How to Calculate ROI in Restaurant Marketing

In the ever-evolving world of the restaurant industry, competition is fierce. As of Spring last year, there were more than 660,000 restaurants operating in the United States. So, what are you doing to stand out in this colossal crowd?

The answer to this question inevitably ties back to one thing: your approach to restaurant marketing. Take KFC, for example. In recent years, KFC’s marketing department has introduced the world to “fried chicken art,” sent a chicken sandwich into space, and even debuted a limited edition gravy-scented candle. Of course, being a global chain with over 20,000 locations has its perks, including a substantial marketing budget that would dwarf most quick and full-service restaurants. After all, space travel isn’t cheap. However, here’s the good news: 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.

It’s crucial to understand that creative for creative’s sake doesn’t cut it; you have to prove that your investment of time, money, and energy actually did something positive for the business. This is where calculating marketing campaign performance metrics, like return on investment (ROI), becomes essential.

In this post, we’ll delve into how restaurants can calculate the ROI of their marketing campaigns, covering:

1. How to Create a Restaurant Marketing Strategy

Often, businesses subscribe to the age-old “throw it all out there and see what sticks” philosophy when it comes to marketing. However, this approach undermines two critical elements of a successful strategy: intention and direction. Without a well-defined restaurant marketing plan outlining what you’re doing and when, you’ll have a tough time pinpointing where your successes came from.

Your restaurant marketing strategy is the sum of all the marketing activities you’ve planned for the year ahead. It’s essential to have a plan in place, so each marketing campaign on your calendar should include:

• Customer Intel: Who are you targeting with this campaign, and what do you know about their behavior and preferences?
• Intended Marketing Channel: Where will this campaign take place? Will you include channels like email or social media?
• Key Marketing Messages: Why does this campaign matter to your target customers, and what are you trying to get them to do?
• Campaign Goal: What is the objective of this campaign? Is it to increase your social media followers or sell more of a specific menu item?
• Campaign Duration: How long will you run this marketing campaign?
• Marketing Campaign Performance Metrics: Track the performance of the campaign, such as sign-ups to your loyalty program and subsequent purchases.

Don’t forget about the elephant in the room: budget.

2. How to Determine Your Marketing Budget

There’s no one-size-fits-all answer when it comes to budgeting for restaurant marketing. The appropriate budget depends on factors unique to your restaurant. You may find that your approach to budgeting varies from one campaign to another.

To pinpoint the correct marketing budget, analyze your total revenue, review past marketing expenses, compile a list of anticipated expenses, and arrive at an amount that feels suitable for your restaurant’s goals.

With a budget and a plan in place, your next task is to monitor marketing campaign performance metrics. In the next section, we’ll dive into calculating marketing campaign ROI.

3. How to Calculate Marketing ROI for Your Restaurant

Let’s consider a hypothetical scenario: After reviewing sales reports and analytics from your restaurant’s POS system and employee scheduling software, you notice that sales are suffering on Wednesday evenings, and your restaurant is over-staffed as a result.

To address this issue, you decide to run a social media marketing campaign promoting a Wednesday wing special throughout January to attract more customers.

In February, it’s time to analyze the marketing campaign’s performance. Here’s what you need to do:

• Calculate the total sales from checks that included your Wednesday wing special.
• Subtract your cost of goods sold (COGS) to determine your gross profit.
• Deduct your marketing expenses to find your net profit.
• Use one of the following formulas to calculate ROI for your restaurant marketing campaign:ROI = (Net return on investment) / (Cost of investment) x 100%orROI = (Final value of investment – Initial value of investment) / (Cost of investment) x 100

To calculate the marketing ROI percentage, divide your gross profit by your marketing expenses. For instance, if this value works out to be 200%, it means that every $1 spent on your Wednesday wing campaign generated $2 in profit. Not bad!

While there isn’t necessarily a “sweet spot” for marketing ROI, the goal is to be in the green—meaning your return was greater than your investment—rather than in the red, where your investment outweighed your net gains.

4. Tips to Maximize ROI on Your Restaurant Marketing Strategy

If you find yourself in the red after completing a marketing campaign, don’t worry; it happens to all of us. Here are three things to consider for achieving a healthy return next time:

• Keep a Watchful Eye: Regular monitoring is essential to determine when and where to make adjustments. Over time, making data-driven decisions will become second nature and help maximize your ROI.
• Beware of Vanity Metrics: Metrics should always be actionable, accessible, and audit-able. Don’t solely rely on metrics that look good on paper but don’t translate into tangible results.
• Engage with Your Audience: Marketing research involves more than just targeting your audience; it’s also about how you target them. Engage with your customers to understand their needs and preferences better.

In conclusion, mastering the art of restaurant marketing involves careful planning, budgeting, monitoring, and analyzing ROI. By following these steps and tips, you can increase the chances of success in a highly competitive industry. Looking for more help creating a winning restaurant marketing plan? Click to contact skipli for a free consultation.

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