Embracing Digitalization to Achieve Topline Growth in the Restaurant Industry

December 06, 2017

Embracing digitalization to achieve top-line growth in the restaurant industry

Have you used UberEats, Seamless, Doordash or Postmates in the last year? Do you increasingly find yourself booking restaurants through OpenTable, Yelp or Resy instead of calling up the restaurant? When was the last time you went to a fast-food outlet and saw a non-digital menu board? We are in the age of digitalization, and that has spread to the restaurant industry emphatically. So what does digitalization mean for the restaurant industry and how can restaurant and fast-food players embrace digitalization to maximize their top-line in an increasingly competitive world?

Digitalization is changing the restaurant industry through 5 core themes:

1. Greater price transparency:

The explosion of delivery services like Seamless and UberEats has changed the way we order and consume restaurant food. Prices are more transparent across different players, making it easier for customers to compare and contrast. Such delivery channels are also increasingly becoming the de facto application for restaurant promotions. Transparency can only mean more price competition, with price reductions and promotions becoming more effective in the short-term, and price increases more difficult. Unless restaurants become more sophisticated in their pricing and promotional strategy, they will find themselves in a “race to the bottom.” The clever restaurants will be the ones that “surgically” optimize pricing while maintaining an excellent value for money perception.

2. Greater value transparency (in the long term)

Transparency is not really restricted to price. Platforms like TripAdvisor and OpenTable provide, through customer reviews, customers with a clear picture on delivered value. The modern customer knows which special to go for and how good the wine list is before even stepping into a restaurant. This value transparency means that restaurant owners need to ensure that they deliver value and that their price reflects that value. At the same time, they need to ensure that value is consistently delivered, whether that is through the service quality, the speed of service, the quality of food, the size of the portions etc.

When value and price are transparent, the winners are the restaurants that best reflect that value in their pricing – the players that strive for good customer feedback and experience eventually have the justification for higher prices. The ones that don’t, even at a discounted price, will in the long-term lose customers and revenue as their service is visibly sub-standard.

3. Digital ordering and dynamic pricing will increasingly become the norm

Digital boards and smartphone/tablet ordering are increasingly becoming the norm across the industry. If you walk into a McDonald’s in the morning, the board displays breakfast items; for lunch and dinner, it changes to burgers & fries. Restaurants are also using tablets and apps to enable their customer to order digitally. Digitalization of menus provides restaurants the opportunity to be more “dynamic” or “seasonal” with their pricing.  Promotions can be dynamically set-up to incentivize conversion or to upsell people to higher-value items. At the same time, day of week or time of day price differentiation can be utilized to fully capture variance in customer willingness to pay (e.g. weekend or late-night pricing) and maximize revenue.

4. Better, systematic upselling and sales dialogue optimization

A digital menu enabled by a tablet and/or smartphone app provides additional benefits when it comes to upselling customers. Digital ordering ensures that upsells are always communicated/prompted to the customer in a consistent manner. Restaurants that have implemented digital-based ordering have seen an increase of 5% in revenue through more upselling, with some restaurants even reporting double digit revenue growth. At the same time, digital-ordering frees up servers to focus on other aspects of customer service and improves the overall experience. Finally, the average cover takes 7 minutes less to be served, which is not only a customer experience improvement, but also frees up capacity more quickly at busy times.

The clever restaurants do not just embrace digital boards & menus, but put value and invest in designing such digital applications in a way that upsells customers and improves their experience.

5. Enabling customer-centric customization

Furthermore, digital menus and boards provide an additional major benefit for top-line enhancement. For the first time, restaurants can use such technologies to start linking customers to covers. This allows them to start becoming more personalized, both in terms of communicating to customers (e.g. promotions, tactical offers) and in allowing them to customize their meals. Although McDonald’s first attempt at customization through the “Create your own” program was axed due to operational issues, its replacement “Signature Crafted Burgers” has been hailed as a success that provides customization within operational boundaries. As millennials are all about the uniqueness of an experience and product, personalization becomes key and the restaurant that can best use customer data to personalize offers, promotions and even meals will grow customer engagement and build stronger relationships.

How to embrace digitalization to achieve top-line growth:

Based on our expertise as pricing and marketing specialists for restaurants, successfully boosting top-line growth in an ever competitive, digitalized world will require the following:

  • Developing pricing strategies and menus that balance pricing with perceived value to maximize revenue and profitability while securing footfall
  • Developing promotional strategies through digital and traditional marketing channels that allow restaurants to cleverly yield-manage their estate, increasing covers in off-peak periods while maximizing revenue and utilization in peak periods
  • Designing menus that are aligned with customer psychology on digital platforms, enabling upsell to higher value items or more items without impacting perceived value for money

Finally, personalizing the customer experience, price and promotion based on a robust understanding of customer behavior and segmentation.