What are your Customers Really Worth?
Next time you feel your staff arent giving the service your customers deserve, pull out a pen and paper and show them the true value of a customer. Its also great for working out what to offer in order to attract new customers.
Many owners and managers in the restaurant business have heard the idea of lifetime value of a customer - the amount a customer spends, multiplied by the amount of times they come per year, times the number of years they frequent the business. We have found that most staff however have not.
In order to make it easier to explain, lets run through a quick example. Dont worry about making the numbers perfect in fact, if anything, be conservative.
What would your average table of two spend? How many times a year would that average couple be back? Once a week, once a month? How many years will they frequent your restaurant? Obviously there can be a huge range here from twenty years to a few months. Multiply these numbers to give you the lifetime value of that average couple to your restaurant.
For example: $60 (average spend) x 12 (once a month) x 3 (years) = $2,160 But what about the people they tell?
Dont forget were talking about over the lifetime of their patronage here. If they are happy, loyal customers how many friends and work colleagues might they tell about (or better yet bring to) your restaurant? Five, twenty, fifty, maybe even, if theyre incredibly social, hundreds of other people again, lets be super conservative & assume they hardly know anyone... they only ever tell ten people that actually make it to your restaurant to have a meal.
Now again being conservative, lets assume that only five of these ten really like what they see this isnt personal remember! Were talking about their first impressions on that night of your staff, your food, the atmosphere: the entire dining experience.
Only five of those ten go on to become regular, delighted customers.
So now is that first customer only worth $2,160 or is it now $2,160 x 5 people?
Thats $10,800!!!
Of course we could go on & talk about those five new customers & the people theyll tell.... and the ones they tell.... but you get the idea.
But before we breakout the champagne & celebrate the thousands of dollars that will be flooding in to your pocket over the next five years, lets pause for a moment & think about what it costs you if it goes the other way...
What if that customer leaves, never to return because of a bad experience?
What if they tell 10 people and they, in turn, tell others. No longer is it the loss of $60 in business, its a massive loss that you will find very very hard to recoup.
Do your staff realise that your existing customers are the biggest single investment that you own? They are probably worth more than the building youre in, never mind that new equipment in the kitchen.
Word of mouth is your greatest asset and also potentially your biggest liability. It is priceless and since your customers are the ones spreading that word of mouth, they too are priceless. And thats why you need to ensure you do everything possible to make sure they are always completely satisfied.
So next time you find yourself pulling your hair out when a staff member treats a guest poorly, try explaining this simple idea to your them itll change their approach!
Once you have that handled, you might also choose to invest more to get a new customer instead of offering a free glass of wine, you might choose to offer a free bottle of wine and maybe a meal on the house as well because you know that ideal customer could be worth $10,800.
The above article was supplied courtesy of Restaurant Marketing. Restaurant Marketing helps restaurant owners get new customers, delight their existing customers and increase the profits from each one. We dont care much for pretty, funny advertising we care about results... so much so that we unconditionally guarantee the work we do for you.
Restaurant Marketing
65 Hume Street, Crows Nest, NSW 2065
Ph: 02-8437 3560
Fax: 02-8437 3561