How can mobile loyalty help alleviate squeezed margins at pubs?

by MyCheck

December 02 2015

A recent Horizons report revealed that the average cost of a three-course meal in pubs had fallen by 2.3% to £18.74 between last summer and this. Great news for the money conscious consumer but not so great for the pub manager! Multiple factors have been attributed for this decline with increased competition from the restaurant sector cited as one of the primary issues. This is more bad news for a sector that is facing downward pressure on drink margins and upward pressure on salaries based on the introduction of the National Living Wage.

The report was not all doom and gloom however. There has been a 45% rise in the number of sides or extras being offered as pubs adopt the ‘every little helps’ mantra to increase revenues by upselling. In a time where the industry is facing ever growing pressures and constant margin squeezes upselling is only one piece of the puzzle, building loyalty to drive repeat business is imperative if pubs are to maintain, let alone increase margins in a sustainable way.

Creating customer loyalty has never been more important, especially when consumers are dining out more but spending less. Estimates from analyst house Gartner shows that the cost of acquiring new customers is considerably greater than retaining existing ones. Gartner, for instance, claims that 65% of a firm’s revenue comes from existing customers and that attracting new business costs five to eight times more than retaining old customers. Gartner also estimates that 80% of a business’s future revenue will come from just 20% of its existing customers.

One possible solution to the problem is being adopted by the very organisations that are threatening publicans. Restaurants are investing heavily in mobile technology to boost loyalty and increase upselling.

Up until now customers have been anonymous. A single customer could go into three different Prezzo’s in one day and the restaurant would have no idea that they are loyal. Now restaurants have a way of identifying customers, and through loyalty schemes, are able to drive footfall with personalised promotions, innovate stretch-spend offerings and retention programmes.

Major chains like Prezzo, Chimichanga and Busaba Eathai are using mobile payments and loyalty to better understand and engage with their customers to drive repeat visits and more easily sell additional items based on personalised offerings.

Busaba Eathai has set the benchmark for the industry. By offering personalised recommendations on dishes and sides via the application, Busaba has seen the average spend for an app user increase by an average of 2.4% per month. A whopping 39% of users are repeat diners, with repeat visits from users increasingly by an average of 6.9% per month. Revenue through the app currently represents over 5% of the group’s total revenue. A staggering set of statistics that shows the potential of mobile.

Research this year has shown that an average of 29 pubs shut each week, and those that survive are, increasingly, places to dine over places to have a quick pint. With the restaurant sector leading the way for value added food offerings and increased loyalty, it’s time pubs considered taking a leaf out of their book and consider mobile as a way to relieve price pressure.

Mobile loyalty might just be the solution to squeezed margins.

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