Starting a restaurant means more than hiring staff, acquiring a location and filling it with kitchen equipment, dining furniture and so forth. To succeed, a restaurant must acquire regular customers. One-time “tire kickers” also have value, but diners who return again and again are a restaurant’s lifeblood.
Just like staff and assets, it costs a restaurant money to acquire customers. Unlike staff and assets, customers can be acquired in a myriad of ways, and they don’t have fixed acquisition costs. But that doesn’t mean restaurants should not estimate and track customer acquisition costs (CAC) for a better understanding of where they should be focusing their marketing efforts and budget.
How do you evaluate customer acquisition costs (CAC)?
There are three variables in a simple CAC equation:
- Numerator: the cost of one marketing initiative
- Denominator: Total new customers “delivered” by the initiative. (This is where uncertainty creeps in – restaurants rarely have much information about their customers; however, a guest Wi-Fi offering makes figuring this out a bit easier.)
- Quotient (result): customer acquisition cost
In other words, by dividing the total amount of money spent on a given marketing initiative by the number of new customers who respond to that initiative, this equation approximates the amount of money spent to acquire one customer using said marketing initiative.
Here’s a highly simplified example: if a restaurant spends $100 on Marketing Initiative A and nets five new customers, the restaurant spent $20 to acquire each new customer using Marketing Initiative A.
Why restaurants estimate CAC
When the restaurant later executes Marketing Initiatives B, C, and so forth, managers can compare the CAC for each initiative to this $20 benchmark. That comparison informs decisions about which initiatives to repeat and which ones to abandon. These decisions, in turn, lead to more effective marketing.
The most cost-effective marketing, however, isn’t about acquiring customers. It involves retaining customers. After all, retaining existing customers costs less than finding new ones.
How do you calculate CAC?
Ads on social networks, flyers delivered by mail, promotion of community events – these are all tried-and-true customer introduction measures. However, modern eateries can acquire regular customers using their guest Wi-Fi networks.
When people enter a Wi-Fi network, their devices usually send them push notifications prompting them to connect. In doing so, they send the network a package of information that includes the device’s MAC address. The Wi-Fi network responds, so devices then become acquainted with the network.
Collecting MAC addresses is a good indicator of site visitors or passersby, but the real information starts to form when guests actually connect to a network. That way, there is an actual person now associated with the device and it becomes even easier to track where, when and how long they connect to a guest Wi-Fi network, regardless of the device they are using. This gives businesses a better idea of how many of their clients are repeats and how many are first timers, allowing them to calculate a more accurate customer acquisition cost, as well as communicate with their guests through surveys and requests for reviews.
In addition, asking guests how they heard about the business through a survey (options including friends, social media, promotional signage, etc.) will allow the restaurateur to collect information about their marketing efforts and see which of their campaigns is working the most efficiently.
Loyalty program signups
Diners, lured by the promise of regularly occurring discounts, may register for a restaurant’s loyalty program using contact information like names and email addresses, or even a social network like Facebook or Instagram. That registration improves the eatery’s understanding of its customers.
The captive portal may even offer a loyalty program signup form, making it easy for customers to become members. Customers are motivated by convenience – if they have the option to sign up from their phone on their own time rather than holding up the line while giving their credentials to a cashier, chances are they will take advantage.
Common rewards for loyalty program registration include:
- a “separate” faster guest Wi-Fi network for members
- a different captive portal that features members-only giveaways
- promotions delivered right to their inbox
- specialized promotions for birthdays
This is a great way to nurture relationships with diners, making them feel valued as customers and, in turn, maintaining a recurring revenue. As stated above, retaining a customer costs much less than acquiring a new one, so businesses that put a strong focus on maintaining and preserving existing clients often find themselves in a better position when it comes to their marketing costs.
Loyalty program members and other diners who provide contact information can opt-in to receive promotional messages. If they do, the guest Wi-Fi network can signal back-office systems to generate follow-up messages. Those messages can:
- invite diners to follow the restaurant’s social network pages
- ask diners to mention the restaurant on popular review websites
- extend offers if first-time diners don’t soon return to the restaurant
Having a customer enter a restaurant is just the first step in a restaurant’s marketing plan. The ultimate goal is to turn that customer into a regular diner.
Successful restaurants today increasingly achieve this goal while reducing their customer acquisition costs (CAC) by not only offering up great food and service but also a sophisticated guest Wi-Fi offering.