Like chefs at a sushi bar, restaurateurs can slice, dice, and roll data in a variety of ways in order to deliver value to guests and increase profitability at the same time. In this post, I will examine one of the most basic yet powerful types of data analysis - customer segmentation - and explain how it can be applied within the context of the restaurant industry.
Customer segmentation provides business owners with a means of better understanding their customer base in order to develop targeted products and services for them. Of course, such an undertaking relies heavily upon data analysis, which is perhaps one of the reasons why it is so prevalent in the consumer packaged goods industry. Yet despite what restaurateurs may believe, they too possess the data to conduct such an analysis. Demographic and preference data for guests can easily be compiled from internal databases or reservation agents such as Opentable. Spend data, contained within POS systems such as Micros, can be linked to particular guests through the use of unique identification numbers. By fostering communication between customer databases and POS systems, restaurateurs can not only understand who is patronizing their establishments, but also how much they are spending.
The information gleaned from a customer segmentation analysis can be used in a variety of ways. For instance, by conducting a statistical analysis of guest preferences, restaurateurs may be better able to develop products and services to meet guest needs. By understanding the lifetime value of guests, promotional offers can be developed to encourage additional consumption. Clearly, the data housed in restaurants' walk-ins has great potential. Yet it is up to the master chef, the analyst, to turn it into a delicious dish.
To play along with your sushi analogies, what scares restauranteurs away from this dish? Do you think they see the leveraging of data as a high-risk, high-cost item? I think the necessity for constantly fresh dishes of data analysis (that is, continued reassessment of the data) may be intimidating as well--consumer trends change so quickly.
ReplyDeleteI wonder if the answer is just training and familiarity with the program for the managers, or if managers need programs like Avero that hand them their data analysis? Surely they lose some of the value if they outsource a key dish... thoughts?
Thanks very much for your note. To be perfectly honest, I don't believe that most restaurateurs even know that this dish exists! Between putting out fires (hopefully not literally!) and managing prime costs, few operators actually dig into the wealth of data that is at their disposal. For the restaurateurs who do recognize that dishes like this exist, I believe that it is the cost, rather than the risk, that inhibits them from placing their order. Data analysis can be an expensive endeavor; thus, potential investments must be carefully assessed in terms of expected return. In terms of the dish described above, that return might come in the form of increased loyalty (frequency of visit) or increased spend.
ReplyDeleteAlthough I agree with you that consumer trends change quickly, I believe that individual consumer preferences are rather stable. Thus, I submit that there is an opportunity for restaurants to harness their data to deliver personalized experiences in much the same way that hotel chains such as Ritz Carlton have in recent years. Furthermore, I believe that an examination of sales trends in the data can lead to the development of profitable promotions. These would simply capitalize on the historical purchase behavior of consumers and leverage that knowledge to drive sales. Unless consumption is truly random, historical analysis of this kind is likely to produce valuable insights that are not beholden to fluctuating consumer trends.
Managerial training would certainly be a step in the right direction, although as I discussed in a previous post, managers are typically swamped with pressing matters during a given shift. Because of this, outfits like Avero are particularly useful as they provide management with easily accessible and interpretable information. I do, however, agree that some value is lost by outsourcing these analyses. First hand knowledge of the operation is critical to defining the right types of analyses to conduct and to implementing the results of those exercises in an appropriate manner.
Significantly, the dish I propose above differs from that which is offered by Avero. To the best of my knowledge, Avero only analyses sales data from the restaurant perspective; in other words, it does not try to understand how the customer fits into the equation. I am arguing that it is essential for restaurants to connect what is being purchased with who is doing the purchasing. By understanding what customer attributes are correlated with purchase behavior, restaurants can effectively target their most profitable guests.
I hope the above clarifies some of the issues you succinctly raised. And now I have a question - who are you?