4 steps to understand customer satisfaction and pricing power

Customer satisfaction is the underlying factor that leads people to keep coming back to your restaurant again and again. The simple fact is this: when restaurant operators excel in running their businesses, diners will continue eating there. High customer satisfaction combined with customer retention equals more pricing power.

So, how do brands establish whether they have pricing power?

Start by understanding your current customer satisfaction and establish your pricing elasticity. These insights enable operators to fine tune their customer service experience where needed while making well-informed pricing adjustments.

Step 1: Evaluate your customer satisfaction along the whole customer journey

Restaurant owners and operators can gain valuable insights from gathering and analyzing customer satisfaction scores (CSATs) to understand how customers value a restaurant’s quality of food, order accuracy, speed of service, professionalism and many others. It’s important to act upon those findings and change current processes where needed.

Think about each step of the customer journey and get rid of any bottlenecks that might deter from an overall enjoyable experience.

With the reach of social media, the customer journey starts when they search for your restaurant online so make sure your website is user friendly and provides customers with the information they are looking for. During their visit, customers, particularly younger generations, take the time to post their experience on Instagram with pictures of your food. Encourage your staff to provide customers with unforgettable hospitality through client engagement, such as offering a welcoming environment that is clean and well maintained.

Finally, their journey ends with post-visit reviews on outlets such as Twitter, Yelp and Google. Take the time to read what your customers are saying, especially negative reviews. By quickly responding to any negative experiences, it gives your restaurant an opportunity to showcase your customer service. Displaying an online presence will help you build a relationship with your customers, which enhances customer loyalty.

Step 2: Consider all your touch points

Today, customers have multiple ways of accessing your food. While it is important that your customers dining in have an excellent experience, do not forget about your off-premise customers, especially with delivery becoming a norm in the restaurant industry.

So if you are using a third-party delivery partner, make sure that your partner’s customer service is in line with your brand.

Step 3: Know your level of price elasticity

To establish price elasticity, operators can use their point-of-sales data to understand the effect price changes can have on demand.

If the demand previously declined on a particular item, it shows that the restaurant’s customers are price-sensitive. To address this, price increases should only be taken on selective items in those locations.

To establish which food menu items have pricing opportunity and which ones do not, brands can study the demand patterns for the individual menu categories and items after price changes. Items with lower elasticity offer operators room to increase price since customers perceive those items to be a good value for their money. 

Step 4: Understand what level of pricing power you have

High customer satisfaction along with low price elasticity – which means demand for a product does not change if price is increased – equate to a brand having pricing power.

Sorting restaurants into four quadrants based on their customer satisfaction score and customer price elasticity can help restaurant brands identify which locations have more pricing power.

As you work on these initiatives, know that delivering excellent customer service can be extremely beneficial to an operator’s bottom line. Taking the time to master every step of your customer’s journey can result in brand loyalty and customer retention that lead to repeat visits. In addition, creating a memorable experience for your customers every time they visit your establishment will allow operators to have additional pricing power with minor customer resistance.

Manjari Kosaraju, Director, Strategy & Insights at Revenue Management Solutions, directs the strategy, operational and analytics work for major QSR brands in North America.

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