In an industry where competition is fierce, behavioral data is increasingly being used to help restaurant chains gain share in saturated markets. A new white paper released by the real-time consumer-intelligence firm Sense360 found that a fraction of a percentage point in market share, gained or lost, can mean the difference between hitting targets and financial ruin for restaurant operators.
Despite restaurant industry sales reaching nearly $800 billion in 2017, according to the National Restaurant Association, proprietors are searching for more ways to squeeze value from the dollars they spend on marketing and advertising. The emergence of behavioral data as a strategy or a solution for obtaining a clearer understanding of where, when, how, and why consumers interact with restaurants is still in its early days, but according to Sense360 co-founder and CEO Eli Portnoy, its emergence is changing the face of the hyper-competitive hospitality industry.
“Restaurant operators are in a fierce market share war,” says Portnoy. “The days of making operational decisions by gut, intuition, and feel are now over.”
Portnoy explains that restaurant operators hoping to gain traction should be managing their businesses in a way that’s similar to Amazon — using data to make faster decisions.
One example in Sense360’s report involves the fast casual restaurant chain Chipotle. Chipotle has been able to gather higher quality insights by doing surveys through mobile channels after introducing new products on its menu. The company’s live behavioral and survey data is likely more on point than traditional survey methods, and the speed with which Chipotle has been able to collect its data is potentially saving the company millions of dollars.
“The industry reminds me of baseball in the early days of Moneyball. Some teams completely bought into the concept of data and used it to find inefficiencies in every aspect of operations and to stretch their dollars further. Others took longer to come around,” Portnoy says. “Many of the more sophisticated restaurant chains have completely embraced behavioral data, while some are experimenting, and others are still nervous to dip their toe.”
Misunderstanding market trends has caused McDonald’s to lose out on an estimated $500 million in sales in recent years. With sales lagging a few years back, and healthy options becoming more popular at a number of fast casual chains, McDonald’s expanded the number of health-oriented items on its menu. The decision was a disaster. Looking at behavioral data gathered in real-time, Sense360’s team found that McDonald’s customers are more interested in classic fast food chains than healthier brands — data that could help the company as it refines its product offerings going forward.
“I think right now there is a lot of low-hanging fruit, and early adopters are getting disproportionate benefit with less incremental effort,” Portnoy says. “Over time, I think a lot of the edge will go to those that invest not just in having the data, but learning how best to use it.”
In addition to using mobile surveys to generate customer insights, Sense360’s report encourages the use of optimization, meaning that companies should eliminate what’s not working for them and double down on what is. Optimization that leads to an increase in sales of just two visits per customer per year, on a $6 check, could equal nearly $10 million in additional profit for a mid-size restaurant chain, according to the report.
Behavioral data is also being used to inform restaurant chains’ decisions of where to open new locations. At Del Taco, for example, it’s common practice to look at the behavior of customer segments most likely to make purchases in order to predict whether buying another chain’s closed-down restaurant location would make financial sense.
“While things seem incredibly competitive and challenging right now for many operators, the reality is that there is a ton of opportunity to use data to be more efficient, to find the hidden gems, and to stretch every last dollar,” Portnoy says. “While this opportunity of using data to benefit your business may seem daunting, these insights are being made highly accessible.”
Stephanie Miles is a senior editor at Street Fight.