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Marketing Metrics – Restaurant Industry

13 Dec

I have been working in the restaurant industry for four years now, so for my Marketing Information Management class, I decided to share an example of how to ensure marketing investments in your restaurant are worth the effort. Determining your return on investment is imperative to make sure that your investments are actually helping your company earn profits.

To demonstrate some marketing metrics, I am using a local restaurant and pub in the Lower Mainland which will remain nameless. This restaurant specializes in serving fresh, local ingredients by making contemporary twists to traditional home-cooked meals. The restaurant supports local wineries and food suppliers, and ensures high quality food by making all dishes from scratch every day. The company strives for excellent customer service, food and beverage quality and an up-beat atmosphere.

The restaurant and lounge capacity is 300 seats – 200 in the dining area, 100 in the pub area. Currently, the restaurant hires different bands to play from 9:00PM-12:00AM in their lounge on Friday and Saturday nights. The restaurant pays each band $400 to perform for three hours, regardless of the size of the audience.

Recently, this restaurant has been experiencing a loss in profits, and has six months to determine whether to continue operation or close down for good. Management has questioned if certain costs within the restaurant are necessary, and is particularly curious to find out whether the band investment is worth their time and money.

According to upper management, sales have increased by an average of $1000 on Friday and Saturday nights for the entire restaurant, but the company does not track day sales and night sales as separate entities. Instead, the restaurant relies on tracking sales for the entire day, and does not track sales or seats by the hour or section of the restaurant. For this reason, the restaurant is unable to determine whether the increase in sales occurs in the evening or the day time. There is a good chance that the restaurant is just seeing an increase in sales because it is a weekend.

One manager believes that hiring a band to play on Friday and Saturday nights is not worth a $400 investment, which is equivalent to $3200 per month, $38,400 annually. Due to the fact that sales have only increased by $1000 on each day for the restaurant as a whole, the band does not seem to be a main reason for people coming into the restaurant. In fact, if the band did not play, sales would most likely stay very constant.

Assuming the average selling price (ASP) or revenue per customer is $20, and the average variable cost (AVC) per customer is approximately $12.40, the contribution per customer is $7.60.

Contribution per Unit ($) = ASP ($) – AVC ($)
= $20 – $12.40
= $7.60

Taking this figure into account, we can determine the contribution margin with the formula below:

Contribution Margin (%) = Contribution per unit ($)/Selling price per unit ($)
CM (%) = $7.60/$20
CM (%) = 38%

In order to determine whether the band investment is generating a large enough return, the restaurant needs to calculate their Return on Marketing Investment (ROMI). ROMI can be determined by the following formula:

ROMI (%) = [Incremental Revenue Attributable to Marketing ($) x
Contribution Margin (%) – Marketing Spending ($)]/Marketing Spending ($)

ROMI (%) = [$1000 x 38% – $400]/$400

ROMI (%) = -5%

Based on this negative ROMI figure, it is recommended that the restaurant uses other metrics to support the fact that this marketing effort is not worth their time or money. According to Marketing Metrics, estimating incremental sales of a particular marketing effort is almost always used as a justification for marketing spending on that program. Incremental sales for this restaurant are estimated to be $8000 per month ($1000 x 8 band days). In order to calculate the sales lift from hiring bands every weekend, baseline sales are needed, which are equivalent to the expected sales without any marketing efforts. The estimated baseline sales for this restaurant are $220,000 per month.

Lift (%) = Incremental sales / Baseline sales
= $8000/$220,000
Lift (%) = 3.63%

Cost of incremental sales ($) = Marketing Spending ($) / Incremental sales ($)
= $3200/$8000
Cost of incremental sales ($) = $0.40

The calculations above determine that the restaurant is currently spending $0.40 per incremental sale, and experience 3.63% sales lift from hiring the bands to perform eight times a month. Due to the low sales lift and negative ROMI, it can be concluded that this marketing effort is unprofitable and should be discontinued immediately, especially if the restaurant is experiencing a loss in profits and is considering shutting down all operations.

Keep in mind that these metrics are only some of the many you can use to determine whether your marketing efforts are making a big enough impact on your restaurant sales.

For another blog post on restaurants, check out my post on Earls vs. Cactus Club!

– Linnea


The Art of Listening – Earls vs Cactus Club Cafe

12 Oct

One of the most important things to remember when executing a social media marketing plan is following the safety procedure for crossing a street. You have to stop what you’re doing, look at what is being said about your company, and listen to your customers’ feedback and suggestions. In order to compare some of the listening tools that are available on the web, I have used three different sources to find out what is being said about two companies – Earls Restaurant and Cactus Club Café. Although these companies are very similar, and are both owned by the Fuller family, people definitely have different things to say about them. The three tools I used to evaluate the sentiment of these audiences are:

1) Social Mention

2) Wildfire

3) Addict-o-matic

After comparing the results of both Earls Restaurant and Cactus Club Cafe on Social Mention, it became apparent that the majority of content shared online about these restaurants was mostly neutral, however, the two restaurants did not have close sentiment ratios. Earls Restaurant had an average ratio of 20:1, while Cactus Club Cafe had an average ratio of 12:1. Although Earls scored a higher percentage rating on passion than Cactus Club, it scored lower on reach, which I found interesting because I predicted the opposite. The strength of discussion online for both restaurants is fairly low, but they are both in close competition.

It is apparent on Social Mention that the main source of content for Earls is Twitter, with a rating of 99, compared to Facebook, with a rating of 10. I found it interesting that Earls’ main user is “earlsrestaurants”, which is the restaurant’s corporate (Vancouver) account, while Cactus Club’s corporate account is second to last in the “Top Users” ranking. This could be an indicator that Cactus Club is not communicating directly with their customers as much as they should be, especially if frequent regulars are tweeting more about the restaurant than the restaurant itself.

The next listening tool I used was Wildfire, which is a great online too that allows you to compare two different platforms and two different brands. On Twitter, Wildfire charted the comparison of Earls and Cactus Club followers, and Earls tended to dominate for follower growth. On Facebook, Wildfire created a graph that showed the growth of likes, which demonstrated a tremendous difference between the restaurants, as you can see below. On the contrary, as I examined both accounts on Facebook, I noticed a different level of engagement on Earls’ main Facebook account as opposed to Cactus Club’s. The responses to fans were almost automatic, and the tone of the content generator is sincere.

On Addict-o-matic, a lot of the content that appeared for Earls was mostly location based, and did not say much about the sentiment of the customers. However, the Youtube section of Addict-o-matic had an endless amount of videos describing the atmosphere and food quality at Earls. Cactus Club definitely had more content shared by customers on Addict-o-matic, and the majority of tweets included pictures food that customers were enjoying at the moment. Those types of tweets were not so evident when analysing the content about Earls; most of it is generated by the company itself.

It is clear that consumer’s perceptions about these brands are very similar, but I have discovered that there is a higher level of engagement and authenticity when communicating with the Earls brand through social networks compared to Cactus Club’s brand. The philosophy portrayed online by Earls is almost one of family, and the Assistant Marketing Manager, Sepy, encourages anything and everything you have to say about the brand. If there is a suggestion about a new dish, or an improvement of a dish, there is always a response and an email address to contact him for more details – he shows that he truly cares.

The free listening tool that is most useful for comparing the sentiment of these brands is definitely Social Mention, because it gives actual percentages and ratios to compare with other brands in the industry, and breaks down the different factors taken into account. I would definitely suggest using free listening tools for businesses that would like to find out what is being said about them – if nothing works, then it’s time to rethink your social media strategy.

If a third competitor were to enter the industry, I would take advantage of the low strength that these two restaurants have, which, in other words, is the likelihood that your brand is being talked about online. I would find a way to get people talking about my brand online, and would use contests and incentives to help launch my brand’s social media premiere. In order to engage customers as much as possible, I would be authentic and reliable, and have a slightly more appealing brand image than Earls. The third competitor would definitely be dressed for success!


SM Metric Suggestions

3 Oct

As a student in the BBAMM program, I had the privilege of listening to Kwantlen Alumni and CEO/Founder of Stonemass LLC, Michael Senger, speak about social media and his leadership philosophy.

Michael has had experience working in multiple corporations, and has always been involved with technology. In 2007, he found the courage to start his own
business, Stonemass, which is an online marketing product development company. Besides specializing in web design, web strategy and social media marketing, Stonemass also offers customers services such as content development.

In order to conduct the company’s social media market research, Stonemass uses surveys of small samples of people to find out the key problems or issues
they are having, so that the company is well-equipped to improve their clients’ needs. Based on these results, they rank them from highest to lowest, and create their strategies using that data. Michael also uses key performance indicators, and believes that big samples are not always necessary when conducting research, and may take too much time to attain. His “wolf” personality urges him to make risky decisions, and so far, each decision has worked in his favour.

Janet Aronica moves away from using surveys and focuses on vital metrics for businesses in her blog post “5 Vanity Metrics to Stop Measuring (And Better
.” She believes that it is important to ask yourself if you know what the data means by looking at it – the obvious metrics won’t tell you anything, you have to dig deeper. Janet advises companies to stop obsessing over the following metrics, and to try her suggestions, which include services available online.

1) Facebook fans – According to Janet, only 3-5% of fans actually read the content posted; most never return to the page itself and never see the content in their newsfeeds.

Alternative Suggestion: Measure % of feedback and impressions by using Facebook Insights; replicate content that has highest impressions.

2) Twitter followers – Janet finds that most people follow random accounts in order to increase the amount of follow-backs they have.

Alternative Suggestion: Look at your competitor’s followers who aren’t following you, using FollowerWonk. Reach out to those followers and demonstrate the value of following your company.

3) Blog Post Page Views – In Janet’s opinion, a few popular posts will not always bring viewers back to your blog.

Alternative Suggestion: Measure bounce rate (% of people who visit one page and leave), social shares (amount of viewers sharing your content on their social networks), RSS and email subscribers (number of opt-in members who want to read your content on a regular basis).

4) Email Open Rate – Janet claims that this is a reasonable metric to check effectiveness of a subject line, but some may not actually read the email. (Emails opened/(Emails Sent – Bounces))

Alternative Suggestion: Measure the click-through rate on all of the links in the email.

5) Number of Customers/Users – This number is irrelevant if the customer is not actually using your product.

Alternative Suggestion: Active users (amount of users who return to use your product every day) and paths to conversion (Keywords and content that draws in leaders that converts, as well as the actions those leads took on your

The recommendations of Ashley Jane Brookes, marketer at Hootsuite, and author “How to Measure Your Social Media Lead Generation Efforts” are very similar to Janet’s, in that they both recommend using existing services online to help improve accurate measurement. Ashley finds that all social media metrics “hinged on social-specific statistics that vary by individual network” do not reveal “the true value social media provides to the bottom line.” According to Ashley, social media lead generation starts with a conversation which turns to engagement, opportunity, then conversion. Ashley outlines the following steps needed to increase ROI on the web:

1)Analytics ( links, google analytics, facebook insights)

2) Engagement – Measuring the activity and participation will reveal how successful your message is according to your audience (Retweets, replies, likes, comments, posts, click-throughs)

3)Opportunity – According to Ashley, this can be measured by asking yourself questions such as “How deep did you potential customer dig into your site after click-through?” Measuring the time spent at each stage is also extremely important, in order for you to improve the layout or timeliness of the website’s functions.

4) Conversion – Ashley suggests tracking questions like, “Did they buy the product you posted on your Facebook page?” Ashley recommends comparing the average cost of purchases made by customers originating from social media channels to identify patterns.

5) Set Goals, Test and Measure – It is important for your company to set clear objectives to know exactly what you want to accomplish online. Ashley suggests asking questions that help you to understand your audience’s origins and motivations, which includes experimentation with messaging (tone, voice, offers, photos and time of day). Ashley concludes saying, “try different tactics,
measure everything, then adjust, and you’ll watch your charts go up
and to the right.”

Comparing these three social media experts shows the different metrics needed depending on the type of business, and the objectives and goals of the business. Ultimately, if you listen to your audience, and find out what they respond to, your company will be given imperative information which will help with the development of a successful social media strategy.

– Linnea

What is Google+ and What are the Benefits?

26 Jul

Google+ seems to be the next big social media frenzy when compared to Facebook and Twitter. Although Facebook does not restrict the amount of characters used in whatever you’re trying to say, some still seem to find the platform a little “less sincere” than that of Twitter. With Twitter, it takes a little time to come up with exactly what you want to say in 140 characters. For some, it’s easy to summarize, but for others, there’s just TMI to include!

Google+ allows people to connect in a more intimate environment, giving the user a chance to group their friends or family members into different categories. Google+ also includes a “Hangout” application, where the unplanned meet-up comes to the web for the first time. Google+ claims that until teleportation arrives, it’s the next best thing (although, personally, I don’t see much difference when compared to FourSquare).

One of the most fascinating things about Google+ is the user’s ability to share videos and pictures in an instant with whoever you’d like to share them with. On Twitter and Facebook, everyone can see what you upload, unless you send a private message. Google+ allows users to be more discrete with who they would like to share content with, which is definitely a benefit when taking privacy into consideration.

Another feature of Google+ that I find to be interesting is that they have embedded what looks like a Google search bar called “Sparks” where you can type whatever interest or topic you’d like to read about, and Google+ will provide you with everything you’re looking for. You know how you get bored on Twitter and Facebook if no one is uploading anything? Google+ will not disappoint.

Lastly, Google+ includes a BBM-like message thread called “Huddle” where you can include whoever you’d like to talk to. Planning an event or get together could not be made easier!

According to an article on cnet news, “at the same time that Google+ has captured 20 million members in just a few weeks, many have complained about the site’s requirement that they must use their real names in their profiles, rather than nicknames or pseudonyms. Many have also seen their accounts automatically suspended over such policy violations.” Google+ is currently working on the problem and has recently apologized for anyone who has had their account suspended.

I don’t know about you, but I’m pretty excited to get tons of people on the Google+ bandwagon!


Millennial Job Searching

9 Apr

I don’t know about you, but I find job hunting very time consuming and challenging. My co-op workterm search is still under way and I am cutting it pretty close to my proposed start date of May 1, 2011.

Based on the article LinkedIn Edges Out Want Ads As Job Search Tool for Millennials on Mashable by Todd Wasserman, LinkedIn is becoming an increasingly popular choice for Millennials to search for their entry-level job after graduation.

According to a survey on Millennials, LinkedIn is replacing newspaper ads as a source of information about new jobs. Twenty-eight percent of Millennials plan to seek work through LinkedIn, as opposed to the previous percentage of 7%. The same proportion of respondents — 28% — plan to find work via newspaper ads, which has decreased by 6% since last year.

The survey was based on a February poll of 8,088 respondents, 73% of whom will be graduating and looking for full-time employment in two years. The chart below shows how respondents plan to apply to jobs.

An interesting finding from the report was that Millennials don’t find the size of the company to be a preference and that 64% of them plan to stay at their new job for two to five years. Another 24.1% say they plan to stay with their employer for more than 10 years.

According to Razor Suleman, CEO and founder of I Love Rewards, this presents a significant “opportunity for employers to make their Millenials happy,” and suggests that “companies put energy into improving their image among Millennials so they’ll want to work there.”

If the hunters are on LinkedIn, employers should take the initiative to be on there too.

Google Helping Small Businesses in Canada

31 Mar

While surfing the web and watching Dragon’s Den, I stumbled across an article posted today on Techvibes by Andrea Wahbe. The article described an important announcement made by Google Canada at the packed event they hosted with Kevin O’Leary in Toronto yesterday. This event was a live webcast which streamed across Canada online for all of those who could not attend the event.

O’Leary opened the live webcast by talking about the fact that “small business owners are the rock stars of our economy.” Kevin went on to describe the importance of businesses helping businesses, and emphasized the need for major players like Google to support small business owners as there is “no greater resource available to them than the Internet.”

Chris O’Neill, Google Canada’s Country Director, announced that Google will be offering free websites and .ca domains to small business owners across Canada. O’Neill went on to say that “there is a huge gap in Canada between where consumers spend their time and where small businesses are.” If business continue to ignore the fact that online marketing and social media are “not for them”, and refuse to have a website, O’Neill feels that this mentality is identical to refusing to have a phone number.

According to a recent Google study, a surprising half of the 2 million small businesses in Canada still don’t have a website. Chris O’Neill has found that most business are too reliant on traditional media, and fail to see the effectiveness of websites, with fears of technical difficulties and costs. By offering free websites and .ca web domains for small business owners, Google hopes to help small businesses take a step towards making it cheaper and easier to get online and interact with consumers.

LivingSocial to Overtake Groupon?!

26 Mar

According to the article on Mashable by Sarah Kessler, “LivingSocial Says it Will Overtake Groupon in January 2012,” among all of the group couponing sites, none of them are serious competitors to Groupon except the up-and-coming LivingSocial site.

LivingSocial was launched in December 2009, and has a total of $232 million in funding — $175 million of it from Amazon. These numbers might seem miniscule when compared to Groupon’s $950 million, and $25 billion worth, but according to the U.S.-market revenue data for both sites, compiled by LivingSocial, it’s been enough to seriously challenge Groupon.

The statistics used to compare the two companies were compiled using variables such as daily publishing, the price of their deals and the number of deals they sell. LivingSocial’s market share has been steadily increasing since 2009. Currently, for every $10 of deals sold on either platform, $4 of them take place at LivingSocial.

LivingSocial has its Escapes deals unlike Groupon, which is their main competitive advantage. Deals on vacations are more appealing than receiving 50% at a restaurant, and LivingSocial has realized that. The company has also realized that it takes time for users to decide whether they want that vacation package or not, so the deadlines to purchase are longer than their daily deals.

If both companies continue to grow at their current rates, LivingSocial’s portion of sales will overtake Groupon’s in January 2012. Groupon’s decreasing market share does not  indicate decreasing sales, however, the change is more due to the fact that LivingSocial is growing at a faster rate than Groupon.

As the company starting with 100% market share in 2008, Groupon started the entire group buying market, but it wouldn’t take long before competitors jumped in to take a piece of the pie. Fortunately for both companies, the market is continuing to expand at rapid rates, and is expected to grow 138% to 2.7 billion this year.