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Guest Insights: Offer Optimization – What does the data tell us?

Kem_Blog
Kem Alily,
Analyst
Parijat_Blog
Parijat Jauhari VP, Analytics Solutions

For those restaurant marketers who use offers to drive sales, it’s critical to ensure that the offer is as targeted as possible to maximize performance and minimize the impact to margin.  We have recently taken a look at offer data across 25,000 restaurant guests to see what we could learn about offers as a marketing strategy.  What we found was interesting.  The results suggest that restaurant marketers aren’t entirely in sync with what guests want.  Here is what we learned:

1. Guests most often redeem when the offer is a Free Item.

This is not surprising, of course, but it’s always good when the data confirms our assumptions.  Since it is the richest offer, marketers should always think twice about using it.  However, knowing that guests will respond and redeem with such frequency, it’s important to think about ways to mitigate the downside, particularly fraudulent redemptions.

But now, take a look at the second most redeemed offer, which is the BOGO (Buy One, Get One free).  Restaurant guests respond almost as enthusiastically to these offers as they do to Free Items.  When we saw this data, we guessed that our clients were offering BOGOs a lot.  But that isn’t the case, as you will see below.

table_2-02

2. Restaurant marketers are not leveraging BOGOs to their advantage.

As the chart below shows, restaurant marketers utilize the Free Item a lot – and it does drive open rates.  Clearly it’s a good strategy in a lot of cases.  But marketers are missing a big opportunity with BOGOs, given the guest response  and redemption rates.   Our data shows that they are over-using offer types that don’t resonate with guests as much as the BOGO does, while under-utilizing the BOGO.

table_1a

3. Which offer strategy is better: Free Item or BOGOs?

Don’t let preconceived notions about your discounting programs cloud your vision when it comes to your offer strategy.  Ideally marketers will test Free vs BOGO over time and look at aggregate check averages to determine revenue impact and profitability.  But what about guest incentives?  Since we know from Fishbowl data that guests like BOGOs, this is behavior you can leverage.  A simple optimization strategy might be to test different BOGOs to see what drives the most business in a short period of time. As you develop more analytics about your guests, you can refine the strategy with better segmentation and/or additional offer dimensions that drive your business goals.

In a future post, we will share additional data about these dimensions that impact the outcomes of offers.