Recession jitters are real in the US right now. Buzz around factory slowdown and deepening trade wars between the US and China have many consumers worried that our economy is becoming increasingly breakable.
So what does the possibility of a recession mean for restaurants?
Let’s think back to 2008-2009 for a minute. For most of us this is a period of time we’d like to forget. No, I’m not talking about fleece-lined crocs or boots with the fur (anyone??). I’m talking about the Great Recession. During this time, declining consumer confidence levels and dwindling bank accounts took a detrimental toll on restaurants’ sales and profits, leading to hundreds of bankruptcy filings and the closure of more than 600 Starbucks locations (Recession Took a Bite of Restaurant Sales).
The good news is that the restaurant industry has done well in the years since the Great Recession. In the last 10 years the number of restaurants in the US has grown more than 16%, according to federal data. However, QSR Magazine recently noted, “In the restaurant industry, same store sales and traffic are up slightly for November, but the six-month outlook has been stagnant or trending down for the last several months as operators seem more uncertain about the future. Meanwhile, menu price inflation is now outpacing overall inflation, which suggests dining out is becoming more expensive relative to other lifestyle costs” (QSR Magazine).
So what can restaurant operators do to prepare as warning bells toll that another recession could soon be around the corner?
Continue to invest in marketing
During tough financial times, businesses tend to make the mistake of cutting their marketing budgets. It’s important to remember that customers are restless too. They are looking for ways to change their spending habits and maximize their now limited budgets. By leaning heavily on marketing efforts that drive customers into your stores, you have the opportunity to deal competitors a blow while remaining profitable in a fractured economy.
Promotions are not the solution
Many marketers gravitate towards mass discounting and promotions as a means for driving customers to their restaurants. However, generic loyalty tactics such as punch cards or BOGO offers to the entire customer base historically fail to move the needle. During a recession restaurants need to think about how to engender greater loyalty and motivate incremental behaviors, not reward customers simply for completing the same action over and over again.
Make the most out of your current customers
Acquiring a new customer can cost five times more than retaining an existing customer. So invest in the ones you’ve got! Center your marketing strategies on the power of personalization. During lean times in a highly competitive market, it’s imperative that you know what your guests bought today–and better yet–anticipate what your guests will buy tomorrow. This type of marketing has become table stakes in keeping up with consumers expectations. Restaurants with the ability to execute such highly personalized experiences reap the benefits of more loyal and profitable customers.
Differentiate from your competition
Research your competitors and offer something better or different than what they have to offer. Take Starbucks for example. With the most highly used rewards app among restaurants, they are a clear leader when it comes to appealing to their customers. They’ve reached this gold standard by developing an experience based strategy that is different from what any one else is doing in their market. For every purchase a customer makes using the Starbucks app, they earn stars that can be redeemed for a future purchase. Whether it be a Star Dash Challenge, Bingo, Hopscotch, or Double Star day, Starbucks has gotten innovative in how they engage their customers. They challenge their customers to come back, and it works without fail causing customer frequency to skyrocket and in turn, customers to spend.
The fact is, that when it comes to the Restaurant industry, surviving a Recession is tough and there is no way to one hundred percent guarantee you will make it through. However, investing in tools with powerful customer data management capabilities that allow you to drive targeted outreach will help to ensure increased customer engagement and maximum profitability.