Relational vs. Transactional

Analytical Culture, Customer Experience, DataBase Marketing, Driller Q & A, Marketing thru Operations, Measuring Engagement, Newsletters

Jim answers questions from fellow Drillers
(More questions with answers here, Work Overview here, Index of concepts here)

Q: I am hoping you can help answer a question for our team. By way of introduction, I am the CEO of XXXX. We are a specialty retailer / restaurant of gourmet pizza, salads and sandwiches. We would like to know restaurant industry averages (pizza industry if possible) for customer retention – What percentage of customers that have ordered once from a particular restaurant order from them a second time?  I am hoping with your years of expertise and harnessing data you may be able to assist us with this question. Look forward to hearing from you.

A:  Unfortunately, in those said years of experience, I have found little hard information on customer retention rates in QSR and restaurants in general (if anyone has data, please leave in Comments).  It’s just the nature of the business that little hard data, if collected, is stored in such a way that one can aggregate at the customer level. The high percentage of cash transactions doesn’t help matters much; there’s a lot of data missing.

Over the years, sometimes you see data leak out for tests of loyalty programs, and of course clients sometimes have anecdotal or survey data, but this isnot much help in getting to a “true” retention rate. More often than not you discover serious biases in the way the data was collected so at best, you have a biased view of a narrow segment. Often what you get is a notion of retention among best customers, or customers willing to sign up for a loyalty card, but not all customers. And the large “middle” group of customers is where all the Marketing leverage is.

What to do about this predicament?

There are really two issues in your question; the idea of using industry benchmarks when analyzing customer performance, and the measurement of retention in restaurants.

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Awareness versus Persuasion

Analytics Education, DataBase Marketing, Web Analytics

In the early days of Home Shopping Network (live TV, not online), we were doing some ethnographic research and started to find “physical clusters” of customers – neighbors or people who worked together. For example, one of these groups was nurses at hospitals, especially nurses who worked the night shift.

We looked for the most active member of the cluster (our “thought leader”) and asked them if they would help us with a “member get a member” program. Would they be willing to distribute discount coupons to their friends, especially ones who were not already customers? Time after time, the answer was:

“Honey, all my friends are already customers of yours”.

We launched the program anyway, because it was a pet project from upstairs – I was a junior marketer at that point so I couldn’t kill it ;) The program never, ever worked, no matter how hard we tried. It generated very few new customers while giving lots of discounts to people who were already active buyers. Basically, the cost of those discounts overwhelmed the value of the new customers generated.

Apparently a similar thing happens online with Social marketing.

As part of a DAA program that reviews academic research for DAA members, I was able to take a look at a paper titled: Firm-Created Word-of-Mouth Communication: Evidence from a Field Test by David Godes and Dina Mayzlin.

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Net Meaningful Audience

Brand Management, Customer Experience

 

Not Meaningful
Not Meaningful

When you’re in the business of measuring the effects of Marketing programs, certain patterns begin expressing themselves over and over.  One of the oldest in the contribution to success of various parts of a Marketing effort, sometimes called the 60-30-10 rule:

60 percent of success is determined by the audience quality
30 percent of success is determined by the offer
10 percent of success is determined by the creative

Where do these stats come from?  Continuous improvement testing.  Over the years, if you run a lot of different tests, you just begin to see this pattern.  And the pattern holds across a very wide variety of business models – online and offline.

The key takeaway here: audience quality is the most important component of success in a results-oriented Marketing campaign.  This is why the CPM’s for niche Magazines, for example, are so high.  These Magazines are tremendously efficient marketing vehicles because they have high audience quality, which drives end behavior – results.

And the primary reason the audience quality is so high?

People pay for these Magazines.  When people pay for something, they value it with more Attention. Why? Simple.

In a magazine like Hot Rod or Concrete Decor or Vogue, the percentage of content that is interesting to the niche audience is very high. In fact, the Advertising is viewed as content.

Smaller audience, very high quality. Ads work like gangbusters.

Clearly, there are other ways to run a media model.  At the opposite end of the media spectrum, there is free.

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