Why Owners Need to Understand Restaurant Customer Data

Hey restaurant owners, want to make more money? Pay attention! In this article I’m not going to bore you with numbers. Instead, I’m going to show you the strategy of how delivery apps like GrubHub/Doordash/etc use your “customer data” as the ammunition to destroy your profits and existence. Sound extreme? It’s reality, but if you […]
Why Owners Need to Understand Restaurant Customer Data

Hey restaurant owners, want to make more money? Pay attention! In this article I’m not going to bore you with numbers. Instead, I’m going to show you the strategy of how delivery apps like GrubHub/Doordash/etc use your “customer data” as the ammunition to destroy your profits and existence. Sound extreme? It’s reality, but if you follow along you won’t become the “statistic.” Once you see the strategy you will think to yourself, “How did I so easily get tricked?” To answer that question, I’m also going to cover the sales techniques applied to you that make you completely ignore reality when thinking about the financial success and operation of your restaurant. This article is not an “opinion” article, there are no “maybe it could go both ways” in this article. Everything in this article is fact, is black and white, and it’s written by me, a computer scientist. I have worked with hundreds and spoke with 1000s of restaurant owners which has  helped me fully grasp the short term and long term effects of how data is strategically used. If you are serious about making your restaurant successful and keeping your city alive: pay attention. 

Without realizing it, your city was under siege before the pandemic. Grubhub/Doordash/etc type companies have spent 100s of millions of dollars on ads. This ad spend has created the normalization of their product.  As more and more people have become comfortable with the process of ordering food from the apps, you have probably started to notice a slight downturn in walk in traffic, or phone orders, while gradually seeing a rise in the delivery app orders. While this contrast was gradual before, the pandemic exaggerated the effect and made restaurant owners start to finally take notice! But just because people are getting vaccinated, doesn’t mean the problem is about to go away. The problem was already there before the pandemic. Once you are educated on the mechanics of the problem, then you can take action to change the problem and be more successful.

Instead of starting by focusing on how you got tricked into becoming a willing participant of the problem, let’s skip ahead to the strategy and mechanics of how delivery app marketplaces like Grubhub and Doordash use the data they collect from your customers against you.

Step 1: Track your customers

Once a delivery app marketplace has your customer’s email address from ordering with your restaurant’s partner link/marketplace order/google maps order/etc…the marketing “machine” starts to go to work! Very smart people working at Grubhub/Doordash/etc have created a “marketing machine” that when fed an email, will start tracking everywhere your customer has logged in with that email: Facebook/Instagram, Google Maps, Google search, Youtube as well every website/blog showing ads using Google or an Ad Exchange. 

The Grubhub/Doordash/etc marketing machine uses what is called a “remarketing list.” This targeted marketing is very powerful and allows any marketer who pays for ads on facebook (and/or on Google who has spent over $50,000) to only display ads to people on this list who are logged in with that email (or other various more complicated tracking methods). Knowing who is the direct recipient of an ad is the “holy grail” for marketers and is very valuable.

Step 2: Display customized targeted ads to the people being tracked

Because the “marketing machine” knows that your customer is watching, it can then focus its massive advertising budget on your customer instead of a random customer. If the “marketing machine” knows the person on the internet was your customer, the machine also knows to display imagery in an advertisement showing the food type they like based on your customer’s previous orders AND maybe use YOUR restaurant’s branding because it knows that that customer has established trust with your brand. So instead of the marketing machine spending $10 to show one unfocused advertisement 1 time to 10 random people, it can now spend $5 to show a hyper targeted ad to one person 5 times that includes YOUR branding and/or other factors to further personalize that ad. You don’t have to be a psychologist to know that seeing a random non-focused ad once vs a focused tailored ad 5x that speaks directly to you will be infinitely more effective in leading to a click and an order. But pay attention..and this is where their sales agents want you to look away and discount reality…even though that ad is possibly using your branding:

  • that ad will never lead to a direct phone call order to your restaurant
  • that ad will never lead to a walk in customer ordering
  • that ad will never lead to a direct order from your website

Instead, that ad is going to lead to an order through GrubHub/Doordash/etc where it MIGHT link to your restaurant’s profile in their marketplace where they can order and then you pay a COMMISSION AND MARKETING FEE. Additionally, that customer might decide not to order from your restaurant when Grubhub/Doordash/etc flash an inviting promo that another restaurant is running in their marketplace… completely shutting you out from anything…even thought they used your branding to get the customer into their website. Once this marketing machine gets a hold of your customer’s email, it is aggressively going after that customer for their 2nd, 3rd, 4th to lifetime of ordering. 

The “power” of their very targeted marketing machine directly at your customer draws customers away from your direct phone orders, walk-in orders, and direct web orders. The consequences of targeted marketing by delivery apps are very real.

Grubhub/Doordash/etc  running ads using your customer’s data: 

  • Compete against your ads
  • Compete against your search results
  • Compete against your results on Google maps
  • Compete against people going directly to your website. 

Step 3: Spend a [email protected] of money to make restaurant owners forget reality.

Those are strong words, but maybe those strong words will force the industry to wake up. I’ve literally had this conversation 1000s of times with restaurant owners in the last 3 years. Out of those 1000s of people, hundreds work with me…meaning 1000s are still not willing to grasp reality. Even while reality is slapping them in the face, they persist and experience one or all of the following:

  • A decline in the volume orders
  • Maintain a volume but make less money per order
  • Raise prices to make up for the margin thereby eliminating a whole population from their experience
  • Close

All of these realities suck to the restaurant owner, suck the customers, and suck to the community. And yet…it keeps happening.  I’ve thought about this alot, how can this keep happening? Do we really want to see a city where the last restaurants standing are restaurants that serve low quality ingredients at higher prices?  I want the creative unique restaurants to still exist that give character to a city, and that can serve a community. Instead with the Grubhub/Doordash/etc business model, but we are seeing that experience erode, money leaving the cities all because an oppressive food ordering eco system is persisting and taking an average of 33% of every transaction. When you see the tactics, and review the consequences it’s all pretty obvious. So how are all these companies still bullying the restaurant industry and claiming they are the good guys?

  1. Nobody, including restaurant owners, wants to believe they have been duped. Even though the tactics and consequences of these food delivery apps are very hard to miss. Once you start paying attention, nobody wants to admit to being duped. 
  2. Sales team. Their sales team is trained to sell and full of young people aggressively incentivized to get you signed up. They have been coached to use words like “partner” and phrases like “we will do the marketing for you”…but who are they really marketing? They aren’t marketing your restaurant.  There is a big difference between marketing your restaurant and USING your restaurant to market themselves. Once take time to pull apart almost every argument that they make…it’s ridiculous.
  3. Branding is powerful. They are literally spending 100s of millions of dollars in advertising to validate their existence. It’s easy to be convinced about something when “everybody is doing it” and if you see repetition everywhere you go. It normalizes the experience, and is the foundation of branding.

Some restaurant owners are savvy to the big picture, but most are not. Starting a restaurant is a crazy idea that takes guts, bravado, confidence, and a temporary suspension of reality to take a leap of faith in a creative endeavor of passion. It’s easy to see how these delivery apps can take advantage of those unique personality traits required to start something great.

No matter the truth, the sales agents working for Grubhub/Doordash/etc will still grasp for ways to justify what they are selling and completely disregard the consequences. They will disregard the math or the remarketing efforts and instead say they are providing value in “casting a wide net” or “creating initial momentum,” even when there are far more cost effective ways to do it outside of the Grubhub/Doordash/etc eco systems.

If you were to confront a sales rep and ask them if they know of an independent study that measures profitability comparison of using delivery apps as the main sales channel vs direct orders that incur upfront cost in self marketing efforts after 3 months, 1 year, 2 years ect…they will either lie, say “trust me I have been doing this for years”, or say “let me get back to you”

The reality is..the sales reps have no idea what they are doing. They don’t know the big picture of what they are selling, or when they do know what they are selling, they will choose to validate to themselves that they need to “pay the rent,” at your expense.

Recap

As you digest all this information, it’s important to recognize that there are only so many hours in a day. The ammunition of customer data you may have willingly given to the Grubhub/Doordash/etc “marketing machine” leads to high commission orders through the delivery apps, and lowers EVERY other sales channel you have. I repeat, if a customer is ordering through a delivery app, they are NOT ordering from the phone, directly on your website partner link, or walking in for dinner service. The delivery apps will do EVERYTHING in their power to remarket your customer’s future orders to their marketplace. With their tracking and marketing skills, they have proven to be very successful at it. Turn it off, there are better ways to get customers.

If you are under the impression that you are “old school” or “used to doing business a different way” or “have done business for X amount of time” and that you are not affected by these apps now or in the future…think again. The data of reality simply does not support your gut instinct. Time does not stand still, customers evolve and either you evolve intelligently or you get left behind. 

Next Step: Fight back with the right digital assassins and make more money

Without restaurants providing any real marketing competition, it’s easy for these delivery apps to steamroll over restaurants. However, with the right expertise, you can actually employ the same strategy that Grubhub/Doordash/etc do, except instead of the links going to a delivery app that takes a 33% cut, they funnel back to you without the huge commissions and marketing fees! Customer data is POWERFUL, if you don’t blindly give it away and instead start using it properly, you can beat them at their own game.

The game is complicated. You can take time to learn the nuances of the game yourself, or you can hire an expert as a shortcut to do it for you. While you may incur slightly more upfront costs, it is the absolute only way for your long term prospects.

If you employ the right assassins (ie Storegear) to properly plan your budget wisely, you can fight back and reclaim your business. Hiring the right talent is not free, but if you can find the right talent you will get a higher return on investment. 

There are many people claiming to be experts…but are not. How do you choose the real experts if you are not an expert yourself?

Check out this article on 5 steps on how to evaluate a website designer for your restaurant or small business.

Bonus: How did you fall for their tricks in the first place!

If you are super focused on cooking, hiring staff, creating an experience and some nice person comes along that says they are going to solve all your problems while being backed by millions of dollars, and multimillion dollar ad campaigns saying how much they want to help you..it’s very easy to get gaslit. However, when you get a moment to take time to think about the strategy employed by the delivery apps, it’s hopefully now painfully obvious how you can make your restaurant more successful.

The delivery app marketplaces hire psychologists to choose the verbiage in their documentation, the words sales people say and to create PR campaigns to make you think they are on your side.

Words like “partner” or “we support restaurants” or “marketing team.” This is a technique of half truths (10% truths). The verbiage of “partner” distracts you from the other “half” of what they are really doing: marketing directly against the sales channels that make you the most margin per orders. If they are your partner, they are the worst partner you could partner with.

They sell their services under the guise of it being “on top of” or a “bonus” or an “enhancement” of what you already do, but in reality they take from your other sales channels and reduce your profitability potential. 

The sales agents will also claim that the margins don’t matter because you need to get your name out there. While there is truth to that, that doesn’t mean that the most cost effective way to do that is giving away 33% of your business.

Many of the apps also make the claim that they offer low or no commission if the order is a pickup and through your direct website link. Again…this “Free” offer comes at a significant cost: evey order coming in through their link will give them access to your customers, allow the marketing machine to kick in, and then fight you for that 2nd, 3rd and 4th to life order.

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