Independent start-up restaurants fail at a high rate for a variety of reasons, from location to timing to stiff competition. From my observations, though, suboptimal marketing plays a big role, and in this article, I’ll share some stats that show that lack of digital strategy plays a role as well.
To acquire new customers, startups must make a strong initial push to get the word out. Marketing a new restaurant in today’s digital-first world isn’t as simple as buying space in the weekly mailer. It requires owners to use some fairly esoteric ad platforms and marketing tools. With the median cost of a typical restaurant opening at $375,000, startups have a lot at stake.
Let’s take a look at some of the underlying local marketing challenges facing independents.
Too often, startups spend marketing dollars on the wrong things.
Have you ever received a “grand opening” ad with coupons in your mailbox from a new restaurant? Maybe you regularly receive these mailers from well-established restaurants. Restaurants spend a lot of money advertising via print/direct mail. In fact, as recently as 2019, BIA Advisory Services estimated that 19.5% of local advertising money among quick-serve restaurants (QSRs) was spent on this method.
I believe this level of spending on print/direct mail is ill-advised for a number of reasons. First, many mailers include coupons to entice guests to visit, but coupons can be cheated: An employee might put a coupon or a copy of one in the cash drawer and pocket the coupon value in cash. Second, the main purpose of a coupon is to draw in new customers. Yet direct mail offers no way to differentiate new customers from returning ones. Mailers are an expensive way to reach new customers considering the potential for theft and loss of margin from loyal customers, at a time when margins are already thinning due to rising labor and ingredient costs.
Third, I believe that this level of spending on print/direct mail marketing is misplaced because the best place to reach new guests is where they live: on their phones. Independent restaurant owners looking for hungry, high-intent buyers within a reasonable distance from the restaurant will find that digital provides the best opportunity to engage prospective guests at the “moment of intent.” Forget mailers. Digital engagement, mainly via social media platforms, provides the ideal platform for local marketing.
According to the BIA Advisory Services study cited earlier, QSRs are beginning to shift their focus to digital and mobile, spending $134 million more on mobile in 2020 than they did in 2019. Another report projects that digital advertising spend will grow from 36% in 2019 to 43.8% in 2023.
Marketing on digital and mobile is the optimal place to reach net new customers and develop a following.
Consumers adopted mobile ordering in droves during the pandemic. Digital sales now represent 40% of Yum! Brands system sales. (Yum operates KFC, Pizza Hut and Taco Bell.) A recent Mobiquity report found a significant increase in the number of people saying it was their first time using a restaurant’s mobile app. Another recent study found that 92% of vaccinated dining customers planned to keep ordering online even after they are able to fully return to indoor dining. It’s clear that startup restaurants that want to increase their likelihood of long-term success need to invest in these digital channels.
Digital marketing and direct channel online sales create challenges for independents.
The multi-unit giants have a major advantage since they can hire an agency to handle digital marketing and online ordering. These agencies have the tech, the resources and the expertise. For many independent restaurateurs, digital presents precipitous challenges. Here are a few.
• Digital marketing involves understanding how to use multiple online ad platforms and other technology. Today, there’s no single platform to simplify the management of digital marketing for restaurants. So restaurateurs are left using a hodge-podge of tech.
• Marketing is a discipline of its own, so even if a restaurateur achieves a certain level of knowledge and proficiency, they may not understand how to optimize their marketing. They constantly face the lingering questions of “Where do I go from here? What should I do next?”
Getting started begins with understanding what independent restaurants need to achieve when it comes to local marketing, which includes:
• Getting a customer to come in multiple times to build a habit and create lifetime value.
• Understanding what your marketing spend gets you, broken down by method and channel, e.g., which ad, campaign or offer led to an increase in traffic, sales or both.
• At the moment of intent, deflecting from third parties to get a direct order. This has several longer-term benefits including avoiding third-party ordering fees and giving the restaurateur direct access to customer data, enabling them to continue to engage the guest.
In a follow-up article, I will suggest practical steps that independents can take to market locally and win new customers, even against the big chain giants and third parties.