First the millennials came for Applebee’s, then they came for Buffalo Wild Wings. And this summer, tragically, millennials finally delivered a death blow to Hooters.
Or did they?
If you’ve followed restaurant news in recent years, it’s pretty tempting to believe the narrative that the youngsters are the reason casual dining chains are facing closures and sales slumps across the U.S. However, many experts suggest that it might be time to stop blaming millennials for the decline of once-stalwart names in the dining scene and start blaming misguided attempts at digital marketing.
The secret to recovering from the past years’ sales slumps probably isn’t adding more kale to the menu. Instead, restaurants should be focusing on using data to identify repeat customers and foster stronger relationships.
Social media stunts only drive temporary traffic
Earlier this summer, IHOP made waves across social media when the famous pancake chain changed its name to IHOb—or International House of Burgers. The move resulted in a round of unflattering press coverage and plenty of mockery on Twitter, but on the surface, the campaign could be called a success. Overall the name change resulted in 30 billion media impressions and was the topic of 20,000 news stories (including one of mine).
And it turns out that social media stunt drove a boost in sales of its burgers, which quadrupled after the name change. However, the brand didn’t sell that many burgers in the first place, and the change many not have result in a sales boost in the long run.
While same-restaurant sales were up by .7% in the last quarter, it remains to be seen whether customers who dropped by for a burger in the wake of the social media frenzy will keep coming back the burgers that launched a billion social media impressions.
Repeat customers are the key to success
Instead of chasing followers, casual chains looking to bolster sales might do well to focus on their regulars. Studies show that about 15% of a restaurant’s customer base accounts for about one-third of its sales. That means if a restaurant can boost those repeat visits by just 5%, it can increase profits by anywhere from 25%-125%.
Yet, when it comes to messaging, many restaurants continue to mass-message customers, instead of identifying the audiences that have the potential to become repeat visitors, according to Pat Riley, vice president of business development at Cogensia, a data-driven marketing firm.
“The problem I often see is that restaurant brands don’t have an understanding of who their customer is,” Riley says. “The dont know them on an individual level. Even though restaurants often have plenty of data, they continue to talk to everyone as one mass group.”
Restaurants are ignoring some of their most valuable data
The key to distinguishing those valuable repeat customers from those who wander in on a lark is data. According to Riley, point of sale (POS) data is an often-overlooked wealth of information for restaurants hoping to connect the dots and differentiate their messaging.
“POS data is really holding a treasure trove of insights,” Riley says. “Restaurants can see when customers are coming in and even the difference between sitting in the bar or in the dining area. Are they ordering off the kids menu? These insights can help restaurants understand what their brand means to their core customer.”
AI is the next step toward forming personal relationships
What if, instead of emailing you a coupon, your favorite restaurant just shot you a text reminding you that Tuesday was dollar wing night? Thanks to artificial intelligence and POS data, some early adopters are doing just that.
For example, TGI Fridays recently used AI technology to pull information from not only its POS systems, but its social media, credit card transactions, and mobile devices then connected that data to offer highly targeted messaging to customers based on the time of day they like to eat, their orders, even whether or not they’re ordering dinner for a family or lunch on the go.
The brand ended up doubling its to-go business in the past year and tripled their frequency in online orders, according to The Wall Street Journal. The move is perhaps less flashy than a headline grabbing social media campaign, but customers who used to stop in twice a year are now coming in six times, which is a huge win in a world where everyone is dining out less.
As long as Wendy’s continues to grab headlines for its Twitter antics, other brands will attempt to follow suite. But for restaurants looking to grow customers rather than followers, strategic data use could be more important than chasing millennials.