Calculating Restaurant Marketing ROI
Statistics indicate that 2% of all revenue goes to marketing, so nowadays it’s very important to understand restaurant ROI and the way it should impact your promotional budget.
What Does ROI In Marketing Mean?
ROI means a return on investment. You’re investing money in your business, but how much value is that investment making? Return on investment is a performance metric and is the profit and revenue attributed to marketing activities.
You can calculate it by dividing the amount returned/amount invested and multiply by 100 to determine the percentage of ROI you received. Calculating marketing ROI is a task that is best performed by your marketing company.
How Does a Good Marketing ROI Look Like?
The return on investment in restaurant business often ranges from one marketing medium to the next. You can put advertising online and earn a 5:1 ROI, but you will not receive the same ratio if you’re sending out direct mail campaigns.
The lowest ROI you should aim for is 200% — or the breakeven point.
Most restaurants will aim for a 500% ROI before accounting for investment costs. In this case, restaurants spending $1,000 on advertising will want to achieve $5,000 in revenue and $4,000 in profit from their marketing campaign. Hyper-relevant marketing campaigns can produce a 1000% ROI, but most campaigns will not come close to this figure.
Calculating and Tracking the ROI of a Restaurant Marketing Strategy
Sometimes it can be complicated to know how to calculate restaurant ROI because you may have multiple marketing avenues running at one time. Tracking where the sales came from can be difficult, but it is possible.
For example, if you send out a direct mail coupon and offer 20% off of pizza if the person uses the promo code 20% off, you can:
- Track all coupon usage
- Tally up total revenue earned on the pizza
So, if 1,000 people ordered a 20% off pizza using the code and each pizza cost $10 after the discount, you would bring in $10,000 in revenue. Of course, there would be additional revenue if consumers purchased breadsticks, soda or other items.
Another way to perform this calculation is totally all of the guest checks for the entire month that used the promo code. The checks would include all of the items on the order, which may include:
- Soda
- Wings
- Sides
- Etc.
So, your 1,000 orders may now have a total of $30,000 in sales. Determine the cost of all goods sold and subtract it from the $30,000. In an effort to make the calculations easy, let’s assume that the costs of goods were $13,000, so you would deduct this from $30,000 to come up with $17,000 in gross profit.
There’s also the fact that audience members may know that you’re a sponsor and come to your restaurant without the coupon because it’s not available to them.
In general, the easiest marketing avenues for a restaurant to track are:
- Coupons
- Online orders
It’s up to you to determine how to do restaurant marketing in your area. I live in a town of retirees that spread the word about their favorite restaurants. Marketing via direct mail is very seldom here, but in the big city where I lived prior, I would receive flyers from every restaurant in town.
Sometimes ROI is tricky to calculate because restaurants want to bring in more people, but it’s not the only metric that is impacted in marketing campaigns.
Source: https://mcdonaldpaper.com/blog/how-to-calculate-your-restaurant-marketing-roi
