Most of the fast-casual dining restaurants have a loyalty program in place. If you have a restaurant business, it’s recommended to keep track of the valuable information that is provided by such programs. Having a loyalty program is a marketing cost by itself. Software companies that provide such programs usually charge a monthly fee but do provide various options such as an accurate customer database, different loyalty packages, email blast or text messages and many valuable analytics insights. Once you have these numbers there are various calculations related to CLV that businesses can perform to better understand the customer lifetime value insights.
Customer Acquisition Cost
Customer Acquisition Cost can be calculated by dividing all the costs spent on acquiring more customers (marketing expenses) by the number of customers acquired in the period the money was spent. For instance, if a restaurant spent $1200 on the loyalty program software plus another 5000 in customer incentives during a year period and acquired 500 new customers in the same year, the customer acquisition is $12.40.
Customer Retention Rate
Businesses are interested in the customer retention rate because it represents the number of remaining customers at the end of a period without counting the number of new customers acquired. The number of remaining customers can be calculated by subtracting the number of new customers acquired during that period from the number of customers at the end of that period. Because the customer database provided by the loyalty software can be filtered, it’s very easy to calculate the customer retention rate without mixing up the numbers.
Customer Profit Per Year
The loyalty software offers more data regarding customer profit per year than the regular sales numbers. Restaurants can have more information about a particular customer than the sales register data can offer. Information such as how many meals the customer ordered, the favorite items, the average dollars spent per meal, per week, per month or the total amount of dollars the customer spent during a particular time frame. To calculate the profit share per customer, divide customer profit with the sum of all the profit.
Loyalty programs are a great way to increase customer lifetime value, however, businesses need to understand the data to make sure they are heading in the right direction. For more insights about why it is important to understand the metrics read my article about Marketing Analytics.