October 1, 2008
Megan Rowe
This is no time to be shy with your guests. To ride out the current economic doldrums and beat out the competition, you need to enlist their loyalty, give them more reasons to keep you in mind on those possibly less-frequent dining occasions, and make them feel like your restaurant is a home away from home.
“In recent years, dining out has been so ingrained in our normal, everyday lifestyle that there has been more willingness to forgive restaurant performance that was less than excellent,” says Melissa Wilson, a principal with Technomic Information Services. “But consumers are tougher right now. They're telling us that they are truly weighing where they're going to be taking their dining dollars these days,” Wilson adds.
What does it take to capture more of those dollars and establish loyalty?
Given the potential value — both immediate, at the cash register, and long-term, from the positive buzz that a regular guest can provide — it's a question that should be on the mind of any operator. The answer depends on the restaurant.
“The first thing you need to do is take another look at your entire operation with a fresh set of eyes and address any disconnects or mediocrity,” Wilson advises. “You need to be excellent and meeting what consumers want in a dining experience.”
To Rick Hirsch and Jean Kerrigan, who operate the Damariscotta River Grill in Damariscotta, ME, the customer experience encompasses more than just the food or service. “It begins when people think about the restaurant or pick up the phone to call us for directions or operating hours,” Kerrigan says. “It continues until they walk out our door after the meal to their cars. Were we courteous and helpful on the phone? Were we genuinely interested in them while they were dining with us, and did we do everything we could to make them feel welcome?”
For the 136-unit Melting Pot Restaurants chain, the ability to thrive and grow has hinged on cultivating regular customers for what might be perceived as a special occasion restaurant. “Our guests are typically celebrating something, such as a birthday or anniversary,” says Bob Johnston, Melting Pot's c.o.o. “Our goal is to hook into the guest on kind of an emotional level. When we find out something about the guest, we have a system for sharing with everyone, so it becomes obvious to the customer that we've taken care to know about them,” he adds.
Collecting useful information starts with the reservations call. Guests are asked “how can we help you celebrate this evening?” and their responses are shared at preshift staff meetings. “Instead of talking about the feature of the day or what wine we're promoting, we talk about what's going on with the guests that evening,” Johnston explains. Crib notes on various reservations are posted on a schematic drawing of the dining room, and any time a server or manager visits the table and learns more, that information is added.
“What it does is capitalize on the fact that most guests are not dining with us because they're hungry,” Johnston says. “They are there because they want to have a good time, celebrate, escape a little, create great memories, and this system helps us do that. We are the restaurant they look to when they're looking for a place to celebrate.” How does Melting Pot management know this process works? They keep a database of guests and know, at least in established locations, that repeat customers account for more than 70 percent of business.
A bit less-structured, but also effective, way to encourage repeat business is creating a home-away-from-home atmosphere. Starbucks and Panera Bread have effectively carved niches as “third place” hangouts, but smaller operators can tap into that demand as well.
Rob and Allie Levitt, who opened the 50-seat Mado in Chicago's Bucktown/Wicker Park neighborhood earlier this year, think their guests — drawn from the surrounding residential neighborhood — appreciate their atmosphere because it's a clear alternative to the sports bars that dominate the neighboring streets. “Traditionally a good restaurant won't necessarily do as well around here if there are no big screen TVs playing games,” Rob Levitt says. “But I think people who have been living here for a long time seem happy to have a place in the neighborhood that's not part of the crazy nightlife scene.
“It's a comfortable restaurant — a lot of people tell us they feel like they're in our home. I'm in the kitchen, and my wife is in the dining room. They get that familial feeling.” The menu at Mado leans heavily toward locally sourced, seasonal ingredients and changes daily, although pork, lamb and beef are always available in some form, and Levitt thinks that variety helps sustain the interest of regulars, who stop by to try the new creations.
Fatz Café, a 45-unit casual dining chain, adopted an “everyone's a regular” philosophy several years ago to capitalize on what was decided to be the chain's competitive advantage: Southern hospitality. “Hospitality is more than a feeling, it's a sincere greeting at the front desk, an associate saying ‘my pleasure’ instead of ‘you're welcome,’” says Richie Cannon, Fatz' v.p. of operations. Fatz trains its employees to be the equivalent of a host who asks “what can I fix for you?” when you visit them at home.
“We ask, ‘what did you do today to wow the guest, make the guest feel special?’” he says. “We very much believe that today's wow becomes tomorrow's expectation. You've got to continually raise the bar.”
In practice, that means at times bending over backward to serve something that's not on the menu. One manager, for example, dashed to the local grocery store to buy crab legs for a child who asked about them. “Any menu item that we used to serve and don't, or something that we don't have — we'll do it if we can,” Cannon says. “It's not just a matter of leaving mustard off of someone's burger.
“Regulars mean everything to us,” Cannon adds. “They are your best word-of-mouth support; they're also your best in-house critics. They will tell you the best things as well as the challenging things. And someone who visits you on a regular basis recognizes change.”
Apart from upscale steakhouse chains, the restaurant industry has been slow to hop on the frequency program bandwagon, but more operators are beginning to understand the value of creating a system to encourage regular visits and reward loyal customers. To be effective, programs need to be structured and executed the right way.
“I would not say they work across the board,” Technomic's Wilson notes. “If they're well-crafted and executed, viewed with a long-term perspective and embraced by the entire organization, they work very well.” The ones that don't last, she adds, tend to be viewed as a discount program.
Apparently they are an effective carrot for many consumers. According to a Technomic study, more than a quarter of those responding said they would be extremely likely to increase their visits to a favorite restaurant if it were to offer a reward program. The most valued perk, mentioned by about two-thirds of those in the study, would be a 10-percent discount on their bill. A $5 gift card ranked second.
Numbers Talk
One of the most successful established reward programs is The Palm's 837 Club. Now in its 10th year, the club has 100,000 members who generate more than one-third of the revenues at the 27 Palm Restaurants in North America, according to Kathy Turley, senior manager of loyalty marketing for the company. The average member visits a Palm location four times a year, but “we do have many members at each location who visit 20 to 50 times a year,” she adds. Even during these challenging times, she adds, many Palm locations are seeing growth in same store sales. “If we didn't have the club, things might look different,” she adds.
Besides offering a variety of rewards based on expenditures at the restaurants, the 837 Club makes its members feel like VIPs on their birthday, when many of them qualify for a free entrée. This might seem like a pricey giveaway, but “what they've found over time is that the recipients of that birthday present come in with a larger party size and their average check is higher,” says Wilson.
Members can earn gift certificates valid at Palm Restaurants, Tiffany's and Saks, along with trips. But a less tangible result of the club is the way it makes members feel. “Our members are very loyal to the Palm and very vocal. They let us know what they like and don't like, and I think they have a sense of entitlement,” Turley observes.
Big Steaks Management looked at the Palms system as a model for its own guest rewards club, called FOS (as in Friends of Steve de Castro, the c.e.o.) Diner Rewards. Members earn points toward Nordstrom gift certificates, spa treatments, dine-arounds and trips. They also bring in over 12 percent of the company's sales.
FOS Diner Rewards was started to create regular customers for two Ruth's Chris Steak House locations in areas with attractive demographics. “We wanted them to become more than a once a month or every other month place to dine,” says David Sadeghi, c.o.o. So, in addition to providing rewards, Big Steaks' POS system tracks these guests' ordering preferences and the locations are prepared to pamper them with their favorite drink or lamb cooked exactly the way they like it. Today, one of the locations brings in a stream of guests two to four times a week.
“With the program, we have become a club situation,” Sadeghi says. “Guests feel that they own the rights to communicate with us, and we have created menus for them.” Bar menus, for example, offer popular items such as kobe burgers, sliders and steak sandwiches, targeted for regulars who like to hang out.
Multiunit operator Lettuce Entertain You, which has run a guest rewards program since 1990, uses its database of 100,000 members to let them know about new restaurant openings and menu changes rather than to track what they're ordering. “Mostly we look at where they go and how much they spend,” says Michael Lynch, the company's frequent diner manager. “Our database does not get that granular. What we have found is that, for example, if we were to offer a free dessert or wine to someone who did not normally order them, chances are good they would redeem the offer, but chances are not good that they will become dessert or wine orderers.” Unlike Big Steaks customers, who opt for spa treatments or Nordstrom gift certificates, LEYE guests are more driven by rewards at the company's restaurants.
Bump up the Business
Following a soft launch, T.G.I. Friday's recently rolled out “Give Me More Stripes,” a guest recognition program. Members earn reward points for spending in the chain's locations, but they also get special treatment on site in the form of a free introductory appetizer or dessert, a one-time jump-the-line pass and more. Andrew Jordan, senior v.p. of marketing for the chain, says the program is “designed to reward and recognize our best guests in the manner that is most meaningful to them.”
The Stripes promotion is also meant to morph according to what the best Friday's customers prefer. It also allows some flexibility. “We can shape the Friday's experience according to what's important to (the guests), Jordan says. “There are rewards and value components to the program; however, the enhanced experience is the takeaway. We'll continue to explore dynamic ways to personalize the experience for our best guests in order to increase the frequency of visits.”
In the end, fancy reward program or not, loyal guests can be your most powerful marketing tool.
“Never lose sight of the fact that people will always tell friends and acquaintances about their experience,” says Damariscotta River Grill's Hirsch. “If you realize that people are going to talk about you, make sure that you always give them something positive to talk about.”
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