Target marketing: Use it for quick fixes only

Outback Steakhouse promoted a meal deal offered only on Wednesdays.

Even though social media and related tools and techniques enable restaurant marketers to precisely target customer segments like never before, doing so may not be the best strategy for restaurant growth. Straightforward mass marketing is what actually works best for chain restaurants looking to boost their business.

Joe’s Crab Shack offered customers one-night-only deals on the last night of Mardi Gras.

That’s the key takeaway of a new report published by the Cornell Center for Hospitality Research, a part of the school’s prestigious School of Hotel Administration.

The study, “The Target Market Misapprehension: Lessons from Restaurant Duplication of Purchase Data,” was authored by Cornell professor Dr. Michael Lynn His work examined “the supposition that different types of restaurants appeal to or attract substantially divergent market segments.”

Lynn is referring to the likelihood that, for example, most restaurant marketers would reflexively assume that the thrift-minded coupon clippers who dine at Steak n Shake are unlikely to also eat at more-expensive chains like Cheesecake Factory, Red Lobster or P.F. Chang’s.

But they do. Lynn’s data found a significant duplication of patronage among these concepts and plenty of others. In the six-month period looked at by the study, 54 percent of Steak n Shake customers also patronized Red Lobster, 25 percent had a meal at the Cheesecake Factory and 17 percent ate at P.F. Chang’s. It’s almost the opposite of how many think restaurant customers would behave.

"The conventional wisdom among both researchers and operators is that target marketing is the way to boost market share," says Lynn. "However, my study found that the market is not that diversified—that is, the customers move from one restaurant type to another more or less in proportion to a brand's market share, and one restaurant's customers are not all that different from another restaurant's customers. For this reason, I believe that mass marketing strategies will be more successful than targeted approaches in bringing in customers."

The data for this study came from an online survey of 8,000-plus U.S. consumers conducted by WD Partners and the National Restaurant Association. Respondents were queried as to how many times in the previous six months they had bought food or beverages (eat-in, take-out, or drive-thru) from any of the 150 restaurant brands listed on the survey material. The research them then ran cross-purchase comparisons on this data.

Lynn, one of the most experienced and respected hospitality industry researchers out there, insists that, for restaurant chains, pursuing a target marketing strategy instead of a mass marketing strategy “is wrong.” But he doesn’t dismiss target marketing altogether.

“Target marketing can be an effective tactic that produces modest or temporary gains in sales, but it is not an effective strategy for substantial, long-lasting increases in your customer base,” he says. “To achieve that goal, you must increase the appeal of your restaurants to all consumers via mass marketing.”

This study could be a game-changer for the full-service chain restaurant industry, However, the recent emphasis on meal deals in this segment, particularly among publicly held casual dining concepts that have large national footprints, indicates that a short-term bump in sales remains a primary goal no matter what the restaurant has to do to get it. However, you can bet that Lynn’s study provides food for thought for high-level chain executives who job it is to plan for the long-term future of their concepts.

The full report covers a large number of restaurant brands across a number of industry segments.