Why Calculating the Customer Lifetime Value Could Save Your Restaurant

Pedanco | November 2018

Think about how much it costs to acquire a new customer.

You put up expensive signage inside and outside the restaurant. Your website itself (not to mention the management of it) comes with a monthly cost. You run promotions in-house and offer discounts online to lure customers in. You try to maintain a regular presence on social media. Not to mention the costs of pay-per-click advertising on Google and Facebook.

Oh! And don’t forget about the cost of your marketing team.

Then, of course, there’s the cost to keep your restaurant fully operational in order to make a good impression and provide a great guest experience.

You spend a lot of money in order to attract new clientele. But is it working?

While you may see an increase in foot traffic and online orders from your efforts, have you given any thought to the quality of customers you’ve attracted?

If you’re struggling with low profit margins and high turnover rates, it’s time to do some simple calculations to figure out what has gone wrong.

Calculating the Customer Lifetime Value of Your Restaurant Guests

The customer lifetime value (CLV or, sometimes, just LTV) is a calculation every business must do. And it’s a simple one at that. Basically, it tells you what the monetary return will be on the average guest in your restaurant. If you’re investing all this money in marketing to and bringing in new business, you should know what exactly you’re getting in exchange for your efforts.

Before you do the calculation, you will need to gather some data from the previous year’s sales. Make sure it’s a full year’s worth of data you’re working with.

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