There are a LOT of restaurants out there and they are ALL in competition with one another. If you want bring bring paying guests to your brand new restaurant, if you want to survive, you HAVE to stand out.

How do you do that? Marketing.

Take KFC, for example.

In recent years, KFC’s marketing department introduced the world to “fried chicken art,” sent a chicken sandwich into space, and debuted a limited edition gravy-scented candle…. and that isn’t even counting their KFC sunscreen!

Of course, a global chain with more than 20,000 locations has a marketing budget just a teensy bit larger than most start-up restaurants (space travel ain’t cheap, folks), but the good news is when it comes to marketing, the size of your budget doesn’t matter nearly as much as the performance of your individual restaurant marketing campaigns. 

Being creative for creativity’s sake doesn’t cut it; you have to prove that your investment of time, money, and energy will actually do something positive for the business.

Before you start throwing your hard-earned money around willy-nilly, just a bit here and a bit there, hoping something will stick… you need to do something different.

You need to make a PLAN.

And since you know marketing can be very expensive, you need to know that expense will be worth it, right? You need to know that what you will get (revenue) will make up for how much you are going to spend (investment).

That’s what ROI is all about.

ROI stands for Return on Investment and it is the MOST IMPORTANT THING TO GET A GRASP ON WHEN PLANNING YOUR MARKETING CAMPAIGN. After all, what is marketing other than planting a little bit of money now with the expectation that you will harvest a crop of BIGGER money later?

Why ROI can be hard

The problem with determining ROI has to do with how incredibly complicated it can be to track the money you make for every dollar you spend.

For example, let’s pretend you are spending your money on a social media campaign. There are a LOT of details you would have to track to have any idea how much of your money it took to get someone to visit your restaurant for the first time. Each of those details is called a “metric” – just a fancy word for something we can track – and there are a LOT of potential metrics we might need to pay attention to.

Social Media marketing is truly effective (think YouTube commercials, Instagram ads, and Facebook promotions), but certainly not free… Companies spend thousands of dollars getting their name or product in the minds of their target market on social media.

How do they know what to spend money on? How do they know what works? Think about it for a minute. What information would YOU need to tell if a social media campaign was working?

If you are internet-savvy, you probably know about conversions, click-through rates, costs-per-lead, lead close rate, and more fancy-sounding digital nerd words… but do you know how to track them? Even if you know about digital tracking, when someone shows up at your restaurant for the first time – just some random family who decides to give you a try, coming for dinner some random Tuesday evening – how would you POSSIBLY know why the came? Are they there because they saw your SNAPCHAT ad? Because the saw a Facebook or Instagram post?

Unless your marketing is LASER-FOCUSED, you would have no idea.

Some companies (the kinds with way too much money), hire companies like RulerAnalytics to track these kinds of details for them. They turn information about conversions, click-through rates, costs-per-lead and the rest into real data that can guide your efforts. For you, someone who just invested your grandmother’s inheritance on a new restaurant? That’s probably not an option.

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How about a loyalty program? Well… you can certainly use the “handmade punch card system,” but these days, that just isn’t enough. How could you possibly track with any sort of accuracy how much extra business you are getting from a “buy 9 and the 10th is free”? Seriously. Is that freebie card bringing them back (or would they have come back anyway?)

Big companies hire others to do these kinds of jobs for them too. Remember, most loyalty programs these days are DIGITAL, not physical. There are many, many online companies that will take your money and do the hard work for you. Paytronix is a fine example: they will help you setup and monitor a loyalty program, keep track of its effectiveness, and give suggestions for improvement. Again. This is a pricy investment. But if you have lots of extra cash laying around, probably a sound one.

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But let’s pretend (for the sake of argument) that you DON’T have a million dollars to dump into a sophisticated online social media campaign or to pay for a marketing company to build you a deep customer loyalty program.

Thankfully, there are tons of POS (Point of Sale) products that will do a lot of this for you. Since you are going to be investing in a POS system anyway, make sure what you decide to buy has a well-regarded ROI tracking system built in.

Toast is my favorite, but there are other options as well. The good ones have very effective measures built in to grab customer data and allow you to track SOME of your customer data… so at least you won’t be flying entirely blind. With careful integration, your POS system will be able to give you an idea of WHICH of your brilliant ideas worked (and which should never, ever be tried again).

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BUT WHAT ABOUT THE RESTAURATEUR WHO IS JUST STARTING OUT?

What about someone who is planning to open a restaurant? They don’t have any data to look at to determine what has been successful or what has been a waste of time and money. How do they determine if their marketing investment will provide them a decent return?

Granted, a lot of this will be guesswork. But there is a process you can follow to make a reasonably accurate marketing ROI projection:

• Review your strategy
• Set a budget
• Set trackable metrics and KPIs
• Guesstimate your ROI
• Rinse and repeat

1. REVIEW YOUR MARKETING STRATEGY

Too often, my restaurant friends go with the old “throw it all out there and see what sticks” philosophy when it comes to marketing. They come up with some rando idea and think to themselves “I bet this would work! I have a really good feeling about the brilliant plan I came up with on too little sleep and 17 shots of espresso. Let’s spend all our money on THAT.”

Doing so messes up two critical elements of ANY successful strategy: intention and direction.

The two critical elements of ANY successful marketing strategy are intention and direction.

Sure, they might enjoy a win every now and then, but without the all-important restaurant marketing plan, the schedule outlining what they are going to do and when, they’ll have a tough time pinpointing where those wins came from. If they have any wins at all.

So, let’s do this first: review your overall marketing strategy:

• Target market: Who are you trying to win over? What are they like and where do they live? What do you know about their behavior and preferences? 
• Channel/ Arena: Where will this campaign be taking place? Will you include channels like email or social media?
• Messages: Why should this campaign matter to the customers you’re targeting? What are you trying to get them to do? Are they getting something free? Are they getting to try a new dish before anyone else? What do they get out of it?
• Campaign goal: Why are you conducting this campaign? To increase your followers on a particular social media channel? To sell more of a specific menu item? To bring guests on a particular night?No matter the goal, make sure it’s VERY CLEAR.
• Campaign duration: How long will you be conducting this marketing campaign?

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3. Decide what metrics you are going to track

Before you roll out this amazing marketing plan, you need to decide how you are going to track it WHILE it is happening and how you are going to track whether it was successful or not. The two terms you need to know about following marketing data are Metrics and KPIs.

Metrics refer to all the low-importance data that is RELATED to your marketing campaign, especially as applied to how the campaign is being implemented.

Key Performance Indicators (KPI), on the other hand, refer to the high-importance data that is the RESULT of a particular campaign. This is the big-picture sort of information. It is ACTIONABLE, meaning it tells you whether you should use this type of campaign again or if it was a waste of time, money, and effort. The KPI for the BOGO promotion we just talked about would be simple: how much did business improve during the three weeks of the campaign?

Here’s another example:

Let’s say you’ve just completed a four-week restaurant marketing campaign with the goal of driving sign-ups to your restaurant’s loyalty program (since you know it’s easier to KEEP a customer than to GAIN a new one). The Key Performance Indicator, in this case, is a program sign-up.

So what’s the difference? Metrics are little picture; KPIs are big picture. Metrics measure what you are doing; KPIs measure whether it worked or not.

“How are the KPIs on your marketing campaign?”
“Well, we gained thirty new signups to the loyalty program last night, so we’re doing pretty good!”

Now that you know what you’re going to do, why, how, and the KPIs you will track to see if you are successful, we need to get to the nitty-gritty: how much will it cost?

4. Future-tripping: how to guesstimate the marketing ROI for your restaurant

As you know, Return on investment (ROI) is the way to put a measurement on the profit that comes from an investment. But how does it do that? What EXACTLY is an ROI and how do you figure it out?

Everything up until now? We’ve been trying to get you thinking in terms of how investment and returns work… now we’ve got to do the hard part. Whip out your calculator. Put on your math hat. We’ve got to determine how much to spend and then make an educated guess on whether it will be worth it.

This is the section where stuff gets real.

ROI is a ratio

ROI is a ratio that compares the gain from an investment relative to its cost. For example, if you spend $100 on marketing and make $100 from that investment, you got yourself 100% ROI. What you spent on marketing was exactly what you made from the marketing.

CONGRATULATIONS! 100% ROI is crazy-awesome!

Let’s say you spend $100 and make $15. Well, on that one, your ROI is 15%. Not as amazing… but still pretty dang good.

What should you shoot for on your marketing ROI? Most US restaurants typically have a marketing ROI of about 10.8%. Based on the national average, we can say with confidence that anything above 11% is great (and anything above 15% is rare). So let’s shoot for the 10-15% sweet spot.

How do you figure out the ROI percentage?

ROI is calculated by subtracting how much you PLAN TO SPEND on your marketing campaign from how much money you think you will make, then dividing that number BY how much money you plan on spending. To turn what you get into a percentage (and you really want to do that!), multiply your answer by 100 and slap a % behind it.

Here’s how the whole thing works:

GOAL: Let say your goal is to have 100 new diners eat dinner at your restaurant each week.

BUDGET: To do this, you plan to spend $40,000 on a social media marketing campaign and plan to run the campaign for 1 month.

KPI: You know (based on your menu and average customer sales) that each of those new diners are going to spend an about $50 and that they will come back an average of four times per year, bringing you an additional $20,000 in revenue per year.

ROI: Use the formula! [(20,000- 40,000)/ 40,000] x 100 = -50%

Alright.

That’s bad. For every dollar you spent you made $0.50. Whoops.

Let’s say that the EXACT SAME marketing campaign only costed you $4000. What would that be like? For reference, here’s the formula again: [(20,000 – 4,000)/ 4,000] x 100 = 400%

Okey-dokey. Now we’re talking! for every dollar you spent, you made $4!

I have to warn you… There is NO WAY you are getting 50 new diners who are going to come back 4 times a year by only spending $4,000. But this should give you a pretty good guide to how the whole thing works.

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Pulling it all together: What is the projected ROI on that marketing strategy you want to try?

Here’s how you make it all happen:

1. REVENUE: Start by projecting your restaurant’s best-case revenue. Not sure how to do that? Here’s an excellent post on the topic: How to Calculate How Much Money a New Restaurant Might Make
2. BUDGET: Figure out how much of your revenue you want to spend on a particular marketing campaign. If you are only implementing ONE strategy, it can be ALL of the 5-10% of revenue you are going to set aside. If you are implementing SEVERAL strategies, the one we are focusing on now can only be a portion of the total.
3. RESEARCH: Dig around. Talk to some experts. Get a rough estimate of how much it will cost to implement your plan and how much success you will have based on how much you will be spending.
4. ROI: Use the formula to determine what your percentage ROI might be. Lower than 5%? You’ve got a bad idea. BAD. More than 20%? Your plan is probably not very realistic..

REMEMBER: During this entire process, you are going to be doing a LOT of guessing. Try to be conservative in how well you think your strategy will work, how much it will cost, and whether it will return the profits you are hoping for. Better to err on the side of caution and be pleasantly surprised, than to engage in a bunch of wishful thinking and crash and burn. Restaurant owners crying into their morning lattes because their marketing campaign was a waste of money… are a bummer. Don’t bum me out.

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Tips to maximize the ROI on your restaurant marketing strategy

If you’ve found you’re in the red after completing a marketing campaign, don’t worry — it happens to all of us. Here are three things to consider doing (or avoiding) to achieve a healthy return the next time.

1. Keep a watchful eye.
   Regular monitoring is essential to determine when (and where) to switch things up. Ultimately, your goal is to maximize ROI by getting the best bang for your buck. You might find the constant stream of restaurant data analytics overwhelming, but over time, making data-driven decisions — whether directly related to marketing or not — will start to feel second nature.
   
2. Beware of vanity metrics.
   Harvard Business Review accurately defines vanity metrics as “numbers which look good on paper but aren’t action oriented.” It does nothing for your restaurant’s bottom line that your Instagram post got 1,000 likes; if customers aren’t coming to give your new superfood smoothie a try, the likes mean very little. Metrics should always be actionable, accessible, and auditable.
   
3. Engage with your audience. 
   Not sure why your website traffic flatlined? Your analytics can point you in the right direction, but the most reliable source is your customers themselves. Marketing research involves more than just the audiences you’re targeting — it also considers the ways you’re targeting them.

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Tips to use social media effectively