n other industries, like retail, brands optimize everything around Customer Lifetime Value (CLV). CLV is the projected cash flow from a guest, based on their recency, frequency, and spend.
Tech and e-commerce companies, and even hedge funds have been utilizing CLV for decades to help leaders fine-tune day-to-day operations.
So how can restaurants adopt CLV? Two leading CFOs, Matt Wilber from bartaco and Paul Potvin of California Fish Grill, joined author and Wharton professor Peter Fader (who pioneered the field of CLV nearly 20 years ago) and Wisely’s CEO Mike Vichich to discuss their playbooks.
What It Means to be Customer Centric
The conversation kicked off by defining what it means to build a business around the theory of customer centricity.
“It’s so true in the restaurant trade, but it’s very true everywhere, that customers are wildly different from each other” Fader explained. He continued, “Why don't we tip a little bit more of the business towards those ones who love us, the ones who will go through the gates of hell to stay with us, the ones who get our logos tattooed on their body parts. That’s this basic idea of customer centricity."
Putting the Theory into Practice
Both CFOs shared how pivoting towards using Customer Lifetime Value as a key metric in their businesses is redefining ops and revealing insights, in many ways.
Potvin shared that California Fish Grill’s focus on CLV is revolutionizing the idea of a sound marketing budget. “My cost of acquisition where we right now might think it needs to be 5, 10, or 20 bucks, that might be able to be a hundred dollars because the lifetime value of that guest is thousands of dollars.” Potvin said.
Wilber is looking to use a deeper understanding of customer data to refine strategic decisions like how new store sites are selected, and how menus are designed.
For example, restaurants often look to pull the lowest volume menu items without knowing who is ordering that item, and what actual effect it will have on the business. “Sometimes that lowest volume item is being ordered by somebody who’s driving a lot of guests to your store,” Wilber explained.
The Punchline? Customer Centricity is the Future
As customers demand more personalization from brands, the evolution of restaurants is accelerating. Both California Fish Grill and bartaco have leaned into the transformation.
“Every customer that’s coming into that building has an opportunity to be one of those top 5% customers,” Potvin said. He added “ You have to get the data infrastructure in place.”
Fader agreed. He acknowledged “It might sound like a challenge, it might sound unconventional, there’s no doubt that it is a big step away from the traditional way of running a restaurant, or a lot of other businesses” but encouraged restaurants to make the leap towards building their business around their best customers. He concluded, “Those that have the courage, the data, the insights to do it, can find great success, great return on investment from it.”
Click play below to watch the full conversation.
Image provided by bartaco