A lesson in loyalty

A lesson in loyalty
Tags: Business Strategy and Profitability, Consultant / Analyst, Customer Service / Experience, Operations Management, Trends / Statistics
January 16, 2012

Recession or not, the restaurant industry is here and growing. Consumers spend a huge percentage of their food budgets on eating out at restaurants, and restaurant sales are expected to top $600 billion this year. And yet according to the National Restaurant Association’s 2011 Restaurant Outlook, 60% of restaurant owners said it was harder to attract new customers than previous years. One in three said it was harder to keep customers. What does this mean?

Most likely, consumers are sticking with what they know and love, and restaurants are working harder to deliver that. Not surprisingly, the same study found that repeat customers represent 75% of sales at quick service restaurants, 75% of sales at family-dining restaurants, 70% of sales at casual-dining operations and 6% of sales at fine-dining restaurants. Those are high numbers, making loyal customer turnover rather costly in today’s market.

Clearly, loyalty is the name of the game in this business. But how do you build something so ambiguous and in a predictably measurable way? The key may actually not be the actual scores of your customer satisfaction measures, but instead how you interpret and act on those results.

On a satisfaction scale from 1-5, most restaurants would take an average response of 4 to be quite good. But according to research recently conducted by Market Force, an average satisfaction score of 4 is costing restaurants millions in loyalty dollars. Why? Because it takes not just a positive experience but an exceptional one to rise above the competition for every dollar of that $600 billion.

The study also found that in the restaurant industry, customers who rated their satisfaction as a 5 on a 1-5 scale were four times as likely to return than those who rated their satisfaction at a 4. Four times as likely, all within a difference of one point on the satisfaction scale. One truly exceptional experience could earn you a loyal customer for life. And with most restaurant customers these days, you only get one blind date before you either lose her forever or buy a big house in the suburbs. The moral of this story? Never settle for a “good” customer experience when you could be finding ways to deliver an “exceptional” one in the minds of your cusomers. It could earn you a killing in loyalty dollars.