Data should underpin the decision-making process of all modern businesses, and restaurants are no exception. Unfortunately, many restaurants end up shying away from implementing a robust data science strategy because they simply don’t know where to begin. This is a huge mistake and can be detrimental to their bottom line. Restaurants can—and should—be collecting and analyzing customer data in real-time to better understand how guests interact with their brand, and ultimately drive sales. In this article, I’ll break down how restaurants can implement a data science strategy and what benefits will come of that effort.
The first thing you need to do is put a system in place for collecting customer data through every channel possible. This should include online orders, mobile apps, POS, loyalty programs, customer reviews and more. You may decide to invest in technology to enable data collection in-house, or end up outsourcing to a service provider; as long as you’re collecting data, you’re on the right path.
Make the data work for you
Once you’ve collected as much data as possible, it’s time to put that data to work for you. First and foremost, this requires that you ensure the data is “clean”—removing corrupt or inaccurate records, and enabling your machine to process the data. It can be quite tedious and labor-intensive, but is absolutely vital. As the saying goes: “Bad data in. Bad data out.”
After cleaning the data you need to do an exploratory data analysis (EDA) to identify high-level trends that you can examine further with specific models and algorithms. From there, you need to run and re-run your data against these models and algorithms to identify patterns and extract insights that may not be visible to the human eye. And then you rinse and repeat, gaining deeper and more valuable insights as the process goes on.
How data science impacts the bottom line
There are countless ways a well-executed data science strategy can drive sales and widen margins. In our experience, these are some of the most common and powerful benefits restaurants gain through effective data science:
- More efficient customer acquisition—A blanket strategy for new customer acquisition where you treat each target as if they’re the same person can be very expensive and inefficient. Understanding each potential target based on their unique data profile greatly improves acquisition efficiency and lowers costs dramatically.
- Increased customer loyalty—Loyalists have substantially higher lifetime value than sporadic guests, sometimes as much as 10 times higher. The only way to effectively take a casual customer and turn them into a loyalist is to engage with them on a personal level and cater to their specific needs and preferences. When you use data science to understand each customer on an individual level, you can engage them with carefully crafted bespoke messages and coupons that create a better experience and keeps them coming back for more.
- Increased average order value (AOV) —Upselling and cross-selling is a very popular tactic for online retailers and often leads to substantial increases in AOV. This tactic can be just as effective for restaurants, but it requires a rich understanding of a customer’s preferences and how to communicate those messages effectively. Data science helps with both of these elements. It gives you a deep understanding of what upsell and cross-sell offers an individual customer is likely to see value in, and also tells you which channel is optimal for distributing the offer. Contrary to what some may think, restaurants are not limited to printed coupons or deals at the register. With the right technology in place, you can easily distribute an upsell or cross-sell offer via SMS, WiFi, mobile apps and more.
- Optimized marketing spend—While the goal is always to convert a customer from a casual guest to a lifetime loyalist, it’s not a realistic possibility for everyone. Data science helps restaurants understand which customers are worth your marketing dollars in an attempt to move them from sporadic guest to loyalist, and which customers are always going to be casual. This helps ensure optimal use of marketing spend, which further improves the bottom line.
The idea of implementing a data science strategy might seem daunting at first, but the longer you delay it, the more money you’re leaving on the table. Commit to investing in data science today, and you’ll be reaping the benefits for years to come.
Tony Tong is a Senior Machine Learning Scientist at Punchh, where he builds advanced Natural Language Comprehension capabilities for business applications and develops full-stack, highly-scalable machine learning services. He also serves as an ML/AI Ambassador to on-board pilot customers and promote an AI-first mindset. Prior to joining Punchh, Tony served as a Quantitative and AI Researcher at Sentient Investment Management, where he developed end-to-end trading strategies using quantitative and machine learning techniques.