Restaurant Trade Area Research

Often when I do FF research for a client - they may have stores whose monthly sales are very close to each other as are the number of monthly transactions - and one would might assume that each store would be best suited to similar marketing. But, the owner operator of the store knows that one store in particular seems to `do well’ whenever the TV ad plan is in force; but for what reason?

It’s a simple reason, the store that `does well’ when the brand is on TV - has a MUCH larger customer base size. What you say? How can that be, the stores have similar sales and similar transactions (and therefore similar sales per transaction too) - what is the difference?

The answer, the store with the much larger customer base has MORE INFREQUENT Customers - that make up the transaction base. Those infrequent customers - of which one store has many more of - react to the ADS - and voila - a real bump in sales.

This is the kind of information an owner can use to place billboards, and get a real effect - or to run truly successful `bouncebacks’ with the customer base. AND, this customer base info is the kind of information you get via my MarketView methodology for your market. Only the MarketView has the TRUE customer base sizes for the operator to finally understand individual store marketing needs.

More on Customer Base Sizes here - http://restauranttradearearesearch.com/2008/08/10/customer-base-size-it-can-be-calculated/

More about my MarketView here - www.squidoo.com/tradeareasurveys - thanks for visiting again today.

To a market researcher like myself — I LOVE this link because it has wonderful REAL DATA. And, that data is not favorable to today’s restaurateur. Why? Well, the data shows that dinner usage of restaurants is off for ALL demographic groups. Great specific information such as (number of dinners out per year) - 18-31years (66); 32-43 years  (63); 44-51years (60); 52-61years (56); 62 and over (49) much more at this link too — http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=122816

Moe’s Grows - Tex-Mex Heads to Turkey as Credit Thaw Fuels Restaurant Growth - http://www.businessweek.com/news/2010-03-19/tex-mex-heads-to-turkey-as-credit-thaw-fuels-restaurant-growth.html

And, check out this big Moe’s fan that I interviewed as part of my Street Level Views service in 2009 — http://www.youtube.com/watch?v=Bj8ZsJ5JeAg - you can see all of these interviews by going to YouTube and entering into the search box `top of mind restaurant’ - and lo and behold - free research for you.

Recently, my daughter related to me how a national FF restaurant was doing a `bounceback’ (stuffed without mention into a drive-thru bag) `free combo’ promotion. It was either buy 4 more and the fifth one was free or buy 5 more and the 6th was free. You had until the end of the year (so about twice a month to get the freebee).

Now, while I applaud the effort - since the frequency of your CURRENT customer base is most important customer attribute in the `new normal’ of the Great Recession - it falls WAY short of real motivation or of doing what it seeks to do - which is to increase frequency or market share.

Why not?

Because it simply isn’t motivating. To the VAST majority of the customer base as it has too high a threshold for compliance. Additionally, it gives away food for free to those who probably don’t even need a motivation to use your restaurant - your weekly or more often user.

Indeed, the next level of usage - those that use your restaurant once every two to three weeks (which can be a large movable segment) - are generally those who do NOT use your brand most often - for whatever reason (perception of high cost, not as convenient, service issues) and are indeed - UNLIKELY to increase their usage pattern over 2 - 3 months - a long time - for the special deal. We don’t even need to mention the once a month user or less often user — which is the vast majority of the customers of your customer base.

So, what should have been done?

Well, first, if the FF chain really wanted to bring a discount on their combo’s to certain folks over the next 5 visits within a certain time frame — give it to them EACH VISIT. Meaning, the next 5 visits before the new year when you buy a combo it’s 20% off. Saving money EACH time - can address high cost perception problems - and be motivating EACH time.

But, even that is NOT what I would recommend - as the timeframe is too long and the purchase requirement too big. So, obviously, I’m suggesting fewer purchases in a smaller timeframe - at a targeted customer (which you determine by asking your customer ONE question at the time of purchase).

To find out which question - to which type of customer - you need my services. 678-467-8650; ask for Rick.

This is a subject I’ve covered before http://restauranttradearearesearch.com/2008/08/10/customer-base-size-it-can-be-calculated/ but, it is well worth revisiting in the economics of The Great Recession and the `new normal’ that many restaurateurs are facing. Indeed, many are waking up to the idea that it will be necessary to `woo’ the existing customer base if one is to survive - as `new customers’ are not likely to be a significant factor. Indeed, in branded fast food restaurants - it’s likely that up to 1/2 of ALL new customers to a store in a given year - are likely `main’ customers of one of the other locations of a particular brand. Meaning - that visit is generated from prior usage in a more convenient location to this user. These are customers that you are likely to get over a year whether you advertise or not - and - other `new customers’ will likely be new `work’ customers - again, to which - little `extra’ marketing is needed. (Many workers are new to a given area each year.)

Now, in the link above - you can calculate that upwards of 40% of all transactions at a unit - were made by about 13% of the customers. Those, of course, are the built in creme for any restaurant - and - really - should be marketed differently than the REMAINING 87% who come less frequently.

Can you afford to ignore 87% of your customer base - without making any special effort to improve their frequency of usage of your store?

Now, in all honesty - part of that 87% may be virtually unmarketable as far as increasing their frequency - but, that said, many ARE marketable in a manner that addresses their frequency. The problem has been that UP TILL NOW - all `frequency programs’ have largely fallen flat on their face . And, there is a good reason for this — they address frequency in a fantasylike manner with this 87%. IE-Customer Frequency Cards.

Indeed, of the 87% who are `infrequent users’ - a full 2/3’s of the customerbase fall into the once a month or less frequency - do you really believe that a `loyalty card’ that has 6 punch-outs is going to be handy, used, or motivating if it results in ONE meal savings a year or at most two? The answer is a clear NO.

In fact, the only ones you are giving free meals to are your customer base that would have visited you anyway. Not much logic to that. (That isn’t to say that the frequent customer base can’t be marketed to - as I will expand on in future posts.)

So, what CAN be done about frequency for infrequent customers - what could be really motivating? Well, bookmark my site and return again for the upcoming answer.

More restaurant links:

Childhood Obesity Report Calls For Government Regulations to Limit Access to ‘Unhealthy’ Restaurant Chains - http://www.cnsnews.com/news/article/53374