By: admin

December 12, 2011

How marketing research can help the restaurant industry get through the recession.

By Joseph Rydholm and Emily Goon

In its fourth-quarter 2008 earnings report, McDonald’s reported that same-store sales increased by an impressive 5 percent in the U.S. and 7.2 percent globally. Those figures stood in stark contrast to the rest of the news coming from the restaurant industry, which for months has been a bleak litany of location closings, plummeting earnings and declining traffic.

With no end in sight to the bad tidings, we spoke to three researchers who specialize in the restaurant industry to get their insights on how marketing research – from online research with recent diners to comment cards and IVR-based surveys and mystery shopping – can help dining establishments weather the current storm.

Beyond discussions on the role of research, one main piece of advice for restaurateurs emerged from our conversations: stay the course. In other words, whatever your outlets do well, keep doing it. If you’re known for offering cheap food made fast, keep it coming. If customers come to your chain expecting a fun, festive atmosphere, make sure that’s what you deliver. Now is no time to cut back or scrimp on the things that make your brand what it is. “Stick to your marketing message but also make sure you deliver on your marketing message. Say it and live it,” says Rick Garlick, senior director of strategic consulting at St. Louis-based Maritz Research.

In addition to delivering on core brand promises and upholding quality, restaurants of all stripes can use research to make sure employees are adhering to corporate service standards and practices and, perhaps more importantly, that they are excelling as brand ambassadors. “Every restaurant has policies and philosophies and guidelines and a set of standards they want their teams to execute, and it can be something as simple as a guest being greeted within 30 seconds of being seated, the timing of entrees, checking back to make sure every guest is thanked on the way out. Without any measurement device, it’s hard to determine if those things are being done and how well they’re being done,” says David Agius, owner, The Sentry Marketing Group, Dallas.

Agius argues that that’s where mystery shopping can be of value, as it can note the quality of the greetings or goodbyes, rather than just the fact that they were uttered, and get at some of the satisfaction-enhancing nuances of service. “At a full-service restaurant, let’s say the standard is that every guest is said goodbye to. That may be the standard but what was the tone of the goodbye? How personal was it? How sincere does somebody appear? Feedback on service doesn’t cost anything to correct but it can be the difference between somebody coming back or not coming back,” he says.

What value means

First and foremost, the consumers who are still dining out are looking for the most bang for their buck when it comes to spending their precious discretionary income, so eateries would be smart to consider emphasizing value. “Whether you’re a fast-food player or a fine-dining establishment the last thing you want to do is alienate customers by lowering quality,” says David Morris, senior food and restaurant analyst at Chicago research company Mintel. “Really, offering quality food at a fair price is the minimum requirement for success for restaurants as the environment becomes more competitive in the downturn. Consumers are in the driver’s seat in being able to seek out quality dining experiences that deliver more on value.”

But of course, different dining segments define value differently, Morris says, and research can help by showing a restaurant what value means to its specific consumer segments. “For a fine-dining establishment value is important but you’re looking at a very different [customer] rationale for choosing a fine-dining establishment. These operations need to be a lot more artful in how they communicate value, more subtle. They need to weave elements of value into those that enhance the spirit of indulgence and celebration that comes with the fine-dining experience, extras that may further pamper the diner, rather than something like a three-for-one special.”

While they attempt to deliver value to their customers, restaurants can also create value for themselves, Agius and Morris both suggest, by making better use of ingredients that might already be on-hand. Restaurants may want to try to “thin down the number of SKUs that they bring in – you’ll see a lot of them focusing on in that right now,” Agius says. “They have a few items that are used in a multitude of ways and the focus is on executing the menu really well and making sure that the food and the guest experience live up to expectations.”

Diners’ emotions

While the standards of quality food, good service and fair prices are givens, there is also some room for restaurants to appeal to diners’ emotions. Not specifically of the “come enjoy a great meal to forget about your troubles” ilk but rather reminding consumers of the reasons they dine out in the first place: to mark special occasions, spend quality time with family and friends or to establish and nurture relationships. “You can’t give them money to spend, but what you can do is remind consumers how important dining out has been to them and the emotional positives it has provided and can continue to provide,” Morris says. “If you look at some of the most prevalent reasons for dining out, they involve celebration, treating oneself, doing something special for other people – these are all things that I think will still be important to consumers in this environment. Will they be able to spend as much? In all likelihood, no, but strong and savvy marketing strategies that connect to those need-states can insure that consumers still look to restaurants to help satisfy those needs.”

Earn loyalty

Learning about diners’ motivations and how they make their choices is one part of a three-phase research approach, Garlick says. The other two parts involve examining how effectively restaurants deliver on the dining experience promised by their marketing campaigns and how restaurants can earn and keep diners’ loyalty. “We believe that the whole key to success in restaurants and the hospitality industry in general is creating a differentiating experience for the customer,” Garlick says. “Once we understand what customer motivations are through choice research, then customer experience research or customer satisfaction research can take the next step to look at how well the restaurant is delivering on the value proposition that brought people in in the first place.

“So with a brand like Chili’s for example, which is all about a fun dining experience, beyond asking if the food was hot, the server friendly, and did you get your food in a timely manner, you want to see if it was a fun experience. Of all of the things the brand is trying to accomplish, did it deliver? Did it resonate with the consumer?”

Plan to cut back

A December 2008 Maritz survey of frequent diners found that 34 percent of people said that they plan to cut back on the number of times they dine out in the next six months and 20 percent said they planned to downgrade the class of restaurants that they frequent. Thus fine-diners will be moving toward the Red Lobsters and Olive Gardens of the world and fans of those restaurants will be trending toward the fast-food outlets.

In other words, Garlick says, “The higher up you are, the more likely you are to suffer in these next six months. These tough times are, no pun intended, a golden opportunity for McDonald’s and similar restaurants because they have the opportunity to appeal to that segment who are trading down. A good way for those kinds of restaurants to use research is to look at the needs of these people who might be using them more now than in the past. What are they looking for? What kinds of products and services might represent some new opportunities to capture their business going forward?”

“In an economic downturn I think it’s more important than ever for restaurants to really understand their consumers – what they’re looking for and how the pressure of the recession is affecting their spending patterns, to be able to develop strategies to help maintain guest traffic, which is really what it’s all about right now,” Morris says. “The restaurant industry is really bleeding guest traffic and feeling a lot of pressure because of the migration on the part of the consumer to either trade down to cheaper restaurants or trade out of restaurants and back to food at home. Ultimately, it’s important to know customers as well as possible in order to target the practical, emotional and lifestyle rationales consumers have in choosing to dine out.”

Trimmable expense

Just as consumers these days may regard dining out as a luxury, restaurant firms may see market research as a trimmable expense, rather than as a necessary tool to help market their brands and maintain guest traffic. Not surprisingly, all three researchers argued that now is not the time to cut back on marketing research. Rather, it’s time to use it to ensure that the dollars being spent, on everything from marketing to everyday operations, are working their hardest. “If I have fewer marketing dollars to spend, and fewer ad dollars and promotional dollars, and with all of the strategic decisions I need to make to compete in a very tight market, I need to make my choices wisely,” Garlick says.

“So much of restaurant research has devolved into immediate feedback. Clients want to buy surveys about was the food hot, the service timely, would I come back here, etc. But what they don’t do is link their brand research and their choice research into their experience research. You have to go beyond just measuring quality. You need to create the experience that will make similarly-minded customers spread the word to other customers. We know the importance of word of mouth in a lot of industries but it is especially important in the restaurant industry. Restaurants need to connect to people at a real emotional level, to the point where they really like a restaurant and it becomes part of their daily experience and becomes a hard habit to break rather than something that can be tossed overboard in tough times.”

Agius says some clients are asking why they should spend money on a marketing research program right now. “Our answer back is, ‘Why wouldn’t you?’ Don’t you want to know if the people who are coming into your restaurant every day are being taken care of in a manner that is consistent with your operating processes, philosophies and procedures?”

More selectively

While a certain segment of the population will have to stop dining out, the vast majority will keep doing so, just more selectively. “Over the past 15 to 20 years, especially when you look at younger consumers, their lifestyles have been tailored around going out to eat. It’s a $500-billion industry, so it’s those consumers who might find it more difficult to pull back from behaviors that are such a part of their lifestyle,” Morris says.

Though short-term issues like customer traffic are certainly paramount, Morris argues that keeping an eye on long-term trends during a recession can help poise a restaurant for even greater success in a more spend-friendly economic environment. “It’s very important not to lose sight of the bigger picture. I think looking at food quality and playing to one of the longer-term trends, like healthfulness or convenience, is going to be very important. These trends don’t evaporate in a recession – they’re still there and need to be addressed. Healthfulness is something that is going to gain momentum. Whether restaurants like it or not, I think the government has already begun taking a closer a look at the caloric and content issues on restaurant menus and that’s only going to pick up. The issues the U.S. has with consumers being overweight and health care costs is something that’s going to be here now and three years from now and five years from now. Those are instances where I think restaurants can continue to prepare themselves for, really, the inevitable change that will come with requiring healthier fare in more transparent ways.”