Do you know these numbers?
Are you a little fuzzy on your Restaurant numbers?
The answer to this question plays an important part in whether you will grow your business.
I would say this one of the business concepts every business owner needs to get their heads around.
I know it's a big claim.
Let me explain.
When you know how much every customer is worth to you, then this changes the growth dynamics of any business.
This question forms the basis of Customer Lifetime Value Concept (CLV). Or as some people call it the Lifetime Customer Value (LCV)
Customer Lifetime Value Concept(CLV)
I like CLV because it's based on the customer.
I sure you're thinking CLV sounds like another fancy pants term Accountants & Stock Brokers use .
There always wheeling out impressive words & acronyms to razzle dazzle, with how clever they are.
I'm sure these fancy finance terms have there place or reason for existing.
So I'm not going to baffle you high tech financial jargon.
Here's the thing if you grasp the Customer Lifetime Value Concept (CLV). Then you will be able to pay as many Accountants & consultants to look up these words for you. If you can't think of anything better to spend your money on.
I would say from my dealings with most Accountants there are not even aware of CLV. or If they are, then they have no idea how to even apply CLV to a business.
There more focused on costs & expenses, & where you have been. (Which is important but it's not going to help you grow your business.)
So do I have your attention Yet?
I hear you saying “Ok enough! What the heck is this CLV Customer Lifetime Value thingy anyway? And what's it got to do with me?”
Write this down.
Your Customer Lifetime Value is:
“How much every new customer spends with you over the Lifetime with your business...”
When you get CLV Customer Lifetime Value. It will help you make important business decisions on sales, marketing, product development, and customer support.
Most restaurants have tried a form CLV without realising.
You when all those voucher entertainment books came out
You know the ones. buy One main & get another main Free.
Or similar types of deals.
Why most cafes & restaurants fail using Groupon and discount vouchers
The problem is because they didn't understand the reasoning behind this concept. Most failed badly.
Most restaurants treated these as just a transaction rather the building a relationship to get ongoing customers.
So instead of trying to wow these people with phenomenal service & amazing food. They were treated like 2nd class second citizens.
Squeezed into some tight corner, & given the waiter on training wheels.
The restaurant owners thought they were getting a dud deal. They had to give away free dinner. For What?
I’ve heard the restaurant staff say “cheap bastards” “How stingy”
So they missed the point.
They were looking at these people, treating them like were an annoyance. Rather the making feel like VIP's Who would love to come back to your Cafe or Restaurant.
That’s why all those Groupon Like Discount sites came & went.
They did not teach you or show you why giving away Free Dinner was such a good idea.Each new customers will catapult your profits by compounding the Customer Lifetime Value Concept...
Repeat customers put heaps of money in your pocket...
I don't want you to make the same mistake as these restaurateurs. Treating these new potential customers as an item on the Balance Sheet, just like an accountant.
Just so you get how important this distinction is to your business. let me explain so you see how it relates to your cafe or restaurant.
3 Ways To Grow Your Business
- 1Get MoreCustomers
- 2Get Them To Spend More
- 3Get Them To Spend More Often
Get More Customers
So getting more Customers is the first part of the equation. This is where you would use coupon or voucher to entice to try your cafe or restaurant. This problem is this where most restaurants stop. You got them to eat at your Restaurant. But you didn't bother to wow them. So they had no reason to come back, now you've just done your dough.
Getting More Customers means you have to Increase the number of customers…
So you want Reach more potential customers & get them to Try out your Restaurant…
Get Them To Spend More
So you want Increase the average transaction value per customer...
“Do You want Fries with That?”
You see, McDonalds knows, every time they ask this question. They dramatically increase their customers spend, and skyrocket their profits, on each transaction.
McDonalds make 13 cents on each cheeseburger sold. When they ask “Do You want Fries with That?”. When they get a Yes (more than 80% of people, say Yes!) Now they’re making a whopping $1.47 per transaction. This is called an Upsell.
When did you last say No to “Do You want Fries with That?” I never have, I’m sure am not alone, saying Yes gives me fries and a drink. What about you, did you feel pressured to get more fries and drink, of course not.
McDonalds are the world champions when it comes to Upselling, that’s in spite of, most of their workplace being under 18 years old. And what’s more, it’s probably these kids first job. So were not talking about rocket Scientist, yet it works day in, day out, every day.
Because you see McDonalds understands their profits jump off the charts, when they ask. “Do You Want Fries With That?” They even spend a week training & teaching those kids, how to ask this question properly.
Do you see how profitable this question could to your question?
Get Them To Spend More Often
This where you make the real money. You want them to keep coming back
Increase the number of transactions per customer…
you see most people are looking to have a delicious meal with family & friends… If they love your food & it’s an enjoyable experience they will come back again…
The soul purpose of coupon or any discounted promotion is get them in the door of your restaurant… But your job not done by a long way…It’s time to shine…
If your coupon has an compelling enough offer they will come to your Restaurant. Now it’s time to Showcase your Restaurant, so they want come back…
In the my next article I going dive into the nuts & bolts so you can see how understanding your numbers will catapult your profits in your Restaurant.Repeat customers put heaps of money in your pocket...
If you want to build a long-term sustainable business, then you've got to rely on repeat customers. As per Harvard Business Review, a 5% increase in customer retention will help you raise your overall profits by 25%.
Once you get this, they are no longer just cheap person getting a subsidised meal. Are they?
If you give them your best effort, your best food, your best service then they will keep coming back. Because others restaurants think these people are just takig advantage of them. They don't know what you know now.
If You spend more to get a customer than your competition because you know once they eat at your Restaurant then they will keep coming back.
It cost 8 x more to get a new customer. So once you get them to you have deliver a gastronial experience, so they just want to come back & bring their friends.
So next time someone books & tell's they've got a Get one Free Voucher.
Get excited you now have an opportunity to shine.
Show off your restaurant