Technology has changed the way restaurants do business, and it’s also changed the way restaurant businesses measure success. The metrics have moved from physical to digital; instead of measuring growth by the number of new locations or new markets, restaurants must now focus on digital literacy and data capture in order to get the most value from every existing square foot of restaurant.

We’ve entered the data era, where successful restaurants must gather and apply data to thoughtfully engage with their customers. The one-size-fits-all days of blanket discounts is over—not only does it not work, but it reduces brand perception in the eyes of the modern consumer who views spray-and-pray marketing as out of touch. Instead, restaurants must understand guests and thoughtfully guide them along their customer journey. 

In the midst of this shift, here are the four modern metrics businesses should be tracking to work toward data-driven revenue and profitability growth:

1. First-party digital sales — Embrace the future.  

Top restaurant execs love to tout digital order growth during quarterly calls with investors and analysts. Growth in first-party orders can signal successful conversion of guests from third-party platforms to owned customers, a necessary step in protecting margin and increasing repeat purchasing and lifetime value. 

Restaurants are rebuilding themselves to accommodate direct online orders. Chipotle is quickly adding drive-thru lanes, dubbed “Chipotlanes” to help customers quickly collect orders placed online and through the Chipotle app. From Sweetgreen to Starbucks, many have dedicated in-store pickup areas to accommodate direct digital order; Sweetgreen just announced that its first drive-thru location will open in the next year, offering another option to pick up orders placed on mobile devices as the salad chain expands to the suburbs. 

Fortunately, customers want to engage directly with restaurants. According to recent data from the National Restaurant Association, six in 10 delivery customers say they’d prefer to order directly from a restaurant.

That leaves plenty of room for improvement. Guests need incentives to order directly from restaurants. Consumers are opting for convenience; third-party marketplaces, with their perks, discounts, and monthly subscriptions, are hard to resist. Restaurants can drive growth in first-party digital sales (and winback lost third-party revenue) with a top-notch digital ordering experience (needs to be both app and web and shouldn’t be the standard one that comes with your point of sale) and a loyalty program that offers more than just discounts (special menu items, swag, VIP experiences—things that DoorDash can’t offer).

2. Percentage of revenue from known customers — When you know them, you can keep them.

There’s a reason e-commerce giants like Amazon don’t allow guest checkout (nor does DoorDash or UberEats… hint, hint). The more you know about your guests, the easier it is to keep them engaged and shield them from competition—an essential practice in any market that’s competing with third-party delivery. Yet 90 percent of top restaurants still make this mistake in the name of “customer convenience,” flushing away valuable data and their opportunity to win a subsequent visit (but hey, there’s always the “cross your fingers and hope they come back” strategy).

Though it may feel impossible to know 100 percent of your customers, technology is getting us closer, especially when you can incentivize guests to tell you who you are, whether in-store or online. By tokenizing credit card information, consumers can learn loyalty points automatically with way less hassle; the result is 200-500 percent higher data capture than the old ways of identifying guests. And besides, who wants to scan a QR code or write their phone number down on a receipt any more … Those are as archaic as plastic keychain loyalty cards. When it’s frictionless, it’s easy to opt-in.

Data shows that nearly 70 percent of restaurant revenue comes from just 25 percent of guests. You must know all of these if not more. Consistent and targeted engagement campaigns help guide customers through their journey; old spray-and-pray strategies just bombard them with costly and sometimes meaningless offers. 

3. Third visit conversion — drive frequency because happy customers come back!

Customer acquisition is expensive—it’s five times more expensive to acquire a new customer than to secure another visit from an existing one. Yet, 47 percent percent of customers that make a first purchase never make a second and most restaurants are focused on getting new customers. Eventually the math doesn’t add up which is why top performers are focused on guest frequency—something you simply cannot know without a loyalty program.

Not only does data give you a baseline, it lets you guide customers through their journey, incentivizing repeat visits and giving you a chance to salvage bad experiences. The magic number is three. According to data, customers who make a third purchase are 10 times more likely to come back again versus one-time purchasers. In fact, brands who increase third-purchase conversion and do nothing else will see a positive return on investment from that alone.

4. Customer lifetime value — a.k.a. “the long game”

The real holy grail is to increase total spend with your brand over time; this is the single best metric for judging any modern business — from retail to food delivery. Businesses that can show their customer lifetime values far exceed the cost of acquiring a customer enjoy sky-high valuations, even if they aren’t yet making a profit. Lifetime value can grow in three ways: increase visit frequency, increase average check, or decrease customer churn.

For most brands, driving repeat purchasing is the best way to improve this number (and same-store sales). You can of course take price to drive short-term gains but ultimately you need to see the same customers coming back more often and that requires strong marketing execution. Building a strategy around customer lifetime value incentivizes incremental purchases for known customers and increases share of wallet. As a bonus, it’s great hospitality; high-touch and tailored to exactly where customers are in their journey.

While loyal customers do indeed come back more often and are more prone to purchase direct, saving on third-party fees, there’s another huge advantage of a repeat guest with strong loyalty—they tend to have higher customer satisfaction, of course, which makes them more resilient to one bad experience, thus drastically decreasing future breakage. We all make mistakes; loyal customers forgive. 

But loyalty solely with rote discounts doesn’t work. Instead, restaurants should work to build true brand affinity through experiences. VIP dinners, passes to cut the line, and special access like new hidden menu feature can make a guest feel extra special while encouraging direct purchasing. No one gets upgraded when they book a room through Expedia—restaurants must begin to lean into “all customers are not equal.”

A nurtured customer base, thoughtfully built through direct engagement, culminates in exceptional lifetime value. This is not just good business, it feels good too. 

 

Zach Goldstein is the CEO and Founder of Thanx. Founded in 2011, Thanx is a leading guest engagement and retention platform helping restaurants and retailers become more digitally agile to maximize customer lifetime value. Prior to earning his MBA from Stanford, Goldstein honed his experience in the customer loyalty space at Bain & Company, helping companies perfect their retention and reward strategies as early as 2005. Goldstein has earned a reputation as a vocal thought leader in the restaurant-tech space through his Food Fighters podcast and authorship such as the widely-revered Four Horsemen of the Restaurant Apocalypse?