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Customer Engagement:  An Innovative Approach for Restaurateurs

十二月 08 2016 Published by under 實習生計畫 (Internship Program)

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The restaurant Industry is insanely competitive, as statistics says between 60-80% of new restaurants fail within the first year. Around 80% of those that make it past the first year have higher chances to close their doors within the next three to five years. Though these statistics are scary, Customer loyalty can play a vital role to overcome it. So the restaurateurs while focusing on new business also need to keep an eye on two important aspects as how to maintain and keep their existing customers happy as they try to attract new ones and how to keep all of their customers coming back on regular basis. The best way to do that is to build a relationship with the Customers & offer them an amazing dining experience which will make a huge difference between a one-timer Customer and those that visit on a regular basis.

 

The Apple CEO Steve Jobs once quoted “Get closer than ever to your customers. So close that you tell them what they need well before they realize it themselves." this is amazingly true. By concentrating not only on engaging quality customers inside the restaurant but also maintaining that engagement even after their dining experience ends will surely help restaurateurs to achieve competitive advantage over others. In order to seek loyalty & formulate effective Customer engagement strategies restaurateurs need to analyze customer behaviors and other relevant attributes, then classify them in groups and finally develop personalized promotional offers & dining experiences that are designed specifically for each individual.

 

The innovative way to measure customer engagement and identify highly potential customer is to incorporate an RFM (recency, frequency, monetary) Model. RFM Scoring model divides customers in to different segments based on their dining behavior enabling restaurateurs to create personalized promotional offers and messages intended to influence a customer’s behavior, thereby increasing the frequency of return visits as well as per visit spending.

 

Let’s understand what RFM model is & how it works?

There are three components of the RFM framework.

1.Recency: How recent was the last dining activity?

2.Frequency: How many times customer visited?

3.Monetary: amount spent

 

To perform RFM analysis, each customer is assigned a score for recency, frequency, and monetary value, and then a final RFM score is calculated. The customers with the highest RFM score are considered to be the ones that are most likely to respond to the offers.

 

Let’s assume Allan, Brandon & Charlie are three Customers.

 

Past 11 weeks dining history of Allan, Brandon & Charlie says that Allan visited restaurant 3 weeks back, Brandon 5 weeks back & Charlie visited 1 week back.

 

So let’s find out the recency score:

 

Customer Recent Visit Recency Score
Allan 3 Week back 2
Brandon 5 Week back 3
Charlie 1 Week back 1

 

Past 11 weeks dining history of Allan, Brandon & Charlie says that Allan visited restaurant 4 times, Brandon 2 times & Charlie visited 3 times.

 

So let’s calculate their Frequency score:

 

Customer Week1 Week 3 Week 5 Week 7 Week 9 Week 11 No. of Visits Frequency Score
Allan 0 1 1 0 1 1 4 1
Brandon 0 0 1 0 0 1 2 3
Charlie 1 0 0 1 1 0 3 2

 

Past 11 weeks dining history of Allan, Brandon & Charlie says that Allan spent $3000, Brandon spent $5000 & Charlie spent $6,500 respectively.

 

So let’s calculate their monetary score:

 

Customer Week1 Week 3 Week 5 Week 7 Week 9 Week 11 Amount spent Monetary Score
Allan 0 $1000 $500 0 $500 $1000 $3000 3
Brandon 0 0 $2000 0 0 $3000 $5000 2
Charlie $2000 0 0 $2,500 $2000 0 $6,500 1

 

Based on the scores of recency, frequency & monetary, the Final RFM score is as follows:

 

Customer Recency score Frequency Score Monetary Score RFM Score
Allan 2 1 3 2
Brandon 3 3 2 3
Charlie 1 2 1 1

 

RFM analysis says that Charlie is the most potential customer while Brandon is the least so instead of sending same generic blast emails & giving similar offers to all, restaurateurs can come up with customized loyalty program or promotional offers & dining Experiences based on RFM score to influence the behavior of individual Customer.

To conclude, RFM analysis is a powerful tool for restaurateurs to identify their best customers as by reading each customer’s pulse through extensive past behavior analysis and responding accordingly, restaurateurs can positively influence customers to keep coming back which in turn will result in their prosperity & profitability.

 

 

EZTABLE intern Nilesh

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