How to Survive Disruption in the Restaurant Industry

Views of the restaurant industry were at their highest in 2017, according to Gallup analytics, with 72% of American respondents rating the industry overall positively.

While these highly optimistic opinions represent great news for anyone associated with the restaurant industry, restaurants continue to face many challenges, including disruption of their traditional service model.

In the past, people defined "restaurant" by their experience. Next came takeout. Then some restaurants started selling prepackaged meals at grocery stores. Some have moved into the catering business.

And now, many are partnering with third-party delivery services. In the past, most restaurants had one or two delivery channels, but now, some have as many as five.

Other industries have experienced similar changes and disruption and survived.

For example, the primary method of interacting with a bank was once in-person transactions.

Next came the availability of 24/7 ATM machines and call center interactions that could do more than simply fix a problem -- they could serve, and in some cases sell, to customers.

Banking has since moved online, and for many customers, transactions with their bank now occur in the palm of their hand with a smartphone and mobile banking apps.

Social media sites such as a bank's Facebook page or Twitter account have become new approaches to solving customer problems or marketing new products.

The number of banking touchpoints continues to increase as banks find additional ways to provide services to customers.

Balancing all touchpoints, however, is essential to survival.

Restaurants Should Engage Their Customers

What Gallup has learned from studies of its banking customers is that a bad experience in even one channel can negatively influence the overall customer relationship.

Gallup's research has revealed that customers value another aspect of service almost as much as they value convenience: consistency.

They have service expectations for a brand and expect banks to meet those needs regardless of delivery method.

Our banking studies have revealed that when banks do not meet those expectations -- when customers do not get the experience they desire -- their engagement suffers.

In a study of 3,100 banking customers, Gallup found engagement dropped by 30 percentage points when these customers gave anything less than a 5 rating (on a 5-point scale with 5 being the highest) to any specific delivery channel, even if they gave every other channel a perfect score.

The problem escalated when banks viewed the customer experience through various channels in isolation without connecting customers' actual experiences to each channel in the bank's ecosystem.

When faced with similar disruption, Gallup analytics reveals that the restaurant industry can learn an important lesson from the banking industry: Engagement and consistency are important to restaurant customers.

A study Gallup conducted of casual dining customers found that those who are fully engaged make 56% more visits per month to that restaurant than actively disengaged customers.

Fast-food customers who are fully engaged make 28% more visits per month to that restaurant than actively disengaged customers.

These findings from Gallup illustrate why restaurants need to understand and adapt to the changing landscape.

They can't just add delivery channels for extra revenue.

Similar to retail banking, it might be more valuable to examine optichannel rather than omnichannel experiences.

If restaurants solely focus on adding more channels, they risk not understanding their customers and hurting their overall brand by not ensuring they are delivering consistent experiences across all channels.

Through research and our work with restaurant clients, we advise restaurants to:

1. Understand the revamped customer experience in the restaurant industry.
2. Prioritize logistics and organization.
3. Segment your marketing and feedback.
4. Enhance customer engagement experiences in traditional channels before expanding.

1. Understand the revamped customer experience in the restaurant industry.

To adapt to customers interacting with different channels, restaurants need to ensure that they manage customer experiences using consistent brand standards -- not isolating delivery methods.

Creating a valuable customer experience system in any industry is difficult, and ensuring that system covers many different ways of delivery presents an even greater challenge.

Organizations tend to look at their customers through one lens of the customer experience platform because of the tools and materials they have in front of them.

A multifaceted approach is necessary when there are two or more channels.

Organizations that have multiple approaches based on each channel of delivery successfully pay the right amount of attention to each channel and start with the customer first.

They approach customer feedback not channel by channel but rather by putting customers first and understanding how they interact with the organization across one or many channels.

For example, these organizations determine which channels customers use most often, how often they use each channel, how many channels customers use and any preferences for a specific channel based on a certain demand.

Once organizations understand customers' experiences, they can identify the key factors in customers' engagement at certain touchpoints.

Then, organizations can share these points of customer engagement with employees so that they have a clear understanding of what actions they can take to increase customer engagement.

2. Prioritize logistics and organization.

Adding additional modes of service can create problems for restaurant managers.

Many restaurants were designed with the traditional dining experience in mind -- not to serve as a hub for takeout orders and third-party pickups.

Understanding how the restaurant runs from the perspective of customers in the restaurant and those picking up orders is crucial.

How the restaurant operates in these channels affects parking, waiting areas, food preparation times and packaging.

Reviewing traditional standard operating procedures with these new methods in mind and, most importantly, with a focus on customer needs and expectations and convenience, ensures that a restaurant can shift its delivery methods without affecting valuable customer experiences.

In addition, making the standard operating procedures easy and straightforward for both managers and front-line employees is imperative.

With new channels come the need to revise standard operating procedures and update old systems and process.

Restaurants should make sure that new procedures and channels are consistent.

3. Segment your marketing and feedback.

Traditionally, the restaurant industry has relied on customers completing opt-in surveys at the bottom of receipts for feedback about their experiences.

In some cases, this feedback is linked to a specific restaurant location and shared with that location.

In the future, this form of feedback requires more nuanced analysis.

Restaurants need to know if the person who completed the survey linked to a certain location dined in, ordered takeout (and if they did was a third-party deliverer involved), or ordered catering.

These differences are vital to properly using customer feedback for improvement.

Knowing customers' expectations as they experience a restaurant through its different service channels is vital to understanding the performance of all segments of the restaurant.

A lunch catering order with food that is cold or arrives late will turn customers away from not only ordering catering again but also dining in the restaurant. However, a perfectly delivered catering order could be an organization's greatest marketing tactic -- attracting both new and old customers to the restaurant from an experience that someone else paid for.

Restaurants need to eliminate these examples of engagement destroyers to retain customers and increase their engagement.

4. Enhance customer engagement experiences in traditional channels before expanding.

With increased customer expectations and serious competitive pressures, restaurants might feel pressure to deliver services in all types of channels such as:

• dining in the restaurant
• takeout
• prepackaged meals
• catering
• delivery

But mediocre performance in any new channels will only hurt a restaurant's overall brand.

To engage customers, restaurants should provide enhanced customer engagement experiences in traditional channels.

Refining what they currently do well to do better will allow restaurants to not only maximize each customer experience regardless of channel but also boost all revenue sources.

Rather than rushing to meet the latest industry trends, restaurant need to deliver near-flawless customer service.

"Doing it all" won't provide the competitive edge restaurants expect -- as Gallup's research from other industries has demonstrated -- but delivering near-perfect customer experiences at every service channel and touchpoint will.

• Download our free report to learn how to improve business outcomes using customer engagement.
• Engage your customers to keep them happy and returning to your restaurant.

Daniela Yu contributed to this article.