EXPERIENCE AS BUSINESS

THE SHG APPROACH

It’s A Day In Their Life

Every time a guest walks into your business, it’s because it’s an occasion in their lives. Birthday, anniversary, first date, last date, job promotion, bad mood pick-me-up, divorce final, winning the championship, etc….And even when a guest has a coupon for a free meal, they are still a guest in your business and are still choosing to celebrate their special event with you.

Why do we want to discount their discontent about poor service or food just because they are getting it for free in the first place? The first rule of recovery involves hearing the guest out, then taking action. This is about more than a lost ticket. Which no one ever wants to take responsibility for. It’s about the guest and his family being in your business on a very important occasion in their life, with very high expectations because you do have a good reputation for good food and service, only to be disappointed because they received the ultimate act of disrespect – a forgotten order – and on their birthday. I wouldn’t stick around to talk to you if you lost my order on my birthday.

And to be upset because you didn’t get to apologize first? That’s just plain hubris. I’ve lost tickets before, but I also never let a guest leave unhappy. Understanding that guests don’t necessarily want a comped meal but rather better service is paramount to being in the Hospitality business. The zeitgeist of our culture isn’t about apologies, although they are the first point of good manners for a host, its about correcting the wrong done to a guest because:

IT IS PERSONAL TO THEM, because it’s a celebration of a day in their life. It’s never “just food”. And your response to them should be as personal as the slight. A bottle of champagne or an invitation to a special night of entertainment and dining on you, or something even more personalized would have been appropriate.

AND NEVER EVER SEEK REVENGE FOR WHAT YOU CONSIDER UNRULY BEHAVIOR ON THE PART OF A GUEST! If you tell them you are comping their meal, changing your mind because you think you were insulted or abused is simply you not keeping your word. Which is worse? Did the guests at the next table hear you and now see you not keeping your word? What word-of-mouth will you get out of that? We’re not in the food business, we are in the PEOPLE business.

Here are a few more thoughts on why the ‘Experience Is Business’:

First off, you have to understand what goes in/on/around your business from the guest’s perspective is how the Guest Experience (Gx) is defined, not yours. And from the guest’s point of view (POV) an exceptional guest experience holds meaningfully differentiated value.

Technically, what the Guest Experience  is, is how a guest thinks of you after considering all of their interactions with you, over the lifetime of their relationship. From their interaction with your website for information, or reviews, to the parking lot, to the table and on to the follow-up after the service. It includes your newsletter or other marketing collateral sent/requested to the guest. It also includes the reviews (formal or informal) of you.

It’s the accumulation of every time they think, talk or do something with you. And here’s a kicker: it encompasses those things that you don’t do/offer but that the guest thinks you should, like:

  • not offering high chairs
  • not splitting checks
  • only accepting cash
  • requiring/not requiring reservations
  • not enough/convenient parking
  • more comfortable places to sit while waiting for a table
  • etc

To further define the guest experience lets also understand that the Gx is the core of your marketing strategy.

Now, unlike retail business where the customer experience goal is to actually not have any experience, the guest experience in a restaurant (or any hospitality business) is our product. It is a social experience. It’s a ‘day-in-the -life’ celebration of a first date, last date, anniversary, new job, lost job, birthday, or any special time to share with friends or family. People engage (the real thing) with one another and talk, laugh, share their life experiences all the while creating one.

It’s not just a plate of food or your 12 steps of service. It is much more. It’s how guests think about you. It’s how they order their lives around you. It’s about their relationships (real) with you and your staff and how they play out in their daily lives.

  • Are you close to their office? Are you their Best lunch choice? Are you the place they recommend to their co-workers and friends at work?
  • Did you host their rehearsal dinner or their wedding reception? Did they meet there?
  • Are you their favorite restaurant to get away to with their spouse or family?
  • Are you the place where they can simply have a good conversation knowing that you know and deliver on their personal expectations?
  • Are you their oasis from a chaotic life?
  • Are you engaged in their life outside of each service experience? (charity work, community support, cause marketing)
  • Are you just another stop on their daily/weekly/monthly timeline?

In other words, what meaning do you hold for your guests and how are you adding to that meaning? This is the essence of how you communicate and solidify their relationship and loyalty to your business.

Most restaurants just go through their steps of service and call it a day. This is transactional at best and a commodity experience at worst. The goal is to add value at each touchpoint that is both meaningful and differentiated. This means you need to personalize each experience as you can and to continue to grow your database of information about each guest so you can do so effectively.

I’ve always talked about the costliest item in a business being an empty chair. Now we take a little peek into what it actually costs you.

But first, some math:

  1. Calculate the difference of where your sales are now and where they need to be in order to achieve the profit level necessary for you to grow your business organically.
  2. Divide that number by your per person average (not your average check). This is how many guests you need to attract in order to generate that profit difference.
  3. Next take your guest acquisition cost (GAC)  or the amount of marketing dollars it takes to generate one new guest. [Total Marketing $ Spent ÷ New Guests generated = GAC] and multiply that times your answer from #2. This is how much you need to invest in marketing your current business (given your existing mix and ROI) in order to generate that profit difference which will give you the growth you desire.

A Few Questions:

  • Do you even know how effective ($) your marketing is?
  • What metrics are you utilizing in order to recalibrate your marketing to be more effective?
  • Do you have the talent to accomplish this or do you need to invest in it? (don’t forget to add in the talent acquisition costs).
  • What can you do operationally to help increase your ROI and allow you to invest less and still hit your goal?
  • What can you do differently with your marketing mix in order to achieve an even greater ROI and thus decrease your GAC?
  • Do you have the resources to invest in either of these?
  • Will your existing marketing mix do the job? If not, how does it need to change? (don’t forget to factor in the change cost).
  • If not, can you obtain the resources at a marginal cost that will still give you the needed ROI?
  • How much of the needed profit can be generated through price increases? Added value?
  • What lost opportunity costs exist if you simply do nothing but maintain the status quo?

This is what a little strategy looks like if your goal is to grow your business and not just sustain it and hope things get best.

Now there is a lot more to a marketing strategy than this brief and minimal exercise here, but it should help you understand what it takes to drives best outcomes from your marketing efforts – and not just in bottom line dollars but also in terms of information you need in order to make best marketing decisions.

There is an lost opportunity cost to your business if you just continue to float by and fail to grow your business by any means other than just working harder (or smarter) while all other variables remain the same.

So now what are you thinking?

For the longest time, I didn’t believe in the rants of gurus who said to think outside the box. I mean, I was looking around and seeing that no one had actually exhausted their inside the box thinking first. Which should be a prerequisite right? How can you move beyond something that isn’t even working let alone there at all? And there are far too many broken pieces to a lot of broken businesses lying around right now. Anyway, the time has come to reimagine a few things. This doesn’t call for outside the box thinking – it requires an entirely new box:

Eliminate Discounts

They’re not working anyway – never have, never will. Unless you’re rewarding real, organic loyalty, then you should eliminate all discounts and begin to see your experience for the real value it holds for your guests. You need to start playing in the value arena (not the cheap, bundling type either) and begin to work your business into more sustainable, long-term profitability in the process – based on your ability to reengineer value into every touchpoint throughout the experience you offer each and every guest.

Management Accountability

I don’t pay managers to just maintain the status quo. But far too many do just that. Business and markets don’t reward that type of stagnant and self-defeating behavior and neither should you. You should set growth goals with your managers both individually and as a team and then begin to give them the tools to accomplish those goals (or exceed them) and reward them accordingly.  3 periods of flat sales and traffic numbers means you don’t have the right people in place. And the economy has absolutely nothing to do with it. I have operators call me all day long and ask me if it’s ok to go for __ years  (insert your own time frame here) without realizing a serious profit (one that rewards risk and finances growth opportunities) Are you kidding me? No, it’s not ok. It’s insane!

Staff Accountability

You need to get it out of your head that coming in to work a 4-6 hour shift of order taking and meal running and sidework is all that a server does.  You need to expand your awareness to understand that each interaction by a server with a guest is a marketing opportunity – and they need to maximize it in order to create return visits, loyalty, referrals and most of all, increased sales. An example would be the policy we have that each and every server must generate a proportional share of reservations every day or they don’t get to play. Maybe you need to recalibrate your compensation model (before the courts do it for you). You will definitely need to think differently about who and why you hire and where you recruit and source that kind of talent.

Professional Responsibility

I’ve been saying this for the longest time, but mom and pop retired. The successful business model today is much more complex and sophisticated than it was just 5-10 years ago. No one expects you to be the master of all trades. It’s impossible. In order to maximize your potential in all areas of your business, you need to find people who live and breathe each one. From your Chef to your business managers to the consultant you hire to help you put it all together by building a framework with you that allows you to focus on and manage growth under any circumstances. Yes there will be pain. Yes outcomes won’t happen overnight. Yes you will lose guests but gain new ones that value real value and will pay for it. Your staff will be more professional and engaged in creating more business. You will have more sales and more guests paying more money for more value and you and your business will flourish because of it. How long will it take? That always depends on two things: how broken your business was at the start of your change effort and how hard you are willing to work in order to re-engineer it for real success. The only question now is how long will you continue to tread water?

I have long been an opponent of operators using coupons and discounts to try and build their businesses for multiple reasons.

  • They accept lower margins as an accepted way of growing the business.
  • They force you to compete solely on price.
  • They focus on short term outcomes.
  • They create a situation (I compare it to a drug addiction) that requires you to constantly seek out bigger best deals in order to simply maintain existing traffic levels, let alone build them.
  • They take away your ability to compete on any perceived value differentiation.
  • You become a commodity in your market area and susceptible to any differentiated brands that exist or enter your market area.
  • You are forced to match competitors pricing without regard to your cost or profit structures.

The list goes on and on. So in believing as I do, I am quite frequently asked what the alternative is. I used to be surprised at this question until it was asked of me in so many situations and circumstances and by so many operators that I now expect it will be asked every time I talk about business marketing to anyone and everyone. Therefore, I am going to try and qualify my position here by outlining the only two business marketing philosophies that exist. And while some may comment that these also apply to most any business or industry, while this may be true, I am a business (food service) consultant and only work with food service operators. I don’t care about retail strategies (they don’t work in food service) or manufacturing or consumer goods marketing simply because their product and ours is totally different. They sell products, we sell a social experience.

There are only two types of business marketing philosophies:

1. Transaction Based Marketing (TBM)

Transaction Based Marketing is marketing done to maximize sales to guests solely through a focus on increasing the number and amount of customer transactions. This can be done through a segmented focus or not. No past, present or future relationship with the guest is demanded or leveraged.

This is basically ‘push’ marketing designed to promote impulse buying through an emphasis on only price. You have an offer or deal (coupons or discounts) you want to ‘push’ out to as many people as possible with an expectation that they’ll use it thereby driving as much traffic into your business as possible as immediately as possible. This is a short-term tactic and requires more and best offers or deals to both maintain existing traffic levels and to increase them over the long-term.

This type of strategy is also supported by utilizing frequency schemes disguised as loyalty programs wherein the customer accumulates points towards future discounts. TBM is expensive because it focuses on both aspects of pricing strategy, cost and profit, at the same time. Costs for executing this type of program run between 10 – 20+% of sales or higher due to the actual production costs, medium delivery costs, discount costs and a very important lost opportunity cost for sales and profits that would have occurred if you had not discounted your products but sold them for full price and typically have lower ROI’s. An example of this would be an operator who email blasts a ‘Buy-1-Get-1-Free’ (BOGO) offer to everyone in his email database.

The campaign is focused on a specific menu item or groups of items and is not segmented to go to particular groups within the database that may have indicated an affinity for that particular item or group of items.

2. Relationship Based Marketing (RBM)

Relationship Based Marketing is marketing done to maximize the guest relationship with the business and its brand with a desire to increase the lifetime value (LTV) of each guest instead of a per transaction approach.

This type of approach is highly segmented as it attempts to match guests who prefer to interact and develop a deeper and more complex relationship with the brand on a social basis other than price. These are the guests who desire more perceived real value from the guest experience. They are more social in nature and require that the brands with which they interact offer some degree of social relevance to their lives in order to maintain their patronage and loyalty.

The idea being that if you can insert your brand into a guest’s life and make it a habit for them to visit you due to a unique social interacti0on or situation that can cement them to your brand, it will increase not only frequency but derive true loyalty that leads to increased positive word-of-mouth, buzz and ultimately guest referrals. Examples of these types of social interactions can be cooking classes, wine tastings, social gatherings (Tweetups) , networking or business group meetings, entertainment, family outings, civic events, cause marketing efforts, etc…

Relationship Based Marketing is relatively inexpensive compared to the heavy transaction costs and lower margins associated with TBM and has a much higher ROI. Instead, the focus is on creating a perceived value in the mind of the guest which correlates to similar social preferences or values that the guest holds. No items are discounted and segmentation of the brand’s messages is more natural and more aligned with guest social preferences and values. While a great example of this is Social Media Marketing efforts, individual efforts can include promoting local and organic ingredients, healthy menu items, green efforts, a more highly defined food culture or culinary experiences, high profile chef’s, premium or unique wines or beverages, greater levels of hospitality, more meaningful personal interactions between guests and staff or operators, community causes or connections, business associations or partnerships, etc…

People still believe, “you get what you pay for”.  So as the world grows more and more social and each of us requires more value and more interaction with the people and brands we interact with, it becomes increasingly necessary for businesses to offer real value in the guest experiences by connecting with guests on a more social level at all touch points possible.

Simply using the old couponing and discounting tactics of years gone by does not, in any way, help accomplish the businesses goals of growth and success. Looking at each guest as a transaction instead of engaging them in a real relationship simply doesn’t make economic sense any longer and even group and chain exec’s are admitting it publicly. It cheapens the real and perceived value of the product, the service and the business overall and makes it more likely that the guest will not be loyal to anyone other than the business with the lowest price. Is that the business you truly want?

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