How does she know? There are a lot of factors and variables at play. One of the better write ups on the topic is from Toast. They happen to have considerable data at their disposal.
There are numerous factors that contribute to CLV that should be considered before plugging numbers into your restaurant’s CLV equation. Jean leveraged her tech to learn the following. Jean’s a restaurant owner. She knows what her customer is worth.
- Average ticket size
- Average visits per year
- Average party size
- Restaurant profit margin
The formula for calculating a restaurant customer lifetime value is as follows:
Restaurant CLV = Avg. Spend Per Month / Monthly Customer Churn Rate
Keep in mind, this is still a bit of an art as well as a science. Without some decent tech, Jean could not have arrived at average ticket size much less know that how many times her customers were in her restaurant and what their average party size was at the time.
Assuming visibility on those numbers, the churn rate became the number of customers who stopped showing up. Toast likes to use a metric associated with the frequency of specific customer visits. So this becomes somewhat of a subjective number. This makes sense given she missed the customer who visits with colleagues or guests monthly more than she missed the customer who came in alone once every six months.
I like this simple math but it can be more sophisticated and useful quite easily. There is still not enough information relative to individual tabs in my view.
What may be done to make the individual level data more accessible and useful. Not just for you as an operator but for the patron as well?
Toast makes some key recommendations. We do as well.
- Integrate a CRM, customer relationship management tool into your point of sale system.
Much like retailers now provide loyalty, incentive programs, and more when you share an email or phone number, restaurants should be doing the basics as well. Often times, you don’t need to build discounts, just make patrons feel like VIPs with special access, priority seatings, and other perks.
2. Facilitate online ordering, gifting, and other things that increase business but also meet customers where they are.
3. Think loyalty.
Certain types of loyalty perks will lead great customers to continue spending and referring. Don’t just deliver things anecdotally. Put systems in place that make experiences for guests happen!
Once Jean had some technology in place, she began to know what her average customer was worth. She began to know who the spenders and loyal patrons really were.
“When you begin to have visibility on who the real movers and shakers are for your establishment and what they prefer, we have tools at Shared Spirits to take the knowledge and leverage it for massive growth.”
Word of mouth from happy patrons is the absolute best and most cost effective way to grow revenue.
At Shared Spirits, we offer Jean the most cost effective way to build highly profitable new customers she’d ever seen.
How do we help Jean?
- We provide technology that compliantly puts a portion of her alcoholic beverage menu online and mobile. The instant this happens, the drinks included are buyable, shareable, and redeemable.
- Our patent pending software tools allow marketing campaigns funded by spirits, wine, and beer brands to be pointed to Jean’s restaurant as redemption points.
- Our software allows Jean to take part in the Shared Spirits, (Buy, Share, Redeem, Rebate) marketing program. This marketing tool allows for the deployment of drink credits out through patrons to their connection, colleagues, and families.
- The program is pay for performance and there is not a single charge until a customer sits in a seat and redeems a drink credit. Once that happens, the nominal fee is automatically charged. With average ticket prices of $55 against a charge that still allows profit, no matter the ticket size, the customer acquisition cost is the lowest of any marketing program in the world.
- Oh, and there is no charge to get started.
Jean’s a restaurant owner. She knows what her customer is worth.
We would love to share more with you.
If you’d like to chat with our CEO, Sherman Mohr, click here to set up a time!