In our previous article we looked at the complexity of fixing the “leaky bucket of loyal consumers” in the business of Quick Service Restaurants.
In this article we will explore how Linear Squared’s Retention2 product uses AI-driven “intelligent” targeting and offer optimization to address this problem.
Segments of One
Retention2 leverages Segments of One. i.e. it investigates the historical purchasing patterns of each individual customer within the QSR’s customer base – treating each person as a “segment” of size 1.
This approach enables us to dynamically arrive at an individualized definition of “lapse” for each customer based on his past purchasing behavior. This is critical in the context of the QSR industry, where a universal definition of churn is not valid. For example, a customer with a high purchase frequency may have lapsed if a new purchase doesn’t happen within a month while a low purchase frequency customer may not have lapsed even when there isn’t a new purchase within a month.
Qualifying customers for promotions based on Lapse status and Customer Lifetime Value.
The Retention2 product classifies customers as “active” or “likely to lapse” based on a dynamic definition of “lapse” unique to their own individual purchasing behavior. Customers classified as above would then be subjected to a screening based on their lifetime value to determine eligibility for a promotional offer.
The promotional offer itself could be tailor-made at individual level within budgetary and operational constraints of the QSR depending on the applicable strategy. i.e. customers classified as “likely to lapse” would be dealt with a retention strategy while “active” customers would be dealt with an Average Revenue Per User (ARPU) growth strategy.
Retention Strategy through Lapse Management
Lapse Management allows our solution to entice customers who have shown “early signs of lapse” to make yet another purchase and thereby remain an active customer. Further the solution is equipped with an optimization model that selects the most optimum retention offer from a set of potential offers designed to curb lapses. What’s more, it is capable of targeting unresponsive individuals on multiple attempts with the aggressive nature and appeal of the offer increasing at each new attempt. This optimal offer allocation aids the QSR to achieve maximum ROI within the boundaries of the available marketing budget.
ARPU Growth through Up-Selling and Cross-Selling
Increasing Average Revenue per “active” Customer (User) can be achieved by increasing purchasing frequency or average bill amount.
The most conducive of these two approaches will be determined algorithmically at individual customer level and most appropriate prompting time or the upsell/cross-sell offer will be determined accordingly.
When allocating offers across the eligible base in order to yield the optimal ROI, predefined budgetary and operational constraints of the QSR will also be considered.
Managing the campaign and monitoring the performance
While all this sounds exciting conceptually, it is mandatory that the decision makers have clear visibility of the ROI and the progress of the promotional activities.
This is provided by the fully customized cloud hosted application that is seamlessly connected to the QSRs databases (data security ensured!) and all promotional activity data. The QSR authorities are given the power to manage the campaigns as they require; nominate the quotas of customers to be targeted with discounts (depending on the budgets), and to view the progress of the past and running campaigns executed via personalized communication channels (SMSs or social media).
The dashboard provides the KPIs and the results of the campaigns managed by the product. The consumption of the promotions, revenue generation, month on month performance and all descriptive analyses on the results would be displayed as required.
So, if you run a QSR or any other consumer focused business and would like to explore how your loyal customer base could be retained more effectively while keeping your revenues in check, get in touch with us today!