For restaurant operators, 2011 was a better year than 2010. But with continuing unemployment in the U.S. and Europe, and slow economic growth forecasts for 2012, finding innovative ways to drive customer visits and revenue will be a big challenge this year.

Current restaurant marketing tactics aren’t working

2011 will be remembered as the year of the daily deal. Many restaurants continued using traditional marketing tactics, but also succumbed to the promise of daily deal providers such as Groupon and social media, with Facebook fan pages alone increasing exponentially. However, these traditional tactics and the newer tactics have performed well below expectations in attracting customers. Below is a quick analysis of many of the traditional and newer marketing tactics that restaurants relied on in 2011: 

1. Daily Deals: While most of the customers visiting restaurants are from within a 2-mile radius, daily deal providers such as Groupon typically drive customers from 3-5 miles on average, and these customers never come back once the deal disappears.
2. TV/Radio Advertising: Expensive to produce, hard to target and impossible to measure; making it a non-option for most restaurants.
3. Local Newspaper Advertising: No longer effective because of declining circulations
4. Search Engine Marketing (SEM)/Search Engine Optimization (SEO): Most customers do not discover restaurants via search engines. Plus, SEM/SEO is time-consuming and requires a lot of expertise that most restaurants do not have.
5. Social Media Marketing: Another approach (e.g. Facebook) that is promising but takes too much time and effort, and difficult to measure Returns on Investment (ROI).
6. Punch (loyalty) cards: Customers easily lose them and don’t want to carry too many cards. With POS-based punch cards, customers can’t easily tell the score (how far along they are with respect to the reward) adding one more hurdle to their adoption.

Referrals drive customer visits to restaurants

So how can restaurants increase marketing effectiveness and ROI? It is important to first understand three key truths that most restaurants already know about their customers:

1. Food is social: What was true in the age of cavemen is also true today. People love to talk about food and restaurants, with family, friends, and acquaintances. When a menu item or an experience is good (or terrible), restaurants can be sure that their customers are going to talk about it!
2. Referrals drive customers: Over 70 percent of the customers walking in to restaurants come because someone they know recommended the place to them. Most restaurants have known this but often struggle to find ways of cashing in on this behavior to drive more customers.
3. Customers are technology savvy: Mobile and social media technologies have grown exponentially, and are being adopted by customers of all ages not just the younger demographic. Almost everyone across any age group has a smart phone that they always carry and also use social media (e.g., Facebook) atleast once a day.

Social loyalty is the right marketing strategy For 2012

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A new marketing strategy is required for 2012 – a strategy that empowers consumers to use the technologies that they are already comfortable with (mobile and social media), and allows restaurants to track and reward customers for doing what they already like to do – spread the word about their food/brand and refer their friends, family, and colleagues. We call it Social Loyalty.

Five key secrets Of social loyalty: EEARS

A social loyalty solution incorporates the best of natural customer behavior, the best of mobile and social media technologies into a very easy-to-use solution that drives social media ROI. These capabilities include:

Engage: Restaurants should engage their customers with a mobile-phone based loyalty program. Some restaurants create forms or setup kiosks for customers to sign-up for a customer database using emails or phone numbers (forms are laborious and error prone and kiosks often are alien to most customers). With 44% of phone-carrying customers already using a smartphone, the best way of engaging customers is by using location-aware smartphone apps.

Empower: Restaurants need to realize that if 70 percent of their customers are coming via word-of-mouth, they need to empower their loyal customers to not only write reviews but also to post them on their own social networks like Facebook. Smart phones are social devices (Facebook is the most popular app on iPhone) and by using smart phone apps, restaurants can empower their customers to write reviews within their premises. A restaurant is an important part of a loyal customer’s life. This means that with, when restaurants empower their customers and ask for feedback, they can unleash a torrent of authentic voices.

Amplify: Smart restaurants can use customer feedback garnered by empowering their customers, and post them directly on their social media presence to further amplify the word-of-mouth. After all isn’t user generated content is what social media is about?

Refer: A restaurant’s loyal customers drive referrals. Restaurants need a way to measure the referrals their customers are generating and reward individual users in order to keep them motivated. In addition several other social and group dynamics like causes, invitations, group rewards, etc. can also drive referral customers. Again smartphone apps working with social networks can provide natural ways to incentivize and drive referrals.

Sustain: Once customers are engaged with a restaurant, restaurants should re-engage these customers by sending them context-specific campaigns like “Hey! Haven’t seen you for 2 months; Please visit again and get an added incentive,” etc. in order to bring them back. Restaurants should use customers’ location-aware smart phones to not only deliver email campaigns but also location-sensitive push notifications to bring them back.

2012 is going to be the year in which restaurants demand marketing solutions that deliver real results and a substantial ROI; and social loyalty solutions are going to deliver.

Jitendra Gupta is the CEO and co-founder of Punchh – a social loyalty solution for restaurants. Clients include Arby’s, Boudin Bakery, Buckhorn Grill, Hungry Howies, Pasta Pomodoro and many others.