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Loyalty Analytics: Addressing the Challenge of Incremental Sales Lift vs Revenue Cannibalization

post_helenHelen Baptist, Fishbowl’s Vice President, CRM, advises clients to focus on incremental sales lift as the goal for all marketing programs.  She shares her experience on how to ensure that you aren’t cannibalizing existing revenues.

A key challenge for restaurant marketers is to ensure and prove that all marketing programs maximize the potential incremental sales lift, while demonstrating that they are not causing the cannibalization of existing revenues.  If campaigns are targeted at customers who would have bought in any case, it’s more likely than not that few incremental sales will result.  We know from experience that marketers can be confident they are delivering incremental sales if they set up marketing campaigns appropriately and then measure rigorously.

There are two ways to look at incremental sales:

  • Per customer.  This approach associates the net lift in sales per customer with a specific one-to-one marketing message and enables comparisons of performance by segment, if different segments are targeted in the campaign.  For example, you could compare the behavior of guests who have not dined in the last twelve months to the behavior of all other guests as a result of one marketing campaign.
  • Per total campaign incremental sales.  This approach measures the total net lift in incremental sales across all segments that were targeted in the campaign.

From a tactical perspective, there are two primary methods to measure the lift from incremental sales:

  • Create and compare hold out (control) groups for every campaign. The guests in these groups are randomly selected to be excluded from a campaign.  By comparing the behavior of a hold out group to the targeted group, you will understand the campaign’s incremental lift.  But this is only the first step.  Marketers should continue to perform analysis on the hold out groups to drive additional incremental sales.  Note that to ensure statistical significance of your control group results, you must have the right number of people in each group. In addition, you must guarantee randomness by making all guests on your list eligible for rotation into a control group.
  • Measure guest behavior pre, during, and post campaign.  These are all opportunities to evaluate changes in customer behavior, such as frequency, spend, recency, and the increasingly important Net Promoter Score™, which measures customer loyalty and advocacy.  The key here is the ongoing measurement of a particular cohort over time.

Fishbowl’s Loyalty Analytics solution offers restaurant marketers the opportunity to benchmark guest behavior and segment performance and ultimately to evaluate changes on a campaign-by-campaign basis as well as year-over-year.  Such analysis and the associated metrics enable marketers to determine net sales lift across all programs, which is the only way to ensure a positive ROI on marketing spend.