One of the most reliable ways to engage with your customer base is by hosting a loyalty or rewards program. A rewards program incentivizes repeat visits by providing loyal customers with meaningful discounts and promotions. They get good food and a good deal — and you get them coming back for more.
Building and maintaining strong relationships with your guests requires a little extra personal attention beyond what your average loyalty/rewards program offers. As any relationship therapist or coach will tell you, the foundation of a strong relationship lies in consistent, open, honest communication. Keeping your guests updated about the goings on in your restaurant and asking for their feedback about what’s working well and ways you could improve is key to growing a repeat customer base.
This is where targeted marketing campaigns come in. Targeted marketing reaches the audience most relevant to you — and reaches them with personalized messaging.
According to an Infosys study, 59% of consumers reported that personalization significantly influenced what they purchased, while Econsultancy found that 93% of companies saw an uptick in conversion rates due to personalized marketing efforts.
The basics of creating a targeted marketing campaign
The purpose of a targeted marketing campaign is to send the right reward to the right guest at the right time to encourage a visit to your restaurant. Here’s where it gets a little complicated: On the one hand, the reward has to be attractive enough to motivate your customers to place an order. On the other hand, the offer can’t be too attractive, or you’ll end up losing money in the process.
The three main elements of a targeted marketing campaign are:
Customer data, specifically their buying behavior
A way to get in touch with the customers you want to target
A significant incentive, reward, promotion, or deal
Targeted marketing campaigns can be run on any channel you use to interact with customers, including social media, your restaurant’s loyalty/rewards program, an email newsletter, and more. Say, for example, you wanted to increase weekday happy hour traffic; you might consider creating a targeted marketing campaign that reaches out to previous happy hour customers with a discount, promotion, or reward for visiting, like a BOGO on apps or 25% off the cocktail of the day.
If you’re new to running targeted marketing campaigns, your loyalty/rewards program members are a great place to start. Restaurant reward programs are all about creating and maintaining a personalized and mutually beneficial relationship with your guests. Sending targeted surprise rewards according to your members’ visit history is just one area where you can benefit from adding intelligence.
Targeted campaigns aren’t just ad campaigns put in front of an unsuspecting audience selected by age group, interests, etc. The guests you’re targeting have actively expressed an interest in what your restaurant has to offer by choosing to join your loyalty/rewards program and have given you a means to get in touch with them – like an email address or phone number. Sometimes, depending on the capabilities of your loyalty/rewards sign up flow, they may have even shared a specific detail about themselves, like a birthday or anniversary date.
Now that you understand the basics and benefits of targeted marketing campaigns, let’s get into the nitty gritty of how to measure their effectiveness.
How do you measure the success of a targeted campaign?
To measure the performance of a targeted marketing campaign correctly, you need to run it in a certain way, collect specific data, and do some math. Since the aim of a campaign is to generate revenue for your business, you’ll want to look at what percentage of the rewards sent to customers converted into purchases.
Which of the following campaigns would you consider to be more successful?
10% off the entire meal
25% off the entire meal
50% off dessert
Campaign #1 had the highest number of recipients, a lower redeem rate, and a lower discount
Campaign #2 had the highest overall redeem rate and a low number of recipients
Campaign #3 had a small pool of recipients, the lowest redeem rate overall, yet the highest discount
Campaign #2 must be the winner! This seems like a reasonable approximation for campaign performance, and many marketing managers would stop there, but let’s try to do better.
Were the above rewards the real reason your guests paid you a visit, or would they have come in anyways? If it’s the latter, then the rewards could have actually cost your restaurant money.
To answer that, we need to compare the performance of the campaign population – the rewards program members that received one of the three offers – to what statisticians call a “control population,” aka rewards program members similar to those you targeted but who didn’t receive an offer. So, if the 10% off recipients were repeat customers who hadn’t visited in a month, your control population may be repeat customers who hadn’t visited in 6 weeks.
# Campaign Visits
# Control Visits
10% off the entire meal
540 (300 redeems)
25% off the entire meal
60 (50 redeems)
50% off dessert
53 (20 redeems)
Campaign #1 brought in 40 additional visitors (compared to the control population) out of 10,000 recipients (0.4%), while campaign #2 brought in 10 out of 1000 recipients (1.0%), and campaign #3 brought in 3 additional visitors (0.3%) compared to the control. So, it seems the 25% discount motivated more people to make a visit they wouldn’t have otherwise. Measuring added visits is a more accurate method of assessing the performance of the campaign. But we can do even better yet!
The above two analyses haven’t taken into account an important fact: Different rewards affect how much money your customers spend during their visits. So, let’s add our last measure, which takes into account the spend from all visitors of the campaign compared to the control group.
10% off whole ticket
25% off whole ticket
50% off dessert
Interestingly enough, campaign #1 made an extra $100, while campaign #2 lost $25 and campaign #3 made $50. Here, we can see clearly that high discounts attract relatively more members but may also reduce your revenue per member. Each reward creates a different reaction, so you’ll have to find your own balance for your rewards.
After analyzing the three campaigns in our example, you may think that the next time you’re planning a campaign with the goal of increasing revenue, you should go for the “10% off” reward, right? Not so fast – there’s one last factor to consider: Campaign #1 targeted 10,000 members, while campaign #3 targeted only 1,000. If you’d have sent campaign #1 to 1,000 members, it would probably make only around $10, which is significantly less than campaign #3. That’s why it is very useful to measure a campaign by the added revenue per targeted member. In that case, we’d get:
Campaign #1 — $0.01
Campaign #2 — $-0.025
Campaign #3 — $0.05
Campaign #3 is the winner after all! This is likely because conditional rewards have a twist: They may bring in less customers but not necessarily less revenue. In this case, the dessert discount is likely to increase your revenue per member, as it adds an extra discounted item to your customer’s ticket, rather than discounting what your customers would have bought anyway.
You can see, then, that optimizing campaign revenue is a science. Intuition is very useful, but it can only get you so far. Now that we’re familiar with the “added revenue per targeted member” measure, we have a reasonable method for measuring, comparing, and improving campaigns. Let’s use it!
How to choose the right reward when running a targeted campaign
Rewards are all about making your guests happy and giving them an incentive to visit. Regardless of the reward and who exactly you’re targeting, the following groups will always emerge from your campaign audience:
Guests who didn’t plan to visit your restaurant and the reward does not provide a sufficient incentive for them to change their minds
Guests who didn’t plan to visit your restaurant and the reward made them change their minds
Guests who would have visited your restaurant anyway, regardless of being offered a reward
Knowing this, the question remains: What kind of reward should I send when running a targeted campaign? If the incentive is strong (like a 25% discount), you’d get more members from group #1 to move to group #2, which is great, yet you’d lose more money on group #3. If the incentive is weaker (like a 10% discount), you would waste less money subsidizing group #3’s rewards, but you also wouldn’t get as many members to switch from group #1 to group #2.
It would be great if we could know in advance which members are planning to visit your restaurant in the immediate future, wouldn’t it? Which brings us to the following principle of running effective targeted marketing campaigns for restaurants:
Knowing, in advance, how likely a given member is to come during a future period of time is extremely valuable.
If you’ve found that a certain customer is very unlikely to visit your restaurant soon, either leave them alone, or give them a huge incentive.
If the customer is slightly likely to visit your restaurant soon, give them a medium incentive.
If they are very likely to visit your restaurant soon, either leave them alone, or target them with a conditional reward that doesn’t cost you money, like a 50% discount on a dessert (as we’ve shown above) or a 20% discount to be given only if the customer spends 20% more than they have in the past.
It’s nearly impossible to estimate how likely a guest or loyalty/rewards member is to come into your restaurant next week. This is where you’ll want to lean on the customer data available in your restaurant’s point of sale system, as well as anecdotal takeaways from your front of house staff who interact with your guests, to get a better idea of how frequently guests visit your restaurant.
Machine learning and targeted marketing: A perfect pair
We’ve seen how one can measure the performance of a campaign and how choosing the correct incentive affects this performance. We’ve also seen that finding the correct incentives for each individual member can be done using the likelihood of that member to visit your business during the campaign period. Armed with these insights, you’re ready to create (and measure) targeted marketing campaigns in your restaurant.
Running effective targeted marketing campaigns to make progress on achieving short or long term goals in your restaurant has required a hands-on approach, until now.
Personalized experiences already reach us in our cars, our music streaming services, while clothes shopping, and more. As the restaurant industry develops more tools for collecting and analyzing the vast amounts of data that go through our systems, we will also see an increase in the AI tools that can make sense out of this information to make it actionable – especially as it relates to targeted marketing campaigns.
Imagine a marketing automation system that notices that you like coming for a beer immediately after an NFL game and concludes that it could be a good idea to invite you to watch the next game at the bar. Or a POS that finds out that you love a hot chocolate and a donut when temperatures drop below 30 that can share these insights with the cashier the moment you enter. Think about an ordering system that knows you’re a vegetarian based on your previous purchases and sorts the dishes accordingly. The possibilities are endless.