A Blog by Jonathan Low


Oct 10, 2018

How Restaurants Are Using Big Data As a Competitive Weapon

Late to the game, but the explosion of data on personal preferences is giving them ways of individualizing service and providing new choices with better margins. JL

Julie Jargon reports in the Wall Street Journal:

Data is emerging as a powerful weapon in the increasingly competitive battle for the restaurant consumer. An explosion of food vendors—and menu items—is giving diners more choices than ever. Some use customer data to tailor menus to tastes. Servers are use the information to steer guests to try new dishes,“Total restaurant traffic is not growing, so anything restaurants can do to offer a better customer experience differentiates them from the competition.”
Sweetgreen Inc. wants to win its customers’ loyalty by getting to know a lot more about them.
The Culver City, Calif.-based salad chain believes using a mobile app to gather data on guests’ allergies and tastes will allow it to suggest dishes that regulars at its 88 restaurants are sure to love.
When guests place an order on the chain’s mobile app, they are prompted to select from a list of dietary restrictions that includes soy, nuts and gluten. Selections cause menu items containing those ingredients to be flagged with a red asterisk so the guests know to avoid them, and the selections are saved for future orders. The company says that is just the first step in a long-term plan to collect evermore specific data about what customers like and why.
“We’re trying to understand what’s underneath food choices: Do you like beets because of their sweetness or crunchiness?” says Sweetgreen co-founder and Chief Executive Jonathan Neman. “We want to crack the code around food decisions.”
Powerful weapon
Data is emerging as a powerful weapon in the increasingly competitive battle for the restaurant consumer. An explosion of food vendors—and menu items—is giving diners more choices than ever. Some restaurants say using customer data to tailor menus to their tastes can give them a leg up.
“Total restaurant traffic is not growing, so anything restaurants can do to offer a better customer experience differentiates them from the competition,” says David Portalatin, a food-industry adviser at market-research firm NPD Group Inc.
It wasn’t long ago that such careful attention to diners’ preferences was the province of mom-and-pop restaurants and some fine-dining establishments. But the mobile age has changed all that, allowing chains to develop that capability, using mobile apps and digital reservation systems to track customer preferences and spending habits and sharing it across their systems. Some 2.8 billion restaurant orders were placed digitally in the past year NPD says, or 5% of total orders. That is up from 2% in 2015. 

Many restaurants collect customer data through their loyalty programs, which diners can sign up for online or via an app. (After customers make a certain number of visits, they earn points that can be redeemed for discounted items or at no charge.) But the data that companies collect through such programs offer a window into the habits of only their most loyal customers, who aren’t the ones they really need to convince to return. And there are limitations to some online loyalty programs: Restaurants that collect email addresses without logging specific purchases can only send out emails about promotions to the whole customer base. An email for half-priced Frappuccinos, for example, would be wasted on someone who only ever orders coffee.
By contrast, individuals’ purchases are easier to track on mobile-order apps. Starbucks Corp. realized that its mobile app, which had only been accessible to members of its Starbucks Rewards loyalty program, could be more effective if it were open to everyone. Starbucks had 15 million active Rewards members, but it had another 60 million monthly customers it knew nothing about. Starbucks in March opened the app to everyone.
It also began requiring customers to provide their email addresses when signing up for in-store Wi-Fi; previously, customers could access the Wi-Fi without supplying any information. In addition, it started requiring customers who come in for afternoon “Happy Hour” promotions, such as free drinks, to register digitally.
Within 90 days of enacting those initiatives, Starbucks gained data on an additional 5 million customers. The company plans to use the data on purchasing behavior to offer personalized deals to customers based on their buying habits.
Starbucks Chief Executive Kevin Johnson told investors in June that the number of customers with whom it forms “digital relationships” will “do nothing but grow. Over the next three to four years, we’re going to consistently find ways to acquire new customers and now engage deeper” with them.
Guest profiles
The next step in personalized service entails collecting even more information that can be shared across a chain or company.
Altamarea Group, a company that operates 16 Italian restaurants around the world, including Ai Fiori in New York, last year began using SevenRooms, a cloud-based reservation system that enables restaurants to create detailed guest profiles with notes on everything from allergies to wine preferences and to share that data across the company—something it wasn’t able to do before.
A diner who ordered a particular wine at one Altamarea location may be offered that same wine when she visits another, says Jonna Gerlich, the company’s managing director of marketing and sales.
Restaurants are using the knowledge to improve service and target guests with promotional events such as wine tastings. Servers are also using the information to steer guests to try new dishes, Ms. Gerlich says. A server who sees, from notes saved in a guest’s profile by a previous server, that someone has quit a low-carb diet might suggest a new pasta dish, for example.
LDV Hospitality, which owns 10 restaurant and bar brands across the U.S. including Scarpetta, American Cut Steakhouse and Dolce Italian, says the SevenRooms reservation system has led to higher guest satisfaction and more repeat visits at its locations.
Restaurant managers use the system to review a diner’s past choices before they arrive on a given night. If the diner prefers a certain drink, sometimes he or she is greeted with that cocktail. “It’s those little touches,” says Bryan Siegel, LDV’s hospitality director. “It changes the whole experience.”
In some cases, when the managers notice that a guest always orders the same thing, they send the guest a new dish on the house. “It’s the gesture more than anything else,” Mr. Siegel says. But expanding diners’ horizons may also encourage them to return.
Sweetgreen also wants diners to try new things, so that they develop more favorites and return more often.
In a few years, Sweetgreen expects to have an upgraded app that provides more personalized nutrition information, making menu recommendations based on how food makes people feel. If, for example, someone indicates that kale makes them feel bloated, or that quinoa leaves them feeling full and energized for hours, the app will be able to tailor menu choices around that.
“The challenge for any personalized experience is how you create a sense of discovery,” Mr. Neman says. “There’s a huge opportunity to do that in food.”


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