Using POS reports to do better restaurant marketing
Are you overwhelmed by the amount of information you can pull from your POS back office reports? Some restaurant owners delve into the numbers daily while others struggle to see their value. Our series on POS reports is written to offer some simple high level tips for using the data available in meaningful ways. Part three of our series focuses on using restaurant POS reports to do effective metric driven marketing.
Coupons and Price Promotions
How well are your sales promotions working? How should you distribute your coupons? Did you draw in enough additional business from a price cut to break even? If you didn’t, does that mean your promotion was a failure? These are just a few of the questions that your restaurant POS system reports can help you answer.
Tracking and understating coupon redemption
Tracking redemption rates helps you create better promotions, communicate promotions better, and do better targeting. Track the number of coupons redeemed using your POS reports then compare redemptions to how many coupons were issued to get redemption rates. If redemption rates are low that can mean a number of things. Maybe your deal wasn’t compelling. While it may be that the discount you offered wasn’t exciting enough to drive demand, increasing the discount isn’t always the answer. It’s important to be careful with price promotions like coupons because it takes a large increase in sales to offset a relatively small cut in price. If you think people didn’t redeem you coupon because the discount wasn’t compelling try stating the deal in different ways before you try increasing it, does save 20% sound better than save $1 for example? Another reason people might not be excited enough about the deal to bring in and redeem the coupon could be the specific item you are promoting. Did you choose a popular enough item to draw in crowds? Choose a star item to make your deal compelling and profitable.
On the other hand, it might be that your deal was compelling but not enough people saw the coupon. Try creating different coupons to be placed in different media so you can track the redemption of coupons by source. Remember to look at this as a redemption percentage not an absolute number if you are issuing a different number of each coupon to start with. Use a different code for coupons distributed in store, emailed out, posted on social media, or placed in print ads to see which marketing channel is most effective for you. (You can use Facebook’s analytics tools to estimate how many coupons were issued through social media- how many people saw the post in their newsfeed?)
A final reason you might have low redemption rates is bad targeting. Who is seeing your coupon? Make sure the people who see your deal are the same people who will want to visit you, will like the deal you are offering, and can redeem the coupon at the appropriate time. For example, if you are promoting a happy hour special, make sure you promote this to people who are of legal drinking age.
Using reports to choose the right discount amount
In addition to tracking coupon redemption rates, data from your POS can help you determine the right discount to offer. With current consumption data for example, you can figure out how many additional units you need to sell to break even at various price levels. As an example, if you are offering $1 off on a $6 appetizer for one week you can figure out how many additional apps you need to sell during the promo to break even. Choose a comparable time to compare sales to (either the week before the promo or the same week last year) and do this simple calculation:
New quantity you need to sell to break even = (Quantity sold LY at regular price*regular price)/ discounted price
Or in the nachos case assuming you sold 100 nachos at the regular price during the same week last year
New quantity you need to sell to break even = (100*$6)/$5= 120
You have to sell 20 additional nachos to break even on the discount. (Notice that a 16% price cut requires a 20% increase in purchases to offset it). Once you know how many additional units you need to sell you can use your intuition or data from previous similar offers to determine if that’s a reasonable goal and you can plug in different values for the new price to see what happens if you increase or decrease the discount. During and after the promotion you can easily track item sales using your POS reports to see if you have reached the break even quantity.
So if you don’t break even, does that mean the promotion was a failure? Not if you attracted new customers who become repeat visitors. Their lifetime value will more than offset a small expense used to attract them. One way to find out if you are attracting new business or simply offering a discount to already loyal customers is by using your customer database.
Using your POS database to learn about your customers
Building a customer database is a great way to learn about your customers and your business. You can find the average lifetime value of a customer in order to determine how much it’s worth spending to earn a new loyal visitor. You can also learn who your customers are; in order to do better targeted marketing. Do your most valuable customers all live within a certain distance of your store? Then targeted advertising to that specific radius is a smart way to spend your marketing dollars. While being in the restaurant and talking to your guests can tell you a lot about customers, that approach is affected by human nature. You’re more likely to remember information about someone who has come in more recently, for example, although someone who came in a week ago may be just as valuable to you, though not as salient. Using your database helps you take an unbiased look at your customers.
Building a database can also help you discover how much of your business comes from new customers and how much comes from repeat business. Look at how many new names you add to your database every week. Did that number shoot up during your most recent promotion?
Depending on your business type it may be difficult to enter customers into your database. If you do a lot of delivery and Online Ordering business, building your database will be easy but dine in restaurants may have a harder time capturing customer information. One great way to build your database is by using a customer loyalty program. Even if not every customer is part of your database, comparing apples to apples, that is new customers added to your database at various times, can help you learn how many new customers you’re attracting. (Be careful that there isn’t some other reason that new loyalty members goes up during that time. For example don’t overlap an employee contest for who can get the most new loyalty members with a price promotion.)
Data driven marketing is very powerful and there is a lot your restaurant POS reports can do to help you better target customers, track and understand the effect of promotions, and more. We’ve covered just a few of the tools available to help you get started using POS reports to make better marketing decisions.