Customer's Emotions Linked to Positive Restaurant Profits

| November 01, 2007

A restaurant's bottom line is often most influenced when an emotional connection is made with customers, according to a new casual-dining survey by customer research firm PeopleMetrics. In its study, PeopleMetrics evaluated customer engagement levels of recent diners of nearly a dozen national restaurant chains -- including Applebee's and Olive Garden -- combining traditional loyalty metrics with an emotional component. The result is that highly engaged customers are found to be loyal, go out of their way to do business with, say good things about, and feel passion for the brand and experience.

Comparing the customer engagement scores of 1,200 recent diners with the financial performance of publicly traded restaurant chains revealed a strong correlation. Restaurant chains with high customer-engagement scores far outperformed low-scoring counterparts, including an average gross margin of 29 percent compared to -12 percent, and earnings per share growth of 75 percent to -50 percent for lower-performing chains.

The study also considered what chains can do to build a more engaged customer base. "We found operators need to do a few things well to increase customer engagement," notes Kate Feather, executive vice president of PeopleMetrics. "They need to hire and retain employees who make the dining experience fun. But most important, restaurants who can quickly and effectively resolve customer concerns are the clear winners."

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