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When Red Robin Gourmet Burgers CEO Denny Marie Post saw the company enter negative territory on both sales and traffic during the fourth quarter of 2015, officials set out to understand what was driving the decline by doing research with their most loyal guests−Red Robin Royalty members.
“We learned that four key things contributed to this downturn,” Post explained during the company’s recent second-quarter earnings call. “The first was the experience in our restaurants had declined mostly and speed-to-table. Secondly, guests perceived we had become more expensive because we have been emphasizing our Finest line over either our Gourmet or Tavern. Our advertising was not breaking through was the third point. And last, we were not a player in carry out or a delivery, which has become more important to our guests. We were well behind the competition in mix and capability.”
Subsequently, the Red Robin team focused on all four issues and they have reaped positive benefits.
“Our operations team dramatically improved their level of service, raising the Net Promoter Score, or NPS, to a consistent 70 or better, in large part, by reducing those vocal detractors to 7 percent or less,” Post explained. “They accomplished this by honing in on those days and shifts where we fell short through our win the weekend tracking and coaching. We remain focused on driving performance because we see a clear connection between locations with highest Net Promoter Scores and higher comps.”
On the value side, the marketing team tested and rolled out an expanded Tavern menu, which now features eight items, including six burgers starting at $6.99.
“This new product news has us back in the value game with the Tavern menu mixing at 12 percent to 13 percent,” Post added. “Improvements in guest experience and perceived value are important, but what about our advertising effectiveness and our off-premise performance? Have we moved the needle on those? Our Let’s Burger ads break through because they speak to craving burgers and fun, and they appeal to a broader spectrum of guests than our past campaigns. We have chosen to invest incrementally in select, high-penetration local market to complement our national media using spot TV, local radio and/or print to raise our profile. We have seen higher increases in sales and traffic where we have done so. And we will continue to invest incrementally in future quarters.”
Third-party delivery also represents a significant amount of sales, almost 10 percent of total off-premise traffic, despite being in only 118 of our locations. Post noted that second-quarter same-store sales increased 0.5 percent while traffic was up 1 percent.
“We are continuing to roll out curbside to locations where it is possible and to add call center support,” Post said. “By early in Q4, all corporate restaurants will be on the call center and have designated in-store pickup areas. Roughly two-thirds of all our units will have curbside delivery. We have been cautious about the expansion of third-party delivery services based on their high cost and uneven guest experience. That said, guests are clearly interested in more delivery options. To understand what we could do, what we could control to improve the delivery experience, we conducted research with third-party users and found that our biggest opportunity was in accuracy of order. We are pushing our third-party services to integrate with our KDS system to avoid mistakes and reentering the guest order, but that will take time.”
Evan Magliocca, brand marketing manager for Baesman Insights & Marketing, told Loyalty360 that Red Robin has done a couple of things well that many within the service industry and retail struggle to accomplish.
“Red Robin sought to understand its customer and internalized the feedback neutrally and, without bias, corrected errors and enhanced offerings, and made customers aware of those changes,” Magliocca explained. “Seeking an honest view of your business and understanding that feedback without bias is extremely challenging. You need to be a customer-centric brand to accomplish that; to list out flaws and try to solve them for the benefit of your customers.”
What’s more, Red Robin reacted throughout the company, not just in one area, Magliocca noted.
“Red Robin changed product assortment to accommodate customers that wanted lower prices,” he said. “Red Robin adjusted logistics to include quicker service and carry-out locations and simultaneously adjusted marketing to increase awareness of those changes. Red Robin’s approach and execution should be emulated by more brands seeking to enhance their business and connect with their customers.”
Imagine Experience CEO Bill McCoy told Loyalty360 that there has been a cultural change over the past decade with people being more interested in the experiences they receive throughout their lives.
“Whether that’s making memories on a once-in-a-lifetime trip, trying something new, or stepping out of their comfort zone to learn something different, there’s a realization that the journey is just as important as the destination,” McCoy explained. “Restaurants have to adapt to offer a more personalized and attentive service to engage their customers in this modern-day climate. Red Robin is listening to its customers through the data it analyzes and sees results by improving the experience its customers require.”
Carrie McIlveen, U.S. Director of Marketing for Metia, told Loyalty360 that, as the digital culture continues to evolve, it is essential to continually collect, interpret, analyze, and act upon the consumer data.
“Red Robin’s focus on all four of these client areas of concern and demonstrating its intentions for change seems to be paying off based on improved service scores and increased sales,” McIlveen explained. “By concentrating on what truly matters to its customers, Red Robin can deliver the customer experience expected by its guests and continue to build loyalty. As delivery services continue to rev up in the food industry, it’s good to see Red Robin is being cautious in carefully selecting the right third-party delivery option. Although convenience is important, it needs to ensure the service of the provider does not reflect negatively on Red Robin’s food quality, brand, and overall reputation.”
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