Ask WRA: Grow profitability by retaining loyal guests

Ask WRA: Grow profitability by retaining loyal guests

By Rick Braa, CHAE

QUESTION: Recently, I spent a week straight in my restaurant covering for my manager while she was on vacation. It appears that fewer regular guests are visiting as I didn’t see many of the people I’m used to seeing. We’ve lost some, so how do I make sure we don’t lose anymore and build some back?

ANSWER: There are several tactics to make and keep loyal guests, including consistency, cleanliness and community impact among others. There is nothing more important than creating a place of connection. Starbucks has grown to over 20,000 stores worldwide; many stores are within a few blocks of one other. Howard Schultz’s vision was to create a third place, beyond work and home – a place to belong. Starbucks is successful because of consumer connectivity to the brand; consumers are part of it and live inside it. Sales from loyal, frequent guests contribute 60 to 80 percent of annual sales for an average restaurant. Those numbers can be higher in a rural or neighborhood location and lower in a tourist location. According to the Gartner Group, 80 percent of your future profits will come from just 20 percent of your existing customers. Further importance is highlighted in a study conducted by Bain & Company, in coordination with the Harvard Business School. This study showed increasing guest retention rates by 5 percent increa

By Rick Braa, CHAE

QUESTION: Recently, I spent a week straight in my restaurant covering for my manager while she was on vacation. It appears that fewer regular guests are visiting as I didn’t see many of the people I’m used to seeing. We’ve lost some, so how do I make sure we don’t lose anymore and build some back?

ANSWER: There are several tactics to make and keep loyal guests, including consistency, cleanliness and community impact among others. There is nothing more important than creating a place of connection. Starbucks has grown to over 20,000 stores worldwide; many stores are within a few blocks of one other. Howard Schultz’s vision was to create a third place, beyond work and home – a place to belong. Starbucks is successful because of consumer connectivity to the brand; consumers are part of it and live inside it. Sales from loyal, frequent guests contribute 60 to 80 percent of annual sales for an average restaurant. Those numbers can be higher in a rural or neighborhood location and lower in a tourist location. According to the Gartner Group, 80 percent of your future profits will come from just 20 percent of your existing customers. Further importance is highlighted in a study conducted by Bain & Company, in coordination with the Harvard Business School. This study showed increasing guest retention rates by 5 percent increases profits by 25 percent to 95 percent. Loyal consumers spend on average 33 percent more than a typical consumer and return more often with zero cost of acquisition.

What keeps loyalists coming back is an “ownership” stake in the business and a personal interest in building it. They recommend the business, post about it, brag about it and invite others while spending more; they’re evangelists. What happens in the restaurant is what makes them feel this way. The food is expected to be good, the facility is expected to be clean, the service is expected to be timely and appropriate and the atmosphere is expected to be right—those are entry points. The variable in all of this is connection and engagement of EACH guest.

Working with some of the best restaurants in the United States provides a rare glimpse into success and failure of many restaurants. Some are busy because of popularity of the food or the chef, but those draws fade and slow down eventually as the next new, hot spot opens and thrives. Restaurants that make the experience about the guest, not itself, have the highest, longest lasting success. Well-conceived restaurants find what consumers want and attract guests because the guest is the star of the show, not the restaurant. Those businesses build and become legendary.

To make sure your business is set apart measure these things daily:

Ensure the guest experience is the focus of every person on staff. From the front desk to the dishwasher, every greeting, clean plate, great product and point of service matters.

Engage each person visiting the restaurant, not just the most vocal or visible people. As service becomes a commodity, customization of the guest experience is the differentiator.

Use names. One of the busiest restaurants in the country requires servers and front desk to learn and use names of guests while in service.

Remember faces. If a guest cannot be recognized by name, the next best thing is acknowledging their presence.

Say, “Thank you” to each guest and mean it. Guests are 75 percent more likely to return to a restaurant if they feel legitimately thanked.

Measure employee engagement on each shift. Make sure each person on staff has a connection with the management team and feels connected with the business.

Create a place where the guest can belong outside the four walls. This can be in the form of a loyalty program, email list or great social media, the point is to communicate often enough so the guest feels “in the loop” and “part of the club.”

Evaluate all touch points of the guest experience. Ensure they deliver the brand promise.

Strategically, set loyal guest acquisition as a priority and focus. Target, convert and keep guests who will evangelize for your restaurant and you’ll enjoy a thriving, profitable and healthy restaurant.

For a more information on improving profitability and driving performance, contact AMP Services at rbraa@ampservices.com. Rick Braa is the co-founder of AMP Services, an accounting and consulting firm specializing in helping companies grow profitability.

(Source: Washington Restaurant Magazine, Winter 2014)

Read more