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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

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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!

-Linnea

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
Alternatives)
.” 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
website.

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 (ow.ly 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

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.

Starbucks’ 40th Anniversary

9 Mar

In honor of Starbucks’ 40th anniversary, the successful coffee company has introduced a few new items to the menu.

Along with their new logo on their cups and sleeves (remaining nameless), starting today, the Cocoa Cappuccino and Starbucks Petites are available to purchase in their shops.

According to FitPerez, the Cocoa Cappuccino combines fresh espresso, bittersweet mocha sauce, steamed milk and foam, and  a mocha drizzle.

The Petites are small sweets including Cake Pops (available in Birthday Cake, Rocky Road and Tiramisu flavors), Red Velvet Whoopie Pies, Mini Cupcakes (Carrot Cake and Peanut Butter) and Sweet Squares (Lemon and Salty Caramel).

Starbucks has finally realized that people are looking for small treats to go well with their coffee; all of their existing desserts are too filling (and high in calories). I noticed that Starbucks has made an effort in the store to display the calorie counts for all of their new items, which persuades consumers into buying a “petite” dessert because is not as harmful as one might think. The company has truly stole my heart with their rocky road cake pop…only 180 calories!! Yum!!!

Social Storytelling

3 Mar

Lisa Geddes, former VP of Marketing for the Rick Hansen Foundation, spoke and inspired my communications class about corporate and effective storytelling. She pointed out that storytelling has been the main communication channel since the beginning of time, referring to tribes, William Shakespeare, movies and music. Storytelling is truly the basis of everything we do. She feels that storytelling is “how we’re built to communicate,” which is why it is so effective in the corporate world. However, companies are having trouble communicating stories about their history to consumers, and are still focusing on quantitative values rather than personal values.

Lisa emphasized the fact that stories should always have a protagonist to introduce the story, a crisis or event in the middle of the story, and a moral to conclude the meaning of the story. Generic, inhumane company background stories do not capture the attention or interest of consumers. According to Lisa, good stories must be in alignment with your company, and must be authentic. They should avoid emotional dissonance by starting fresh from where the company last left off. Stories should always explain “why” and have a good reason for telling the story in the first place. The audience is only going to be engaged if they can relate to the story, so companies should know their audience’s interests and lifestyles in and out. Good stories should be emotive, informative and entertaining, and must contain a central message, while providing context.

Companies are still failing to produce authentic, engaging stories about their background and values because they feel that consumers are already doing so by using social media. Little do they know, if they have a presence online and engage consumers with their own story, consumer input may change for the better, and more positive stories could be generated by consumers on a daily basis.

Lisa then went on to explain that in order to “change your culture, change your story.” She also mentioned the theory of opening a story or message with the line “let me tell you a story.” According to Lisa, it is proven that when this phrase is mentioned before telling the story, a part of the brain opens up and prepares itself to listen carefully. Lisa’s presentation was very inspirational and highlighted the power of storytelling, especially in the corporate world.

True Originals Campaign Gone Wrong

5 Feb

We’ve heard it all before. Social media is NOT meant to be used unaccompanied. It is meant to be used as a supporting tool to improve existing business strategies. Bacardi clearly did not get this memo. Last August, they launched a webisode series that was shown solely on Facebook. The campaign, called True Originals, featured multiple videos in which a mysterious character searches for the world’s most creative, original bartender.

In each webisode, the character orders a different beverage, or asks the bartender to surprise him. His expectations seem high, but all bartenders manage to put their own unique twist into each beverage, impressing him enough to reward them with a special chip that seems to be of implicit importance. At the end of each webisode, the video closes displaying the website for the campaign: http://www.trueoriginals.com. From this site, it directed the user to the True Originals Bacardi Facebook page. This page only displayed a disappointing 1000 fans, which could have been more effective if they were directed to the main Bacardi page, not a temporary page. Now, when you search the True Originals website on the web, it directs you to your Facebook home page, which is confusing to the user and looks bad on Barcardi’s part. The least they could do is direct it to their main Facebook page, right?

The idea behind these videos is fantastic, as it inspires consumers to buy Barcardi rum and put their own twist on classic cocktails, but the fact that Bacardi chose to use Facebook as the only channel to showcase these short films was a bad idea. Although bartenders on Facebook enthusiastically reposted the videos on their pages, the results did not generate many fans of the True Originals Bacardi Facebook page, or their main page for that matter. Lessons to be learned: Use social media to drive your original strategy and generate excitement about the product. Make sure the campaign is
consistent, easy for users to navigate, and most importantly, make sure you connect your campaign across all high traffic social media
platforms. Here are some of the webisodes from the campaign. Enjoy!