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Wednesday, May 15, 2013

Higher Customer Restaurant Retention and Purchases through Customer Focus


The million dollar questions in the restaurant industry are, “how to encourage more patrons to frequent my establishment and spend more while they are there?” New research helps to identify and establish important factors for restaurant owners to consider when operating their businesses. Understanding which factors relate to consumer decision making is important for adjusting restaurant operations to highlight particular benefits and capitalize on the potential rewards.

The restaurant and service industry is growing faster than any other major industry in the country. When compared to other industries in the sluggish economy the food service arena has maintained sales increases (National Restaurant Association, 2009). This makes the restaurant business one of the best investments during tough times as volume continues to increase. To maintain that volume and profit level requires a focus on core business offerings.

Most of us know that improving customer satisfaction can increase patron retention. The process involves understanding customer’s needs and expectations better than the competition in order to enhance them for maximum benefit (Yang, Cheng, Sung & Withiam, 2009). Those establishments that are customer driven and customer focused have higher levels of market advantage. Yet it is hard to know precisely what increases the purchase and frequency rates.

Foodservice products can be seen from a particular perspective. They can be broken down into categorize of core benefits, tangible benefits, and intangible benefits (Kotler, 1998). Core benefits are the product/service, tangible benefits are the servicescape, and intangible benefits are the customer experience/interaction. Understanding each of these helps to see how they influence each other without damaging core business focus. No one should take their eye off of the ball in their search to develop higher levels of service experience.

As manager focus on understanding the pieces that answer the fundamental questions of frequency and increased spending they sometimes forget these core business principles. The type of restaurant and the demographic they serve are important aspects of understanding the context of other service enhancements. Each customer chooses their restaurants based upon personal preference and want to ensure that their expectations are being met.

Research conducted by Parsa, Gregory, Self & Dutta (2013)) attempted to determine precisely what are the most important factors in consumer decision making processes. In other words, when customers were making a choice what type of process did they engage? In order to test this concept the researchers focused on scenario bases experimentation where they used a high-end and low-end restaurant to assess client’s intentions to patronize and return to the establishment. They settled on eight possible combinations for two levels of restaurant attributes. A total of 190 cases were analyzed from each of the restaurant types.

Results:

-Customers were willing to spend more if the high-end restaurants focused on food quality while the low-end restaurants focused on speed.

-In the high-end category customers were willing to pay an extra $23.59 if the food was of exceptional quality while customers in the low-end category when services was fasters $2.47.

-Customers from high-end restaurants with high quality food and low-end restaurants with the quickest speed indicated a higher expectation to return.

Business Analysis:

Understanding the core strengths of a restaurant helps managers understand where to place their focus in developing higher levels of customer satisfaction. Through all of the possible combinations high-end restaurants that offered expensive food should focus on quality while low-end restaurants that focused on cheaper food should focus on speed. Other service factors didn’t matter as much as these two polarities. As customers pay more for their food they expect a higher level of taste and benefit. When customers pay less, customers want the service to be quick. Putting too much emphasis in the wrong places without realizing their secondary benefits will be a waste of money, time, and effort. This may be one of the reasons why establishments such as McDonalds focuses on processes and restaurants such as Andiamos focuses on the quality of the chef and food offerings.

Kotler, P. (1998) ‘Marketing Management: Analysis, Planning, Implementation, And Control’, Englewood Cliffs, NJ: Prentice-Hall, Inc.

National Restaurant Association (2009) online http://www.restaurant .org 

Yang, C., Cheng, L., Sung, D., and Withiam, G. (2009) Strategic pricing policy based on analysis of service attributes. Cornell Hospitality Quarterly, 50 (4).

Parsa, H., Gregory, A., Self J. & Dutta, K. (2013). Consumer behavior in restaurants: assessing the importance of restaurant attributes in consumer patronage and willingness to pay. Journal of Service Research, 12 (2).

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