If you’re a growing chain, hunches, assumptions, emotions and instinct go just so far before managing by them becomes a risky business. Bottom line: If you’re growing, so is your need for accurate, relevant information on which to base strategic decisions. Who really are your customers? What do they like and dislike? Who are your biggest competitors?
You may think you know, but chances are pretty good that your view is slightly (perhaps significantly) skewed.
Yes, you’ll pay a price for commissioning research to answer such questions—$30,000 or more for a baseline study, according to one consultant—but moving forward without good data could wind up costing a whole lot more.
Want to know what your customers really think? Ask them. These four chains did.
Moving the Target
First they found out which customers would help them grow, then aimed new products right at them.
Last summer, Mimi’s undertook a segmentation study that netted 16,000 customer responses across the company’s 103 restaurants, with a minimum of 150 responses coming from each unit. Over a 10-day period, staffers issued invitations to guests (with their checks) to participate in a 15- to 20-minute online survey. Each participant received a $10 gift certificate. The survey was designed to gather demographic data; to find out who made the decision to visit Mimi’s and why; to determine which competitors were considered; and, most importantly, to cluster customers into distinct groups based on demographic, lifestyle and other behavior characteristics.
“It’s a very rich data pool,” says Lowell Petrie, vice president of marketing. “And because it was online, it was very cost-effective. I did a segmentation study a few years ago and it cost a quarter of a million dollars because it was all done manually. Now, the data can be entered directly by the respondent and the numbers are automatically tabulated. Depending on the type of study, online research is at least 25 percent less expensive than traditional methods.”
“We had a lot of observations and assumptions,” Petrie adds, “but wanted to know exactly who our customers are and what motivates them, what the strengths and weaknesses of our brand are in their minds. Ultimately, we’re using data collected to reconfigure our customer base, effecting higher participation of those groups we feel are our future in terms of growth and profitability. We’ll redo the study in a year or two to see how much the needle has moved.”
What They Found Out
We were surprised by income levels and the mix of male and female guests. Income levels were higher than we anticipated, and the customer base skewed more toward females than we knew,” Petrie says. “And we were somewhat surprised by who they told us our competitors were. They were much broader in terms of concepts and segments than we had thought.”
The segmentation results revealed nine distinct groups in Mimi’s customer base. “Most companies would have far fewer groups, and there would be one or two that dominate,” Petrie says. “Ours showed a broad, evenly balanced customer base and revealed a lot about what motivates each group. That broadness is both positive and negative. It shows we have very broad appeal, but it also makes marketing difficult from a conceptual standpoint.”
What They Did About It
Mimi’s is shifting its customer base through product development aimed at its top four customer groups. “One group might be business diners, for example, who have high disposable incomes and eat out a lot,” Petrie says. “We know based on the research what each of these groups wants and we’re targeting the majority of our product development toward them. New items are introduced on our Seasonal Features menu and they’ve been extremely successful. We’ve removed items that weren’t selling well. We now understand why: they weren’t targeted correctly.”
Getting Past Your Gut
Finding out what the fledgling brand really meant to diners led to a major redesign to entice franchisees.
In 2001, EVOS worked with a market research firm to survey guests in its first unit (there are now four, three company stores in Tampa and one franchised in Las Vegas). “Our concept is healthy fast food, and we needed feedback on what people thought about fat and other nutritional and environmental issues relative to our marketing,” says co-founder & CEO Dino Lambridis. “We also wanted to know where else our customers say they go for healthier fast food. And we focused in heavily on how they responded to the look and feel of the restaurant.”
EVOS has since done two additional consumer research studies—both in-store intercept surveys with each gathering 200 to 300 responses—to help it further refine its marketing and new store prototype.
“You have to take some of it with a grain of salt, but the research gave us direction,” say Lambridis. “For our first six years we had no customer data. But as we geared up to franchise, we knew we were past the point where we could make decisions on gut. We needed data. Franchisees are spending a lot of money to run with the concept. We have to make sure that we have legitimate, accurate information.”
What They Found Out
The data shed light on specific factors motivating EVOS customers to frequent the restaurant. It revealed the prevalence of guests who visit because EVOS is eco-friendly versus those who do so because it serves all-natural food, or food that’s lower in fat, or organic items, or because it’s just generally healthy. “We understand better how to proceed with marketing and speaking to our clientele,” Lambridis says. “We learned that ‘healthy’ means a lot of different things.”
Data also hinted that a redesign was needed. “Guests liked the concept, but didn’t feel it was warm or inviting. They wanted to hang out at EVOS, but said the environment was too fast-food—open space, edgy seating, bright and colorful, ’80s music.”
What They Did About It
Such feedback led to a major re-branding effort, implemented slowly over the past two and a half years. “We started making soft changes,” Lambridis says. “We brought in warmer colors, softer seating, booths and banquettes to make the space less stark and more hip. We switched the music to urban lounge music and re-focused our marketing. We don’t emphasize just fat and calories, for instance, in part because the data confirmed that ‘healthy’ goes beyond that. Rather, we emphasize high-quality, natural, unprocessed ingredients. Ultimately, we’ve tried to modernize the idea of healthy eating.”
Since undertaking re-branding, average unit volumes have tripled, he adds, which has also led to a revamping of production processes to handle the load and maintain speed of service.
Paying the Price
Customer research is budgeted for every year, and it’s led to plenty of important menu changes.
Pat & Oscar's
San Diego, California
The 19-unit pat & oscar’s commissions one to two major studies each year and does ongoing customer satisfaction surveys and quarterly focus groups. The larger studies, done through a third-party firm, are a combination of in-store and online surveys with existing guests, as well as online surveys and in-person intercepts with consumers unfamiliar with the restaurant and so-called “trial-rejecters,” people who they discover through the interview process have tried it and not come back.
Ongoing satisfaction surveys consist of an invitation on a coupon or receipt for customers to call in or visit a Website and give feedback on their experience. “It gives us a real-time look from real guests at every restaurant on a daily basis,” says CEO John Wright. “We also get a recap of the results every six months.”
Quarterly focus groups, managed internally, typically include 12 to 15 customers who provide feedback on menu and operational issues. Invitations to participate are issued to members of the company’s loyalty program.
“We do a lot of research for a company our size,” Wright says. “We started about three years ago when we were gearing up to grow dramatically. We had to make sure we had the right footprint, the right venue, all the operational questions answered. Sure, we swallow hard when looking at $25,000 to $30,000 to field a research study, but we now build it into our annual marketing budget and once it’s there, it becomes easier to accept.”
What They Found Out
Several “aha” findings have come out of the research. Among them, the company learned that its trade area is a relatively large seven miles and that guests often visit in conjunction with other activities, such as shopping and movies. They also learned that the frequency of existing guests’ visits was lower than expected; guest satisfaction starts sliding if food isn’t delivered within 10 minutes; the restaurant didn’t offer enough for individual diners (versus families/groups, which they specialize in serving); and the menu board was confusing.
What They Did About It
To improve frequency, dine-in and catering loyalty clubs were launched, as was online ordering for takeout and catering. To address speed-of-service issues, major production changes were made. “It took about a year and a half and half a million dollars, but we now get virtually everything out within eight minutes,” Wright says. “And in the process, our taste scores rose, as well.”
The company tweaked its menu to be more appealing to individual diners, pumping up Meals for One options and adding soup, salad and sandwich combinations. And a complete redesign to simplify and clarify the menu board was undertaken. Finally, trade area and consumer psychographic data helped the company understand where it should develop new restaurants. While it previously sought locations near Home Depot or Costco, for instance, it now seeks lifestyle centers that include retailers like Nordstrom Rack, Best Buy and Barnes & Nobel, as well as movie theaters.
Digging Deep and Local
Very specific data on a diverse and spread out customer base called for a whole new marketing plan.
Last March, abuelo’s conducted a comprehensive segmentation study, comprised of online surveys with 3,000 customers across all locations over a 30-day period. “We wanted to know who they were and what their frequency of visits was,” says Renee Underwood, vice president of marketing. “What they could tell us about how they viewed everything, from store design and atmosphere to menu specifics to local marketing.” That initial study was followed up by more detailed local-markets demographic studies—designed by the research house Claritas, but licensed to other research firms as well—undertaken in partnership with Coca-Cola. A mystery shopper program followed, and Underwood is now investigating ongoing guest satisfaction surveys.
“The segmentation study helped us understand which key segments we should target in our marketing efforts. It was overarching baseline data,” she says. “Then, with Coke as a partner, we went into each of our markets and did research that told us a lot more about local customers there. Coca-Cola has had a long relationship with Claritas. They knew we were in a growth mode and needed data so they helped us get started with this type of research. Going forward, we’ll work directly with Claritas for each market we’re going into.”
“We’re a relatively small chain—38 units—but we’re spread throughout the country,” Underwood says. “From a marketing standpoint, we didn’t have the critical mass for TV or radio. Much of our research has been an effort to give us information that we can use to better market ourselves on a budget.
“Without good, accurate data it’s too easy to spend a lot of money doing a lot of the wrong things, things that don’t make an impact.”
What They Found Out
Abuelo’s learned that its customer base is made up of many distinct groups. The Claritas studies dug deeper into lifestyles, demographics and behaviors of customers in local trade areas. “It’s helped us better target our marketing efforts,” Underwood says. “Is this a female customer and/or a business diner? Are they heavy into TV? How do they spend their leisure time? How far did they drive to get to their restaurant? What radio formats do they listen to? What types of magazines do they read? What charities do they support? We now have that type of granular local-market data for each unit.”
What They Did About It
Abuelo’s is developing a marketing strategy targeting distinct groups. “We learned that our customer base isn’t homogenous, so we’re working to distinctly segment and market to them accordingly,” Underwood says. “Specifically, we’re doing database marketing—primarily e-mail and direct mail—so we can target business diners, for instance, or ‘socializer-meeters.’ If I know a particular group likes wine with dinner, I can do wine-related marketing to them. If I’d offend customers living in the buckle of the Bible Belt by sending invitations to a tequila event, I can avoid making that mistake. Research-driven marketing will make us more effective on a limited budget.”