How to Measure & Increase Restaurant Customer Lifetime Value

The easiest way to know if your restaurant is doing well, making a profit, and attracting customers is to measure some key metrics and ratios. For example, restaurant customer lifetime value can tell you if you are succeeding in gaining loyal customers who spend lots of money at your business.

In this article, you will find an in-depth guide on why this metric is very important for your success, how to calculate it, and, most importantly, how to increase its value.

What is customer lifetime value?

The restaurant customer lifetime value is a metric that shows you how much revenue a client is expected to generate for your business over their lifetime.

It is one of the most complicated metrics to measure as it involves a lot of moving factors, so you will need to understand customer behavior and be able to identify purchase patterns.

Customer lifetime value depends on how often a client visits your restaurant or orders online, how much they spend, and for how long they will keep being loyal to your business.

Why customer lifetime value is important for your food business

It is a known fact in the restaurant industry that it is more expensive to get a new client than to keep an existing one loyal. Especially if your restaurant’s customer acquisition cost is high, which often happens if you have a lot of competition.

Here are the benefits you will enjoy if you start monitoring the restaurant customer lifetime value metric:

• Identify opportunities for improvement: when you start paying attention to all the factors involved in the calculation of this metric, such as average ticket size or average party size, you can easily identify problems and come up with solutions. For example, if you don’t have many groups visiting you, can create promotions that target people who come in large numbers;
• Get more loyal clients: after you notice where you score on the customer lifetime value, you can scale up your loyalty promoting measures, such as rewards for repeated purchases;
• Make a steady profit: if you have a constant stream of loyal customers, you know that you can rely on them to make purchases each month and ensure your restaurant stays profitable.

How to calculate restaurant customer lifetime value

The most common way to measure this metric is by using this customer lifetime value formula:

Where:

The calculation will not always be exact, and you will have to repeat it for different periods of time as sometimes a customer only visits your restaurant once a month.

Here are some additional metrics you should calculate at the end of each month as they significantly impact restaurant customer lifetime value:

• Average ticket size
• Average visits per year
• Average party size
• Restaurant profit margin

Read more: 10 Important Restaurant Ratios & How to Calculate Them

To get easy access to the data required to calculate all the above metrics, it is best to get this technology combo: restaurant POS system + online ordering system. Ideally, ones that communicate with each other to make your work easier, like the ones from GloriaFood.

This way, you can monitor data for both in-location customers and online ones to get an overall view of your business’s financial health.

7 tips to increase your restaurant’s customer lifetime value

If once you have calculated your restaurant’s customer lifetime value, you notice it is rather low and customers don’t often revisit your place, it is time to act. Check out these useful tips that will help you get more loyal clients, increase average value, and make more profit:

1. Start rewarding customers for return visits

Even if you have stellar food and service, customers sometimes need a little incentive to come back. It doesn’t have to be big, it can be as small as a free dessert after a certain amount of orders to show clients you appreciate their loyalty.

If you are looking for a simple way to reward customers that don’t require a lot of effort to set up, check out the Promotions module embedded in the online ordering system from GloriaFood.

In a few simple clicks, you can set up a reward system where you offer clients a promotion according to:

• The number of orders they placed
• The amount of money they spent

Read more: How to Increase Customer Loyalty in a Restaurant

2. Increase the speed of service in location

Clients have grown accustomed to speedy service in all parts of their lives, including restaurants. They don’t want to wait around for a server to notice them or for their food to arrive. No matter the type of service you offer at your establishment, here is how you can improve the speed of service:

• Have restaurant SOPs in place: so every member of their team knows their responsibilities, how to do certain tasks, and who to go to if problems arise;
• Train employees: especially when you introduce new technology, so every server can expertly operate the POS system and help clients in a timely manner;
• Use a QR code ordering system: enable on-premise dining so clients can browse the menu, order, and pay with their phone, with no waiting around for servers. This way, employees can concentrate on creating a great experience that will persuade people to keep coming back.

3. Make it convenient to order food online

If you are still taking orders by phone, you will be very disappointed when you calculate your restaurant customer lifetime value. Phone ordering requires extra time and can also lead to misunderstandings and errors.

Instead, give customers the convenience they desire by allowing them to order online. If you want to have complete control of the process, we recommend you add the online ordering system from GloriaFood to your website.

It will only take you 10 minutes to install, and you can start accepting orders by the end of the day. Clients will appreciate how easy it is to browse the menu, view promotions, and then seamlessly go to checkout and order.

To make the experience complete, ensure that you have a sales-optimized website that leads customers to the online ordering button. A responsive website that loads fast and has all the important information will considerably improve client satisfaction.

4. Keep engaging with clients through email marketing

Your clients lead busy lives, and your restaurant can slip out of their minds, even if they enjoyed their experience. If you want to keep them engaged and remind them of your delicious food, start setting up some irresistible email marketing campaigns.

Don’t worry, you don’t have to start contacting an agency or learn new skills, you can just use the Autopilot module from GloriaFood. This efficient feature automatically segments customers according to their purchasing history to deliver them relevant emails.

With Autopilot, you can:

• Encourage second orders by engaging with first-time customers and persuading them to place a new order;
• Re-engage clients who haven’t ordered in a while by tempting them with promotions;
• Prevent cart abandonment for people who get easily distracted.

5. Use promotions that increase average order value

If you notice that you get a decent amount of return clients, but your average check is low, it is time to encourage customers to order more. An easy way to do so without impacting customer satisfaction is by implementing promotions. For example:

• Combo meals: with a main, side, and dessert. Even if clients don’t intend to order so much, they won’t be able to resist the good value;
• Free delivery for orders over $60: people will add a drink or a side to their order to skip paying for delivery;

• Free dessert for orders over $50: a tempting chocolate cake will persuade people to add more menu items to their cart.

You can set up all the above restaurant offers and more in a matter of seconds with the easy-to-use Promotions module:

6. Be open for communication and feedback

Loyalty isn’t earned just in the restaurant. Social media gives you the great opportunity to keep in contact with your customers even when they are not visiting your establishment.

If you want to turn your social media followers into loyal customers, this is what you can do:

• Create posts with mouth-watering pictures of your food and a direct link to your menu to persuade people to place an order;
• Add posts that invite people to comment. For example, ask them what their favorite menu item is or what dishes they would like to see on your menu;
• Reply to messages and comments as fast as you can to show clients you appreciate their engagement.

Read more: How to Attract More Customers to Your Restaurant Using Social Media

7. Create a community around your restaurant

You can win over your clients by turning your restaurant into a place that offers more than just food. Consider both creating experiences at your business and participating in external events that put your establishment in a good light. For example:

• Organize cooking classes with your chef;
• Have tasting nights with local producers;
• Invite local artists to play at your restaurant;
• Donate to causes important for your local community.

Read more: 10 Community Outreach Ideas for Restaurants to Attract Locals

Final words

While restaurant customer lifetime value is a complicated metric to calculate, it is also valuable for your overall success. It can tell you how successful your loyalty programs are and help you come up with improvement ideas that will have a direct effect on your profit.