Running a business is all about having a loyal customer base. Food service businesses are no exception.
The core customer base for a food service business is the local community around that business. So, it costs more to lose a customer from your core base. For a food service business, customer lifetime value means everything.
Many customers have their favorite dishes that they’ll order every time they visit your restaurant. How often they visit may differ, but they’ll likely place the same order each time. This consistency adds money to your business over time.
The downside of repeat customers is that same consistency applies if they take their money somewhere else. Then, you lose money from your business. And that revenue is harder to regain from a limited pool of local customers.
In 2012, Starbucks released a case study on customer lifetime value, showing the average spend and frequency of visits per month for all their customers. The case study determined an average customer lifetime value of $14,099.1
It’s also been shown that the longer a customer is retained, the more that customer will spend on larger margin items year over year.2 In the case of a bakery, a customer will come in for their Friday sweet treat but may buy their mom’s birthday cake after consistently enjoying the bakery’s smaller items.
By contrast, one negative interaction – from poor customer service to a food preparation mistake – can mean losing that money from your business. In fact, a dissatisfied customer will share their negative experience with 8-10 people, potentially hurting business beyond that single customer interaction. In a community that doesn’t have much traffic from other areas, negative experiences can kill a business over time.
These aspects of customer lifetime value should be kept in mind when dealing with customer complaints, creating retention programs, and training your employees.
1Kissmetrics (2011, August). How To Calculate Lifetime Value – The Infographic. Retrieved from https://blog.kissmetrics.com/how-to-calculate-lifetime-value/
2Upserve (2012, May 29). What Is Your Restaurant's Guest's Lifetime Value? Retrieved from https://upserve.com/blog/restaurant-guest-lifetime-value/