As of Spring last year, there were more than 660,000 restaurants operating in the United States (that’s more than the population of Portland, OR).
What are you doing to stand out in a crowd of 660,000?
How you answer this question inevitably ties back to one thing: your approach to restaurant marketing.
Take KFC, for example. In recent years, KFC’s marketing department has introduced the world to “fried chicken art,” sent a chicken sandwich into space, and debuted a limited edition gravy-scented candle. Of course, a global chain with more than 20,000 locations has a marketing budget that would dwarf most quick– and full-service restaurants (space travel ain’t cheap, folks), but the good news is when it comes to marketing, the size of your budget doesn’t matter nearly as much as the performance of your individual restaurant marketing campaigns.
Creative for creative’s sake doesn’t cut it; you have to prove that your investment of time, money, and energy actually did something positive for the business by calculating marketing campaign performance metrics, like return on investment (ROI).
In this post about how restaurants can calculate the ROI in their marketing campaigns, we'll cover:
Too often businesses subscribe to the age-old “throw it all out there and see what sticks” philosophy when it comes to marketing. Doing so undermines two critical elements of a successful strategy: intention and direction. Sure, you might enjoy some wins, but without that all-important restaurant marketing plan outlining what you're doing and when, you’ll have a tough time pinpointing where those wins came from.
Your restaurant marketing strategy is the combination of all the marketing activities you have planned for the year ahead. Learn more about how to create a restaurant marketing plan here.
Each of the marketing campaigns on your calendar should have the following information outlined:
And let’s not forget the elephant in the room: budget.
There's no magic number when it comes to budgeting for restaurant marketing — it's wholly dependent on factors unique to you and your restaurant. You may even find that your approach to budgeting for one restaurant marketing campaign doesn't work for ensuing campaigns you're piloting.
You’ll find plenty of opinions online around how much of your total gross revenue should be earmarked for marketing. It seems like for every person you ask, you get a different answer: WordStream, for example, recommends that new businesses plan for 12-20% and established businesses plan for 6-12%, while Food Newsfeed suggests between 12-35%. Confusing, right?
To pinpoint the correct marketing budget for your restaurant, look at your total revenue, audit your past marketing spends, write a comprehensive list of what you anticipate you’ll need to buy or do, and then arrive at an amount that feels comfortable (or even a bit uncomfortable) to you.
With a spend and a plan now in place, your next task is to monitor marketing campaign performance metrics. In the next section, we'll focus on calculating marketing campaign ROI.
Here's a hypothetical: After reviewing the sales reporting and analytics from your restaurant POS as well as employee scheduling software reports, you’ve noticed sales are suffering on Wednesday evenings and your restaurant is over-staffed as a result.
You decide to run a social media marketing campaign promoting a Wednesday wing special for the month of January to get more bodies through the door.
Come February, it's time to analyze the marketing campaign's performance. Here’s what you’ll need to do:
Use one of the two following formulas to calculate ROI for your restaurant marketing campaigns:
ROI = (Net return on investment) / (Cost of investment) x 100%
ROI = (Final value of investment - Initial value of investment) / (Cost of investment) x 100
To calculate marketing ROI percentage, divide your gross profit by your marketing expenses. If, for example, this value works out to 200%, it means that every $1 spent on your Wednesday wing campaign generated $2 in profit. Not bad!
Is there a “sweet spot” when it comes to marketing ROI? Not necessarily, but the goal is to be in the green – meaning your return was greater than your investment – not the red – where your investment was larger than your net gains.
If you’ve found you're in the red after completing a marketing campaign, don't worry — it happens to all of us. Here are three things to consider doing (or avoiding) to achieve a healthy return the next time.
Looking for more help creating a winning restaurant marketing plan for 2019? Click below to download Toast's customizable restaurant marketing plan with some additional restaurant marketing resources bundled in.