Jun 15, 2015 | Customer Loyalty Research

Replying to Customer Feedback Grows Sales +22%

Divya Narayanan by Divya Narayanan

Thanx has analyzed thousands of restaurant customer feedback responses over the last two years. Three facts we’ve learned along the way: 1) your best customers matter, 2) every single customer experience counts, and 3) replying to feedback grows sales +22%.  Restaurants – here’s how to use feedback to solidify a customer’s loyalty.

customer-feedback

Let’s talk customer feedback.

At Thanx, we launched NPS customer feedback as part of our marketing suite for multi-unit businesses back in September 2013.  Why? We believe the most effective marketing is exceptional customer experiences, every single day.

Almost two years later, we’ve got thousands and thousands of feedback responses that we can connect back to customers and their spending over time. If you’re a bit of a data nerd (like I am), this is exciting. It’s an opportunity to learn how customer feedback influences real customer behavior.

In early March, we analyzed Thanx feedback data to find the answer to three big questions:

  • What’s the value of a customer who gives you great feedback?

  • What happens when a great customer has a bad experience?

  • Does responding to or rewarding feedback have an impact on whether a customer revisits your store?  

What we discovered was, frankly, really frickin’ interesting. Ready? Let’s dig in.

The "Cliff's Notes" Version

Here’s a roadmap for the next three sections, as we go into detail on each: all restaurants need to manage customer relationships and respond to feedback. Our research demonstrates that restaurateurs can grow sales and improve customer satisfaction by:

  1. Focusing their efforts on their best customers;
  2. Getting ahead of service issues - particularly if they impact a VIP customer
  3. Responding to and rewarding feedback in real time to improve customer engagement.

P.S. check out our handy-dandy summary infographic at the bottom of this page (we won’t mind if you skip ahead).

Focus on Restaurant Customer Feedback

Right off the bat, we decided to focus analysis on six multi-location restaurants who’ve partnered with Thanx for at least a year. For starters, we have a lot of data from these restaurants. More importantly, customer feedback is invaluable in the highly competitive restaurant industry. There are 631K restaurants in the U.S., with overall sales projected to grow only 1.5% in 2015 (inflation adjusted)! The growing popularity of Yelp also makes it easier than ever for a customer to discover new restaurants. In other words, a visit to one restaurant directly takes away a sale from another.

In the restaurant industry, paying attention to customer feedback isn’t optional, it’s essential. Our data prove it.

Using Net Promoter Score To Manage Customer Satisfaction

We use the Net Promoter Score (NPS) to measure and track customer satisfaction. It’s a proven and powerful metric developed by Bain & Company. NPS begins with a simple question that divides customers into three groups:

measuring-net-promoter-score

You calculate net promoter score by taking the percentage of promoters less your percentage of detractors. Why does this matter? Bain experience shows that businesses with the highest NPS outgrow their competitors by 2x.

In other words, businesses that prioritize great customer experiences consistently win.

Finding #1: Promoters outspend and outlast all other customers

Our  first step was to divvy up and analyze each restaurant’s promoters, passives, and neutrals. Across all restaurants surveyed, promoters consistently spent 5-70% more each month than any other customer. Each year, promoters were 5-21% less likely to defect from a restaurant.

So, customers who love their restaurant experience spend more, visit more often, and are less like to leave. Your immediate instinct may be, “...that seems obvious...”

Well, yes. It’s obvious. BUT – Here’s the nuance: promoters don’t only spend more, but they cost less to serve (lower advertising and marketing costs), and they’re less price sensitive. They also bring new business to your restaurant through word of mouth referrals. A promoter is many (many many) times more valuable than a detractor.

net-promoter-score-promoters

What this means for your business: Restaurants, take care of your promoters. Make them feel valued. Invest in changes that create more promoters.  That’s the secret to growth.

Finding #2: Every Customer Experience Counts

Even the best restaurant in the world slips up every now and then. We wanted to know: what’s the impact of a negative experience on a promoter’s behavior?

Here’s where it gets interesting: like a true relationship, promoters give their favorite restaurant the benefit of the doubt after a one-off negative experience. After years of friendship, you wouldn’t drop a friend for forgetting a weekend plan. Promoters show that same loyalty to you.  Our analysis showed no difference between a customer who had one bad experience vs. a customer who had consistently great experiences.

Now, love may be forgiving, but it isn’t blind. After repeat bad experiences, a once-promoter becomes a detractor and visits 45% less over 5 months. These customers keep visiting restaurants, of course, but they’re starting to take their business elsewhere.

net-promoter-score-over-time

What this means for your business: Consistency is key (but you don’t need me to tell you that). Survey your customers at random to keep on top of service issues. Have a system in place that helps you quickly flag promoters who’ve had a recent bad experience. Proactively reach out to understand what went wrong and learn how you can improve. Share that feedback with your front-of-house staff.  Send customers a reward as a thank you.

Don’t miss out on this opportunity to course correct, or you risk losing an important customer to another restaurant.

Finding #3: Reply to Customer Feedback to Grow Sales

After customers rate their restaurant experiences, we give them an opportunity to leave feedback to explain their rating (if they wish). About 1 in 6 customers left feedback in addition to their NPS rating.

We sometimes see restaurant owners who are dismissive of feedback. It’s easy to brush feedback under the rug by convincing yourself that you know better, e.g., “what does this customer know about running a restaurant.”

Respectfully, we completely disagree. Feedback is invaluable: not only does it surface real restaurant issues, but we found that customers who take the time and effort to write feedback (of any length) spend more.

Let’s put numbers around this: a customer who provides written feedback spends 1.4x more over the course of their lifetime than a customer who just rates their experience. This is huge.

Which begs the question, what’s the impact of responding to or rewarding feedback?

When analyzing this question, we split our data into four groups:

  • Transactions that didn’t have a customer satisfaction survey at all

  • Transactions where a customer completed a survey

  • Transactions where a customer got a response to their feedback from a restaurant manager

  • Transactions where a customer got both a response to their feedback and a reward

For the four groups, we looked at how likely a customer was to return in the two months after their transaction. Customers who got a reply to their feedback were 14% more likely to return. This impact was even stronger when a customer got a reward as thanx for their feedback.

Why? Customers feel valued when a real person takes the time to read their feedback and respond to it thoughtfully. Just the act of responding to feedback can help customers feel more connected to your brand. Feedback is a way to engage a customer in a conversation, thereby solidifying their commitment to your brand.

A simple equation to remember: replying to feedback = higher sales.

reply-to-customer-feedback

What this means for your business: In an ideal scenario, you’d respond to every single piece of feedback you get (before Yelp).

We know this is hard. Replying to feedback is a full-time job, and you have a million priorities. Here’s how I’d suggest you prioritize.

  1. First, respond to and reward all passives and detractors liberally - even a small reward can have a big impact.

  2. Second, acknowledge all of your promoters who took the time to leave a longer, thoughtful response.

An Aside: Mobile Customer Feedback Surveys Have Awesome Response Rates

We were happy to see great response rates to our customer feedback surveys. 47% of customers who saw our push notification in-app completed a survey. Compare that to a typical email survey response rate of 10-20%. Our main insight: push notifications really work.

Closing Thoughts

We’re more convinced than ever that all restaurants need a way to manage and respond to feedback. The Net Promoter Score is a great option: it’s easy to implement and delivers powerful results.

The three most important insights to take away from our analysis:

  • Your promoters are the secret to sales growth. The most important thing you can do is make sure they feel valued (e.g., a VIP program)

  • You can’t take your promoters for granted. Set up a system that helps you quickly identify and respond to valuable customers who’ve had a bad experience.

  • Reply to and reward feedback liberally! You’ll have a real impact on your bottom-line

We’ve summarized our findings in a short infographic below. What it all comes down to is this, feedback isn’t a one way street but a “loop”. Feedback is an opportunity to begin a conversation that’ll solidify a customer’s commitment to your brand. Take advantage.

  Visit the Thanx Restaurant Customer Feedback Infographic  

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