80/20 vs. 4: Restaurant Marketing By The Numbers

By Greg McGuire

The Pareto Principle has long been hailed as the Holy Grail of marketing, the one rule by which all marketing efforts succeed or fail. The principle itself is pretty simple: 20% of your customers drive 80% of your sales. There’s always a core group of loyal customers who not only spend money in your restaurant, they bring their friends, give glowing reviews at dinner parties, and otherwise provide a vital linchpin in your money making machine.

Figuring out who those 20% are can be a full time job, and the logic has long held that if you find them, and target them effectively, you’ll be well on your way. But as the Information Age has matured, so has the wealth of tools available to marketers, and therefore the size of the groups you can target has gotten much smaller. Some marketers have even begun to parse groups of customers down to what some are calling the 4% factor, or specific offers that have a high conversion rate among 4% of your customers.

So how does this apply to restaurants? Well, for starters, restaurants are a business, just like any other. And as a business, restaurants have products that need to be sold to the right customer. Every day your restaurant has the opportunity to learn more about your customers: how often they come in, how much they spend, what they order, etc.

The more you know, the better you can target your promotions and marketing. Too often restaurants take a shotgun approach to their marketing campaigns – blanket advertising in local media outlets and generalized coupons (20% off your order, etc.). That strategy used to be enough. But as more restaurants compete for the same customers, aging marketing approaches are simply not going to work anymore.

Here are some tips to bring your restaurant marketing strategy into the 21st century:

Know thy customer. You’ve probably heard this one before, but it has never been more true. The main difference is that you have many more ways to get to know your customer today that simply didn’t exist before. For restaurants specifically, consider some strategies to learn more about your customers:

• Hold a raffle/door prize event.Customers who enter must fill out a card with their email address, favorite menu item, really anything you want to know about them.
  
  
• Use an email marketing campaign to engage customers and collect information about them.
  
  
• Conduct surveys, either electronically or on paper in your restaurant.

Use coupons to learn more about your customers – if you can collect an email when a customer redeems a coupon for a specific menu item, then you can use that information to target them for specific types of future promotions

Leverage thy knowledge. Now that you’ve put some effort into collecting information about your customers, you need to leverage that information to your advantage. Use the 4% factor to separate customers into specific groups with particular tastes. Then hit those groups with specially tailored promotions made just for them. The goal is to get your response rate (i.e. conversion rate) through the roof.

Engage thy followers. Targeting small groups of loyal customers should generate an enthusiastic response. And when customers respond, you should be poised to engage them and solidify your rightful place as one of their favorite brands. The tools you have available to you today make customer engagement even easier. Experiment with different avenues until you find the social media that works for you.

Gauge and repeat. The idea is that these small groups you find through your marketing campaign will respond at much higher rates than a traditional (and usually more expensive) marketing campaign. You’ll only know for sure if you gauge response. Use coupon codes and other ways to measure who’s biting on what, and then modify and improve your campaign until you have it honed down to a high performance machine.

The good news is that running a 4% campaign will probably be much cheaper than a traditional shotgun blitz. The bad news is that it takes some significant time investments and more than a little trial and error. For those willing to put the time in however, the gains can be huge.

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Greg McGuire blogs about the foodservice industry at The Back Burner, which is written by the employees of Tundra Specialties, a company specializing in restaurant equipment and food service supplies.