What is it like to win an unlimited supply of something?

“My grandfather ate Corn Flakes every single day of his life after he got back from WWII. He was a man of routine.

Every. Single. Day. If he was on vacation he’d bring it with him in the mini-packs.

Late in his life, he decided to write a letter to kellogg’s telling them just how much he loved their cereal and how appreciative he was to have enjoyed it his whole life. In return, they sent him (effectively) a lifetime supply”
This excerpt from a recent Quora post shows that for the winner, not much changes – the grandfather ate Corn Flakes all his life and after winning continued to do so. But more interesting is the lesson illustrated here. The money your most loyal customers spend is of secondary importance to the value they add to your brand by championing your business.

Why else would Kellogg’s give their product away for free to someone who otherwise would have kept spending money on Corn Flakes for the rest of his life? They must have known that the grandpa wouldn’t take his lifetime supply into a cave and tell no one. On the contrary, he told his family, his friends and all his colleagues around the water cooler. And now you are reading about it on the worlds largest watercooler – the Internet.

Now should you go ahead and start awarding your best restaurant customers lifetime supplies of free meals? Unless you’re McDonalds, hell no! The economics of a tactic like this don’t make sense for most restaurants. Instead ask yourself how you can elicit a lifetime of loyalty from these customers. The value of the people they tell, the love they show on social networks, positive reviews they give on sites like Yelp or even friends and new customers that they bring in with them, dwarfs the money that they spend themselves in your restaurant.

For example, a recent study done by UC Berkeley shows that a “a half star rating increase (1 to 5 scale) meant a 19 percent greater likelihood that a restaurant’s seats would fill up during peak hours.”

Even your less than fanatic customers present a tremendous marketing opportunity over otherwise anonymous marketing channels. In Jay Conrad Levinson’s authoritative book on small-business marketing tactics, “Guerrilla Marketing,” he states “it costs six times more to sell a product or a service to a new customer than it does to an existing customer.” The path of least resistance to increased profits for your restaurants lies in marketing to and nurturing your relationships with these existing customers.

The value of your existing customers lies in what you know about them. The more you can learn about them, the more valuable they become to you. In the story at the beginning Kellogg’s knew the grandpa already loved their product so giving him a lifetime supply would yield a good return on their investment. Imagine giving someone a lifetime supply of something that they hated. Like pouring money into a black hole. But there are still ways to valuably remarket to the customers that aren’t yet giving you 5 star Yelp reviews.

Remarketing provides a way to target a group of people who are willing to spend money eating out, already like a particular type of food and are driving distance away from your business. Worded this way, most restaurants would jump at the opportunity to throw their marketing dollars at such a segment, and yet marketing to their existing customers is so often overlooked!

Compare the targeted approach to a recently broadcast radio advertisement I heard for a steakhouse here in Austin, TX. We can use some back of the napkin math and assumptions to show how a lack of targeting bleeds value out of such a marketing activity. The funnel below illustrates how all the things that the steakhouse doesn’t know about the people listening to their ad (i.e. whether or not they eat meat), depreciates 99% of the value – right out the gates!

This isn’t to say that you don’t need marketing targeted at new customer acquisition, but it is foolish to think that your marketing relationship with your customer ends when you finally get them to step in the door. That is where it starts. Take a long term view of your restaurant’s success and nurture these relationships as they are your most valuable asset. In all your marketing and business activities you should consistently exude excellence and authenticity. Your customers will take note, and reward you tenfold.

About the Author

Brandon is the Chief Product Officer at TapSavvy, an Austin-based software company which offers restaurants tools to manage their reputation and grow their business.  Through the TapSavvy Web App restaurateurs get a real-time view of, and respond to what customers are saying in their restaurant – leveraging deep customer insight to improve operations, conduct staff evaluations and market their business more effectively. ”