E-commerce companies are great marketers. It is in their DNA. How many ads do you see each day from someone selling something online?
You see ads in your email, on websites, and in mobile apps. If you look at a product on Amazon, you'll see ads showing you that exact product the next time you read the news or check a sport's score.
With so many ways to buy items online, marketing is a key way to attract and win customers, and to then win repeat business from them.
There is a lot restaurant operators can learn from how e-commerce marketers approach their craft. We've pulled together a list of six below.
CAC stands for your Customer Acquisition Cost. It represents how much you pay for a new customer.
LTV stands for Lifetime Value. It represents the amount of gross profit you will earn on a customer over all of the orders they will make with you.
Your LTV has to be greater than your CAC. In fact, LTV should be at least twice your CAC and hopefully much longer. Think about it: Your LTV minus your CAC represents how much money a customer contributes to paying for things like rent, staff, insurance, and other operating costs. The more LTV is greater than CAC, then the fewer customers it takes to break even.
AOV stands for Average Order Value. It is the amount of revenue you make on an order. Your goal is to increase it over time. While that sounds obvious, not every restaurant operator is deploying tactics to do so. A few include:
The common idea behind each of the above: They are not discounts or coupons! You do NOT need to give your food away to earn customers. Coupons do have their place -- especially to win customers on the third party ordering aggregators -- but if you can source your customers through other channels then you should not feel compelled to always discount.
Once you win a customer, getting them to order frequently is a key. Making sure you are communicating with customers across as many channels as possible. That starts with each order, where you should include a piece of marketing material to remind the customer to order again. Remember how every delivery used to come with a menu with a phone number? Those operators were on to something.
The modern equivalent is getting a customer's phone number or email so you can market to them with SMS or email. Certain POS providers include this in their offering; however, there are other vendors who can add more value. (More below!)
We are all focused on revenue. But revenue is NOT the amount of incremental dollars you make with each order.
Every order has costs. The cost of food. The cost of a third party delivery aggregator's commissions. The cost for the containers you put food in. Your contribution margin is the profit you make AFTER these costs.
Notice that this does not include employees' wages. While you will hire or retain more employees dependent on your volume, you won't do so because of one more or less order. Your contribution costs are those that ARE impacted with each order, and your contribution margin is your revenue after these costs.
Focus on increasing your contribution margin. An item that sells for $20 with $5 of food costs is better than an item that sells for $22 with $10 of food costs. Think about that when deciding which items to focus on in your marketing because doing so will have drive your customer Lifetime Value.
Once you've optimized your Lifetime Value and you know you will make money on each customer, you can begin to invest in your customer acquisition. You'll feel comfortable investing in your marketing because you will see it as just that: An investment.
If you know the average customer will order 5 times, each order will average $50, and your contribution margin will be 60% then that customer will lead to $150 in profit for your business (5 orders x $50 per order x 60% contribution margin). You should be comfortable investing $50 to win that customer because even after that investment the customer will provide $100 towards paying for your operating expenses.
You might be wondering, "Shouldn't I try to pay less than $50 to acquire that customer?" The obvious answer is, "Yes!" But the nuanced answer is, "Perhaps not." That is because you might not get the maximum volume of customers if you try to decrease your CAC too much, too quickly.
Would you rather have 1,000 customers where you LTV minus CAC was $100 ($100,000 in cash earned to pay your operating expenses) or 500 customers where your LTV minus CAC is $125 ($62,500 in cash earned to pay your operating expenses)?
The great thing is technology is here to help you! Here are a few other companies we recommend:
Using tools like the above help you get more out of each customer. Targetable helps you find more of these customers through Facebook and Instagram advertising. Our platform will automate your advertising. It sends you drafts of ads to approve in an easy-to-use interface that feels more like Instagram or Pinterest than the Facebook Ads Manager. When you're ready to invest in your customer acquisition because you know it will help you find more customers with great lifetime values, then schedule your demo to learn more.
When putting your marketing strategy together, think like an e-commerce company. Drive your lifetime values and optimize you customer acquisition investment!
Start advertising smarter today!