Achieving Higher Customer Lifetime Value in Your Restaurant

Restaurant customer lifetime value, or CLV, is the amount of revenue you can expect over the entire lifetime of a customer, from their first visit to your restaurant to their last visit. Note that acquiring new customers is much more expensive than retaining existing ones. Therefore, enhancing your restaurant’s CLV leads to greater profitability and stability in time. 

How Do You Calculate the Customer Lifetime Value (CLV)?

Follow this simple formula to calculate the customer lifetime value.
CLV = Average order value × average purchase frequency × average customer lifespan

CLV Calculation Example

An example of a QSR (Quick Service Restaurant): $15 per visit × 4 visits/month × 24 months = $1,440 CLV

Is the Customer Lifetime Value the Same for All Restaurants?

The total customer lifetime value changes based on the type of restaurant, which may include a full-service restaurant (FSR), quick service restaurant (QSR), or fine dining.

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Fine dining restaurants often experience fewer visits but a higher average order value (AOV) per visit, and typically, customers have a longer lifespan. FSRs and QSRs often see more visits but lower AOV per visit.

Tools like Paytronix track each of these variables in real-time, eliminating the need for spreadsheets and guesswork.

What Metrics Impact Customer Lifetime Value (and How Do You Track Them)?

Five easy-to-track metrics may impact CLV, including:

These data points are trackable directly in Paytronix’s reporting dashboard, so no manual analysis is needed.

What Does a Customer Lifetime Value Growth Ladder Look Like?

Customers often follow the same path on the customer lifetime value growth ladder, as illustrated below:

1. First visit
2. Second visit via an offer
3. Loyalty enrollment
4. Personalization via CRM
5. Surprise-and-delight moment
6. Automated milestone campaign (e.g., 10th visit)
7. Win-back if inactive

Thankfully, there are numerous strategies you can use to maximize CLV through targeted marketing and customer relationship management. This is one metric you can have some control over. Let’s examine how to increase it. 

How Can You Improve Customer Experience?

Customers frequently return to restaurants where they had an amazing experience. That’s why it’s critical to do everything you can to offer exceptional service that encourages repeat business.

Start by thinking through how your customers experience your restaurant from start to finish. Ask yourself the following questions:

• How do they get to your restaurant?
• Where do they park? (The average US parking space requirement is roughly one space for every 75 to 100 square feet of building space.)
• Is the parking lot well-lit, clean, safe, and adequate?
• Who greets them?
• How do they place their order?
• Do customers receive any personalized messaging through loyalty programs?
• How long do they wait for their meal? (US diners expect fast food orders within five minutes or less, casual dining orders within 20 minutes or less, and fine or full-service dining orders within 30 minutes or less.)
• Does a manager check on them while they eat?
• Are their drinks refilled without asking?
• How frictionless is it for them to pay? (US customers prefer using debit and credit cards and may spend up to 83% more when using card payments compared to cash.)
• How are they thanked for their visit? (Roughly 80% of your business comes from regular customers, so go out of your way to thank each visitor, even if it’s for three seconds.)
• What can be done to improve these experiences?

Some brands build such exceptional customer experiences that customers remember them, return, and expect them. For instance, Chick-fil-A is one of the largest fast-food brands with drive-thru lines that frequently back up on streets. Employees tell customers, “My pleasure,” instead of just processing orders.

Olive Garden gives out chocolate mints, which they’re known for. The sandwich chain Which Wich gives each customer complete flexibility with their order by letting them choose all the ingredients and toppings they want on printed checklists.

What Is the Best Way To Implement Targeted Marketing Programs for Increased Customer Lifetime Value?

Your customers aren’t all alike. A one-size-fits-all approach to marketing and customer retention is much less effective than targeted marketing programs capable of speaking directly to each customer’s needs and preferences. 

When you segment your customer base into different groups, it’s much easier to send them engaging marketing campaigns they’ll respond to. This can increase customer lifetime value, as it encourages them to return to your restaurant.  

For instance, you can create different segments based on age, income level, and family size. Ideally, you would send emails about a "kids eat free" night promotion to families who have children and happy hour promotions to customers who work and are over the age of 21.  

Some other ways you can segment your customers to better target marketing efforts include: 

• Geography (including geofencing campaigns) 
• Past behavior 
• Occasions like birthdays 
• Dietary preferences
  

How Do You Plan a Marketing Budget Around CLV Gains?

Software solutions with integrated loyalty programs, CRM systems, mobile apps, and more can help you earn more and save more over time.

Investing $2.50 in a loyalty reward may lead to $50+ in added CLV. Putting money into CLV opportunities helps justify higher acquisition costs because retention is profitable, and you can use CLV as a forecasting tool: How many more customers like this do you need to grow revenue by 20%?

For example, Legal Sea Foods invested in a campaign to increase loyalty signups and, over time, increase customer lifetime value. The campaign resulted in a 60% increase in loyalty members within two weeks, and new enrollees continued to visit the following month.

Paytronix helps track the ROI of individual campaigns, enabling decision-makers to understand CAC-to-CLV ratios by customer segment.

Tiered CLV Optimization Strategies by Restaurant Type or Size

Restaurant owners can optimize their marketing by focusing on strategies that work well for their restaurant type or size, ranging from enterprise to mid-size to small businesses.

• Small independent restaurant: Focus on text-based loyalty and referral incentives that encourage guests to come back as often as possible. These types of incentives encourage loyalty over time while increasing CLV.
• Mid-size multi-unit chain: Utilize geofencing and personalized birthday offers via email or SMS using software solutions like Paytronix, which can track this information and send out offers effortlessly.
• Enterprise brand: Automate win-back campaigns and set up AI-driven reward tiers, so your marketing team doesn’t have to lift a finger. This strategy allows marketing teams to focus on the bigger picture to create a more successful CLV.

Paytronix enables CLV-driven campaigns for all of the above segments through scalable technology and dynamic audience creation