In any business, including the restaurant business, customer acquisition is very important. But, retaining them and reducing customer attrition is equally crucial. The more you get repeat customers, the greater are the chances of creating lifetime loyalty and value for your restaurant.
According to the Harvard Business Review, the cost of acquiring a new customer is anywhere between 5 to 25 times more than retaining an existing one. Another research was done by Fredrick Reichheld of Bain & Company, and it shows that customer retention can increase profits by 25-95%. Still another statistic indicates the probability of selling to an existing customer is 60-70% while the probability of selling to a new prospect is 5-20%. All this data proves a simple point; customer retention is necessary for restaurants. To know how you can retain your customers, read 7 golden rules of customer retention in restaurants.
That being said, it is equally important to understand that customer attrition or customer churn may be happening at your restaurant, and you may not even be conscious of it. Even if you have noticed a decrease in your regular customers, you may not understand the reason behind it. Customer attrition happens in every restaurant and is common, but if you do not understand why it is happening and how to stop it, your restaurant customer churn rate will only increase. This will not only result in dwindling profits but also give your restaurant a bad reputation and ruin your prospects of getting new customers as well. Thus it is necessary to understand the causes of customer churn at your restaurant to decrease it and before that to fully know why customer satisfaction is so important and what customer turnover (commonly known as customer attrition or customer churn) exactly is.
What Is Customer Attrition Or Customer Churn In Restaurants
Customer attrition or customer churn rate is a metric that measures the percentage of customers that end their relationship with your restaurant. These maybe regulars who stopped frequenting your restaurant, new customers who did not like the service and so never return or any such customer. There are many reasons as to why your customer turnover might be rising, but the base of each is customer satisfaction. If your customers are not satisfied with you, they will not visit you for the price you are charging. Hence comes the importance of customer satisfaction to reduce the customer turnover rate at your restaurant.
Why Customer Satisfaction In Restaurants Is Important
Customer satisfaction in a restaurant is what prompts customers to come back. It is important for not just restaurant profits but also for repeat sales. The higher your customer satisfaction rate, the lower will be your customer attrition rate. Thus some reasons why customer satisfaction is important are:-
- It reduces customer turnover in restaurants and leads to repeat sales.
- It establishes restaurant goodwill.
- It gives the restaurant a good social media rating thus attracting new customers
Causes of Customer Attrition in Restaurants
In spite of the business benefits that repeat customers bring, it is surprising that most restaurants fail to attract them and reduce customer attrition. Some reasons, why your customers are not returning to your restaurant could be:-
- Poor Quality Of Food: If the food you serve does not match customer expectations, the customer will not come back.
- Poor Customer Service: Poor customer service directly leads to customer dissatisfaction thus increasing customer churn rate.
- Unreliable Service Standards: If your service cannot be counted on it will frustrate the customers, and they will leave.
- Dirty Housekeeping: No one wants to dine at a dirty place, keep your hygiene standards up to retain your customers.
- Incompetent Pricing: If your pricing keeps varying the customer will not know what to expect thus prompting him/her to switch to another restaurant with more consistent pricing.
- Lack Of Customer Loyalty Programmes: If you do not have any incentive programme for your loyal and regular customers, it is only a matter of time before they switch.
- Inability To Adopt Technology And Social Media: Technology and social media presence are both crucial to customer satisfaction. Inability to adopt both will lead to customer attrition.
Here are the details of the same:-
1. Poor Quality of Food
If you have read restaurant reviews by critics and customers, the first thing they talk about is food. When your customers don’t get what they are expecting on their plate, they don’t have a reason for a second visit. Just imagine the plight of a customer when s/he orders a cup of coffee, only to find that it is cold or too sugary. Or, she/he gets a bowl of tinned fruit salad when he was looking forward to freshly cut fruits.
Quality food is the most fundamental component of a restaurant business; it should be delivered the way it is meant to be – delicious, fresh, with a pleasing presentation and in the right quantity.
2. Poor Customer Service
Apart from relishing a scrumptious meal, customers want to be taken care of at your restaurant. Customer service in the restaurant business comprises of attention, communication, timely delivery of the order and staff courtesy. So, if you don’t greet and guide them to their table, they will feel lost. Similarly, if you deliver the food in 40 minutes instead of 20 minutes as mentioned on your menu card or, your staff doesn’t address them correctly or listens to them intently, they are bound to rate your restaurant poorly on customer service.
A Customer Experience Impact Report revealed 85% of people are willing to pay up to 25% more for superior customer experience. This clearly states how important excellent customer service is for your restaurant!
A Harvard Business School case study on Starbucks threw some interesting observations. It said that a satisfied Starbucks customer visits 4.3 times every month and stays loyal for 4.4 years. A highly satisfied customer visits 7.2 times every month and remains a visitor for 8.3 years.
To provide the best customer service and reduce customer attrition, make sure that:
- Your staff goes the extra mile to please customers. Small gestures like ‘Welcome, Sir,’ ‘How can I Help You?’ or ‘Please visit us again,’ can go a long way in developing an emotional connection with them.
- Your staff treats every customer royally and provides attention to every little detail from the time customer walks in.
- Their order is delivered on time and quickly. In case, a particular dish that the customer has ordered will take longer to cook, inform in advance.
- Your restaurant acknowledges and owns the mistake in case customer complains, and fixes it immediately.
3. Unreliable Standards and Services
Have you ever noticed how Mc Aloo, Big Mac, French fries, Mc Puff & all other food items taste same and follow a standard delivery process across all outlets of McDonald’s? That’s consistency for you. In a restaurant business, it’s not only the first but also the second, third and subsequent impressions matter as well. The key to repeat business is ensuring consistency in products (what you offer) as well as services (how you deliver it). This develops a sense of confidence in your customers, and they want to come back because they know they will have a consistent experience every time.
The key to addressing this problem is defining your quality standards and service guarantee. Your restaurant policy and procedures should be documented in the kitchen (for employees) as well as in the dining area or the waiting lounge (for customers) in the form of designated restaurant service standards. This way, your employees will know what they are expected to deliver, and customers will know what they can expect to be delivered. Also, it would be a good idea to conduct random or surprise checks on your food, service, and staff to take stock of what’s happening on the front end.
4. Dirty Housekeeping
Your restaurant may have the most aesthetic interiors, but a speck of dirt on the dining table, a soiled napkin or an overflowing dustbin in the bathroom can take away all the joy of dining for the customers and contribute in customer attrition. A study of 373 service failures conducted by Beth Chung and K.D. Hoffman confirms that housekeeping is one of the most vital factors to keep the customers coming back to your restaurant.
So, get the basics of housekeeping right. Right from entrance and bathroom to cutlery and staff uniforms, everything should be spic and span.
5. Incompetent Pricing
Pricing also plays a vital role in your restaurant’s repeat business and reducing customer attrition. Repeat diners look for affordable prices for regular meals. Also, if your prices are much higher as compared to your competitors, you’ll probably miss out on the returning dining crowd.
Try to offer meals at different, affordable price points. You can include some lower pricing popular meals along with higher-priced exclusive menu items. For instance, Subway has introduced the low-fat Chicken Peri Peri sub and the low fat Spicy Mixed Beans sub both of which are available for Rs.139 or, when had in a combo with 350 ml of 7UP Nimbooz, for Rs.169.
6. Lack of Customer Loyalty Programs
Have you thought of giving your customers a valid or rewarding reason to return? Once you have acquired a customer, she/he needs to be nurtured to build loyalty and show them how important they are.
There are various ways to incentivize customer loyalty and reduce customer attrition.
- Offer them discount coupons for the next visit. Like the pan-India chain of Specialty Restaurants does. Whenever you dine at any of its brands such as Mainland China, Oh! Calcutta or Sigree, you will get a cash voucher for a certain amount which can be redeemed during the later visits. Why won’t you be tempted to go again?
- Offer them more personalized and focused attention. Birthday/anniversary gifts, an invitation to exclusive events or a free starter for second-time visitors can make them feel special and give them additional reasons to visit again.
- Offer a point-based loyalty program. Boloco, an American restaurant chain gives its customers a stylish Boloco card which tracks the amount of money the customer spend in their restaurant. With every $50 that guests spend in their restaurant using this card, they will earn points that they can redeem against food items of their choice, such as an extra small smoothie or a super jumbo burrito.
Try these tips to leverage your Loyalty Program Campaigns and reduce the customer attrition in your restaurant.
7. Inability to Adopt Technology and Social Media
Technology and social media have upped the game of restaurant business. Online ordering, facebook updates, tweeter contests, wi-fi facility, tableside POS tablet to view & order menu and mobile wallet payments are just a few things that enhance customer experience and motivate them to visit your restaurant again. They are also great tools to understand the expectations of customers, what they think and how their grievances can be handled.
So, if you have not attached the tag of ‘tech-savvy’ restaurant yet, you need to do so faster and soon.
The restaurant industry is a competitive space. Gaining even small numbers of repeat customers may help you in a long way, and attaining the desired business growth.