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CEO Point of View — Customer Life Cycle Value (CLV) for Restaurant Marketing: Long Term Guest Focus Drives Business Growth

Scott ShawAs restaurant marketers increasingly grapple with the proliferation of guest data, they will learn what their counterparts in other industries, such as retail and hospitality, have known for a long time: the power of CLV. But what is it and how do you use it? Fishbowl’s CEO, Scott Shaw shares his perspective on this valuable metric.

CLV is a measurement of the value of any given guest or guest segment over time. To get the value, take the average spend per visit of a person and multiply that by the frequency of visits and length of time the guest patronizes your restaurant. Then apply your margin to the value and that’s the CLV. The key factors are frequency, spend and lifespan.

How to Calculate Customer Life Cycle Value

CLV isn’t useful as a tool for every day decisions, but it offers insights into the less obvious trends and opportunities in your business. Let’s say you decide to increase the price of a popular menu item. While the higher check results may make you happy in the short term, you may be sacrificing the overall CLV if customers come less often or stop coming altogether. That’s a tradeoff you need to identify. CLV can help you create an optimal discount strategy, ensuring that you are incentivizing the right guests. It should also serve as the gating factor for marketing investment decisions.

The challenge, of course, is getting the data out of silos and creating actionable information. Loyalty only provides a fraction of the needed data, skewed when guests forget to use their cards. But advances in technology are driving new opportunities for restaurant marketers, such as credit card tokenization that can be coupled with eClub member data. As restaurateurs increasingly take steps to close their marketing loop, the insights they glean on individual guest behavior can drive smart marketing strategies that result in longer term guest relationships with higher CLVs – the key driver of profitable business growth.