What is the function of a business?
If you answered, “To make money,” you’re wrong. The function of a business is to attain and retain customers. The goal is to make money.
As I’m sure you know, having a full dining room, bar or drive thru is no guarantee you’re profitable. Volume can hide a multitude of sins: Chefs over-order perishable goods; cooks burn food; servers underwhelm guests; bartenders break liquor bottles; patrons knock over glassware; busers drop china-filled bus tubs; dishwashers drop forks in garbage disposals; and drive-thru cashiers over-portion napkins, sauces and condiments. Full house? Awesome. But a lack of customer retention via effective training means you just lost money tonight.
Money spent on customer acquisition (advertising and promotion) can fill a restaurant, but money spent on customer retention (training and service) makes that restaurant profitable by transforming a single visitor into a lifetime guest.
So, if our function is to attain and retain guests, which of the two is more important: customer acquisition or customer retention?
Regular readers of this column now presume that I will vociferously support and defend customer retention. And, if you’re a regular reader of this column, it stands to reason that you’re not only smart; you’re right.
Foodservice marketing budgets are over-engrossed with customer acquisition and not so much on customer retention. That makes sense for the first year you’re open, when you’re trying to build a customer base, but it’s backwards thinking in year two and beyond. I could hand a $10 bill to pedestrians walking by my restaurant to come in and try us. But that doesn’t guarantee patronage beyond one meal. A well-trained staff delivers on the brand promise and creates brand affinity with customers, two critical drivers of repeat business. And, with all due respect, the unit-level restaurant is ultimately more important than the corporate-level marketing room. The cash registers reside in the restaurants, not the home office.
When’s the last time you saw a TV ad for Starbucks or Chipotle? How about McDonald’s or Subway? McDonald’s spent $963 million in advertising last year, according to Business Insider. AdAge Data Center reports that Subway spent $516 million. Both Starbucks and Chipotle spent a fraction of those amounts in advertising. Now which two of those four brands have a stronger reputation for taking care of their employees and customers? Which ones invest more in customer retention (training and service) than customer acquisition (advertising and promotion)? Just saying.
Let’s look a little closer at the four stages of marketing and the role that training plays in its success. Restaurant trial occurs either by chance or by choice. Chance patronage is just that: circumstantial patronage resulting from either proximity or error. “I ate there because it was close to work and I tried it,” or “I got lost and was hungry.” Choice patronage, on the other hand, is a much more nuanced decision, initially triggered by external marketing (ads, promotion). But sustained patronage results from internal marketing: unit-level teams excelling at execution and hospitality.
The four stages of marketing
Awareness. In this initial stage of engagement, potential diners may not have even heard of your restaurant. So advertising, promotion and social media marketing budgets tend to be heavily weighted toward new customer engagement. Your potential new diners become aware of you through these efforts. Those who miss your message may hear about you from influencers who didn’t (influencers being the one person in 10 that affects awareness in the other nine).
Consideration. This stage is characterized by contemplation and then decision-making on the part of the potential customer. They’re now aware of you and trying to determine if you’re worth their time and money. If they decide you’re not, then the Awareness stage marketing campaign was money ill spent. If they decide you’re worthy of their time and money, you move to the next phase. Marketing has done its job and operations/training takes over.
Visitation. The diner has now moved through two complex and formidable marketing stages (Awareness/Consideration) and actually goes to the restaurant. This is why customer retention strategy (service and training) is so important: it’s where the brand meets the customer. Cherish this stage, because you experience the double win of patronage: The customer spends money with you and simultaneously does not spend money at the competition. Huzzah!
Preference (Affinity). This stage is the ultimate target for every foodservice department, executive, employee, manager, trainer and stockholder. Preference drives repeat business and lifelong patronage. Only by excelling at the Visitation stage every time do you convert customers to prefer your brand over others. Marketing is the car, training is the engine and execution is the steering wheel of customer retention.
As you consider the four stages, evaluate how your marketing, ops, HR and training teams can improve each one. When a new restaurant opens, most of its marketing dollars should be allotted to customer acquisition. But as diners accrue over time, shift those dollars into customer retention. Don’t overspend on marketing and underspend on training, lest you fall into the vicious cycle of constantly acquiring customers you can’t retain.
If you spend more on customer acquisition than you do on customer retention, you’re actually working for competitors who do just the opposite by providing excellent training, personalized service and a quality experience for every guest.
Jim Sullivan is a popular keynote speaker at foodservice conferences worldwide. You can check out his training catalog of books, videos, apps and e-learning at Sullivision.com, and follow him on YouTube and Twitter @Sullivision.