Customers are your best investment

The fine print can say 'future returns may vary'. But the headline is that your current customers are a remarkably sound investment.

Equipment or physical facilities depreciate over time and with use. Even visibly so. But repeat customers can age well, consistently adding value to your business.

Restaurant promotion efforts, however, are often tilted towards attracting new customers. It's an easier job for marketing to do, but data suggests that a restaurant can gain an edge with a renewed focus on customer retention.


Before looking at what a current customer actually brings to your business, it's interesting to note that - across the business spectrum - there is a bias towards finding new customers.

A recent Emarket survey of American businesses put this in sharp relief. The survey asked variously-sized American companies which was their most important marketing objective.

29.9% of the respondents said it should be customer acquisition. 26.6% said it was customer retention. A fairly even split.

But the reality was different. 62.2% of the same respondents admitted that they concentrate on customer acquisition. Only 20.6% were focusing primarily on customer retention.

A 2012 marketing report from the giant business-consulting firm McKinsey highlighted a similar divide:

"55% of current marketing spending is on new customer acquisition"

"Only 12% of current marketing spending is on customer retention"

What large enterprise-level corporations do isn't necessarily a blueprint for how small businesses like restaurants should operate. But one broad point is probably even more true for restaurants - that success, in almost every instance, is built on repeat business.

The National Restaurant Association pegs repeat customers as up to 80% of sales for a typical casual restaurant. As a simple fact, most restaurants have 4 or 5 repeat customers for every new customer that decides to try their place.

It's easy to appreciate the spending of a repeat or regular customer. But recent surveys also highlight a surprising benefit of repeat customers: they are likely your best source of new customers.

It turns out that even the most tech-savvy young people still rely on the 'old' way of finding new places to try: they talk to their peers.

A recent Y-Pulse survey of young adults (18-33), found that 80% of respondents primarily find out about restaurants from friends and family. They noted that the main reason for using these sources was 'a sense of trust'.

The same Y-Pulse survey also showed that 80% of respondents do not follow any restaurant on social media. More than half of those respondents said they were not interested in using social media to find new restaurants.


Aside from being an evangelist for your business, what is an actual, regular customer worth?

The numbers vary, of course, but a regular customer might visit your restaurant 2-3 times a month. Which adds up to about 30 visits a year.

In some concepts, like pizza or lunch or quick service, the frequency can be significantly higher.

Assuming a modest per-customer check average of $15 would make that customer worth $450 a year - even if they always ate by themselves.

But more often, each customer is your connection to other customers. Your customer eats with or buys for others, which raises the value of their business higher still.

A hypothetical customer spending $47 on dinner for two, at each of their 30 visits, adds $1500 a year to your business. And they do it each and every year you can keep them as a customer.

To be clear, those are enviable returns, even in comparison to the large businesses most often associated with caring about facts like customer acquisition and customer retention.

The daily Starbucks-lover doesn't spend $1000 a year on their have-to-have coffee. The Apple fan who gets a new phone every two years and an iPad too doesn't crack that $1000 per annum mark. But your restaurant can do it - again and again.

The heartening part: you don't even have to be extraordinary. You just need to be one of someone's favorite places.


Circling back, not many independent restaurants really have a 'marketing' budget. And certainly not one they can tilt towards retention over finding new customers.

A focus on keeping current customers is, instead, most likely to come from the simple choice to make it a priority. A choice to understand what helps keep customers and what can make them give up on a place.

Referencing McKinsey's work again, in a general business sense, two points are worth highlighting:

"A customer is 4 times more likely to stop being a customer if their 'problem' is service related rather than price or product related."

"70% of buying experiences are based on how the customer feels they are being treated."

Simply put, customers take their business personally. Especially over time.

All things being equal, customers will care most about the places that care most about them.

A quick read of typical online comments points out the disarmingly simple things that impress restaurant customers:

– being made to feel welcome
– unhurried service
– good bread
– clean bathrooms
– short wait for check
– short wait for table
– comfortable seating
– fresh flowers

Certainly, there are points such as 'good value' that are more difficult to 'win' at. But most everything on this sort of list is something almost any restaurant can hope to be 'good at'. And without large costs or complexity. Given the potential return of a regular customer, the numbers certainly say that it's worth it!

So while marketing to find new customers, don't overlook that some of your restaurant's most natural tools of service may be the key that unlocks your restaurant's best investment and continued success: your repeat customers.

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