculations at the end of the article)[iv]. Ideas to put into practice:

  • Based on your POS (Point-of-Sales) data, be aware of these KPIs: top selling items, revenue per guest and total revenue per day.
  • Set a goal for your team → ie. 1€ more per customer.
  • Pilot ideas to sell 1€ more per guest i.e. blackboard with daily menus, stander on the table, cross-sell digestif and coffee, etc.
  • Then analyse once again the top selling articles, revenue per guest and total daily revenue from your POS. Has the strategy had an impact on top line revenue?
  • If yes, preserve this strategy and push it more. If not, try a new one until you get an increase in revenue. Iteration is key.

If your POS does not allow good and easy-to-read data analysis, it is time to upgrade to a POS system that can you give you actionable dashboards. Alternatively, work with an external analytics tool such as Cockpit or the evergreen Excel.

Retention

According to Harvard Business Review, acquiring a new customer costs from 5 to 25 times more than retaining a frequent one[v]. With the following activities you can keep frequent customers happy and be sure that they will come back:

  • Use a CRM as already mentioned in point 2. Greeting customers by name adds personalization. Furthermore, if you know what they ate on a previous visit, the likelihood of seeing the customer in the restaurant again in the future will increase.
  • Creating partnerships with loyalty programmes has been proven to be successful. We tested such a service in Germany and the spending of loyalty-card-owner was 23% higher than with other customers.

Referral

This is the classic Word-of-Mouth advertisement that restaurant aficionados naturally do to promote their favourite place. Offering a digestive, dessert or the best table to your loyal customer means a boost to the Word-of-Mouth system. For this reason, a CRM system able to recognise frequent customers is needed. Yoyo Wallet is a successful company that is digitizing the reward and referral stage of the user journey in order to increase the number of your restaurant's ambassadors.

Start small, achieve big results

There needs to be one software or action for each of these steps. Let me recap my favourite for you.

Conclusion for during-and-post COVID-19 times

Prepare your activity for each of the AARRR steps during the lockdown, in order to start growing faster than your competition. The AARRR framework is not linear, you need to test, learn, adapt and test again until the sweet-spot of growth is found. It is worth it!

Refences

*Expanding your restaurant business with intelligent technology, this article was first published on Medium.com.

Tiziano Nessi

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