Outside Insights | November 2016 | By Guest Author

Segmentation is the Key to Customer Satisfaction

Operators committed to establishing a connection with their guests are coming out ahead.
The foundation of any experience enhancement strategy is knowledge of the customer. Thinkstock

Enhancing the customer experience has emerged as a top priority for an increasing number of quick-service restaurants. The goal is to create a destination for customers, a place where you feel at home and understood, a place that’s a regular destination, where getting what you want is quick and easy and where you continually discover something new that you enjoy—and are willing to spend money on.

Starbucks is probably the gold standard of this strategy, with its targeted loyalty incentives and innovative convenience programs, and with its restaurants that, in many cases, have become social communities with regular patrons who use the space as a de facto office. Granted, this approach is not for everyone—some quick serves are focused on fast and efficient service—on getting customers in and out quickly so that the registers keep ringing. But for those committed to establishing a connection with their customers, the keys to success are increasingly coming into focus.

The foundation of any experience enhancement strategy is knowledge of the customer. Predictability is key—if my customer is getting a coffee every morning, I want to know what time he or she will be arriving. More importantly, I also want to know what my customers are buying and to segment those customers accordingly. For example, for the customer who buys a plain black coffee every morning, I want to ensure that they are served promptly, efficiently, and courteously, and that they accrue loyalty points and continue to make my store their destination of choice. I want to pay more attention, meanwhile, to the customer who frequently indulges in elaborate (and expensive) lattes. I want to provide loyalty points and incentives tailored specifically to that customer’s preferences. For example, buy three lattes, get a fourth one for free, and keep those high-value customers returning to my store.

In-store cross-brand and partner advertising tie-ins comprise another layer of the segmentation strategy. Relevance is essential: the young woman who regularly buys a salad and smoothie is a good target for an ad for fitness clothing or a health club. The guy who orders a double-cheeseburger and fries, meanwhile, probably won’t cash in an online coupon for kale chips.

A quick-service segmentation strategy that delivers a personalized customer experience rests on a foundation of data collection and analysis. At a high level, buying patterns can be identified from store receipts. Beacons, in-store cameras, and face recognition technology can collect volumes of individual customer data on-site. The challenge lies in gaining insight from all these data points and applying that insight to tailored and effective programs. Here, the rapidly developing field of artificial intelligence is breaking new ground. Specifically, cognitive tools that apply pattern recognition to analyze mountains of data have the capability to identify connections between seemingly random data points to help quick serves find the nuggets that underlie successful affinity programs, as well as analyze programs to assess what works and what doesn’t.

The mobile device, meanwhile, serves as a key data provider, as well as the vehicle for delivering information to the customer. The table stakes capability here is a quick, easy, and reliable connection. But in quick service, as in other sectors, the customer’s mobile interaction is becoming increasingly targeted to specific preferences, which are based on accumulated data and analysis.

Realizing the wide range of innovations enabled by data analytics and mobility requires network infrastructure to deliver communications bandwidth. While the next-generation network technology needed to support customer-focused applications is certainly available, quick serves face a thorny dilemma. The economic reality is that the sheer volume of locations of any large quick-service chain creates a multiplier effect on the cost of network upgrades. Moreover, building a business case is a challenge, since migrations to new network platforms are typically phased in over time. This means that the ROI from near-term investments aren’t realized until future contracting cycles. And adding bandwidth is only part of the challenge—developing and managing customer-focused applications requires fundamentally new skill sets and significant changes in organizational alignment.

Then there’s the nature of an industry characterized by razor-thin margins, where changing the size of cheese slices by a fraction can have a measurable impact on profitability. Another consideration is the franchisee model, where individual store owners have to sign on to investments in upgrades.

Slow and steady is typically the best way to walk this capability/cost tightrope. At present, quick serves typically lack the holistic and collaborative view of enterprise architecture needed for transformation, and continue to take a silo-focused approach that treats networks and apps as separate entities. An effective strategy recognizes that the transformation to next-generation networks and applications is not a rip-and-replace endeavor, but rather requires comprehensive organizational and technological change management. Approaching change in a step-by-step manner that accounts for the multiple moving parts involved can address the daunting multi-location implementation challenges that any quick-service initiative will likely face.

Carriers, meanwhile, need to recognize the quandary their customers face. Beginning with the end in mind is imperative. Just consider the Starbucks’ initiative with Google and Level 3 Communications to upgrade in-store Wi-Fi and web access. The outcome: an awesome in-store Wi-Fi experience for Starbuck’s customers. In other words, simply offering cheaper bandwidth and serving as a transport mechanism isn’t enough. Those who are willing and able to be innovative and package their solutions in a way that aligns with business outcomes and the customer experience will gain a competitive edge.  One option is to forge strategic partnerships and alliances to offer solutions around consumer Wi-Fi, digital menu displays, mobile ordering, and in-store pickup.

Mario Vollbracht is a managing director with Alsbridge, a global sourcing advisory and consulting firm.

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