Creating Profitable Restaurant Experiences: The Future of Upside for Restaurants

Today’s customers want a hybrid restaurant experience—one that’s both online and offline, and that also gives them great value.  

Unfortunately, given resourcing and market constraints, most restaurants are unable to achieve this vision. 

More often than not, restaurants that invest in interactive technologies use customer segmentation to predict what type of incentive will motivate each group to buy more. Then they run a campaign and measure performance afterward with limited data. The problem is that top-line metrics like clicks, sign-ups, or transaction growth fail to capture the full bottom-line picture. Specifically, focusing on these top-level metrics fails to take into account the upfront investment required to acquire new customers, and whether the campaign was successful in driving enough long-term changes in customer behavior to pay back the initial investment. 

Today, we estimate that the majority of restaurants actually lose money on segmented (not personalized) programming.

But that doesn’t have to be the case. The future of restaurants is personalized and profitable, and it is already here.

Defining personalization

All restaurants want more customers to try their menu and come back often. They are constantly competing with nearby inventory to earn customers’ business.  

There’s a general consensus that “personalization” helps restaurants build a more meaningful customer relationship – thereby winning more of their spending – but there’s less of a consensus about what “personalization” actually means. 

Digital ad technology long ago made personalization an expectation online, where cookies allow each of us to see tailored ads, webpage layouts, and discounts based on our individual preferences and past behavior. With more accurate targeting, online businesses can improve their profitability, and customers get a better experience. Seen this way, it’s clear that personalization extends well beyond a birthday email or basic customer segmentation.

In the past, truly personalized experiences (such as Amazon) were impossible in brick and mortar commerce. But now, as shifts in consumer shopping behavior have given rise to omnichannel acquisition strategies, more brick and mortar restaurants are able to stay competitive

And Upside is making this possible.

Creating profitable restaurant experiences with personalization 

Upside helps restaurants bridge the gap between the online and offline worlds to achieve a level of personalization that improves the customer experience while also bringing new profit to local businesses. 

In practice, this means meeting customers where they are – on their phones – and using restaurants’ anonymized transaction logs to learn more about each customer’s past behavior at a specific restaurant over the last 12 months. With that information, Upside provides dynamic, margin-bound, transaction-level promotions that motivate customers to either dine for the first time, or visit more often

Today, participating restaurants on Upside see: 

  • 2.1x more visits from customers each month
  • 2.3x higher spend from customers
  • 63% average return on investment  

Competitive restaurants are using Upside’s transaction-level offers alongside their own loyalty programs. Restaurants’ own programs – while critical for customer retention – do not widen reach enough to drive new customers or change behavior enough to win more visits from participating customers. And acquiring customers is much more expensive than retaining them.  

To help restaurants successfully acquire more new customers and keep them coming back, Upside’s algorithm uses 24 pricing factors—based on four years of data spanning more than 200 million offers—to learn about each customer. With this information, the platform provides compelling customer promotions while maximizing restaurants' net profit. All this is done using the anonymized processor data restaurants already have at their disposal. So there’s nothing new the restaurant has to do. No integration, no training. Upside does all the work.

Moving from total ticket to item-level personalization 

Today’s item-level promotions are often profit-cannibalizing, meaning that restaurants are offering discounts on menu items that a consumer would have paid full price for. Usually, promotions are determined based on order history or customer segmentation related to demographic characteristics like age or gender. 

From looking at a restaurant’s loyalty data, there is no clear indication that the programs themselves are making customers behave differently, since customers who choose to join loyalty programs are often the ones who were most likely to shop with you anyway (also known as selection bias). Nor do these segmentation characteristics account for individual preferences, market pressures like a pandemic, or real-time margin fluctuations. 

The alternative is providing dynamically-priced item-level offers. 

Dynamic item-level pricing determines the exact amount required to compel a specific buyer to make a purchase. This allows restaurants to maximize profits that would have otherwise been lost with traditional loyalty offers. 

In the near future, Upside’s machine-learning platform will also go beyond promotions to dynamically identify the right types of experiences and incentives at the precise time every individual customer needs them, and then deliver them through a restaurant’s owned communication channels like their app, website, and email communications. 

In practice, this looks like knowing Jamie always orders protein, and directing him toward higher-margin meat items. This gives Jamie the opportunity to try new things at a more favorable price, in a way that supports the restaurant's bottom line. 

This is a novel strategy to maximize loyalty and customer retention, and would be a true differentiator for restaurants.

Moving from personalized promotions to experiences  

Upside is focused on helping brick and mortar restaurants maintain their position as community staples. Today this means helping restaurants grow their bottom line through more visits and higher spend. Tomorrow this can mean everything from introducing customers to new menu items, to personalizing their own experiences.

For example, we imagine a future where the product alerts the manager that Taylor has never been to your restaurant before, and the manager can decide if she has enough time to go to Taylor’s table to welcome him.  

Extending this level of personalization through experiences – beyond promotions – would considerably maximize loyalty and retention of a customer, and would be a true differentiator in today’s market of fierce pricing battles.

The future of restaurants is a hybrid of online interaction and in-store personalization, and Upside is on the move to make these visions come true.

Learn more about what Upside can do for your restaurant business.