Customer Retention Is Up, Study Says
The restaurant industry is on the rebound when it comes to customer retention. Major national brands are taking the lead in maintaining and improving profitability, according to the fifth annual 2011 Leaky Bucket Study, which measures the likelihood of customers returning to a restaurant brand.
Published by Restaurant Marketing Group, a division of ZenMango, the study is the restaurant industry’s only leading indicator of guest retention, and analyzes a brand’s “leak size”. The higher a brand’s leak score, the more customers that brand is losing; lower leak scores indicate a higher level of customer retention.
With 2,008 respondents, the study evaluated 78 of the nation’s leading restaurant brands in March 2011. Once respondents were identified as unlikely to return to a brand (less than 50 percent certain) they were evaluated on the primary return intent factors including quality of food, menu, atmosphere, price/value, location, service and family friendliness.
Brand categories demonstrating the most significant improvements were the Mexican, seafood and steak categories. Additional highlights from the study’s findings include:
- Overall restaurant industry leak size was 30 percent—a 2 percent improvement over 2010 and a 6 percent improvement from a 36 percent leak size high in 2009. (The industry is now almost back to its pre-recession 2008 size of 29 percent.)
- The restaurant industry continues to be a consumer’s marketplace. 42 percent of restaurant customers feel that more restaurants are competing for their business and another 47 percent feel that the same number of restaurants are competing for their business.
- Primary drivers for choosing restaurants are (in order of importance): pricing specials/deals; quality of food; and convenience of location. However, three additional new factors have emerged in 2011: atmosphere of restaurants, availability of special meals (i.e., gluten-free menu, calorie labeling), and how “green” the restaurant is perceived to be.
- Restaurant customers continue to be cautious about how often they eat out. Forty-four percent of restaurant customers say they are eating out less often.
- Grocery stores continue to be a formidable competitor to restaurants. 36 percent of respondents said they are purchasing more prepared food from grocery stores, as opposed to restaurants, than they have in the past.
“In today’s market, consumers know they are in the driver’s seat and their expectations go beyond price and value,” says Arjun Sen, president of ZenMango.
“Our research indicates that each restaurant guest decides during one experience whether they will come back to the restaurant and for what occasion.” According to Mr. Sen, a brand’s profitability is directly linked to leaks in its customer base.
“When a brand brings in 7 percent new customers but loses 6 percent of its customer base each year, the brand nets 1 percent. When a brand is able to reduce leaks by half, it can have a significant positive impact on the brand’s financial performance,” he said.
According to Trey Hall, senior vice president and chief marketing officer at T.G.I. Friday’s Global, the annual study provides information that can change a business trajectory. “Understanding why consumers are leaving the brand is as important as why they are coming, and stemming the flow of defectors creates a strong ROI on all efforts,” he says.