Domino’s, Starbucks and Taco Bell are embracing technology to gain market share over rival restaurant chains that have been slower to adapt and independents that can’t afford to.

1. Chains that embrace technology
fare best in restaurant wars
Michael Halen and Jennifer Bartashus
Bloomberg Intelligence analysts

2. Domino’s, Starbucks and Taco Bell are embracing technology
to gain market share over rival restaurant chains that have
been slower to adapt and independents that can’t afford to.
Quality mobile apps have fueled sales performance in the last
several years, and new technologies including WiFi, beacon and
mobile-marketing automation are creating new ways to engage
customers.
The restaurant chains that figure out how to utilize these
technologies first and most effectively stand to win the battle
for consumer dollars.

3. Big data can help restaurants know their customers, boost sales

4. Accurately categorizing customers lets restaurants tailor
marketing, menus, engagement technology, service and food to
multiple customer types, maximizing sales and margins. Cutting
edge technology allows chains to combine demographic and
psychographic data with in-store behavior to create dynamic
customer profiles.
This enables the chains to tailor discounts and offers to each
consumer, while gaining accurate marketing attribution and
ROIC measurement. Data-driven insights help ID and target
these customer groups.
Targeted promotions can reduce reliance on discounts to frequent
diners and market to their preferences instead. The programs can
also help add visits during non-peak hours. Bloomin’, Brinker and
Chipotle are using discounts to drive traffic, and sales and margins
could benefit from targeted offers.

5. Bloomin’, Brinker & Chipotle Same-Store Sales

6. Restaurants save big bucks with data-driven changes to media mix

7. Thin profit margins keep restaurant advertising fairly lean, with most
spending under 5% of sales. Accurate customer segmentation
driven by data analysis can help chains target messages to generate
higher sales lifts while holding or even lowering budgets.
A shift in advertising mix is also underway. Marketing via social media
and YouTube can be effective and cost-efficient. Interactive games
have become increasingly popular. Technology can help measure
return on investment of specific campaigns.
Casual-dining chains such as Olive Garden and Ruby Tuesday still
heavily favor traditional media ads, while Taco Bell, Jamba Juice,
Chipotle and Denny’s have been faster to increase their mix of
digital advertising via social media apps and YouTube.

8. Advertising Costs as a % of Revenue

9. Digital marketing funds may be next for restaurant franchisees

10. The cost of implementing and continually evolving customer-facing
technology at restaurants has muted its use. Domino’s, Papa John’s
and Pizza Hut have online order usage rates of over 50%. To drive
usage, Pizza Hut franchisees contribute 10 cents an online order
to a digital marketing fund, and Domino’s franchisees 21 cents.
This may be a strategy for other restaurants, such as Dunkin’ Donuts
and Taco Bell, which have robust online order apps, and others
looking to develop more capabilities.

11. Pizza Chain Franchisees Pay Digital Order Fee

12. High-quality mobile ordering apps fuel restaurant share gains

13. Several restaurant chains with high-quality mobile apps, including
Domino’s, Starbucks and Taco Bell, gained market share in 2014
and 2015. The chains attracted customers, particularly millennials,
with mobile ordering, mobile payment and/or loyalty programs
that enhance the customer experience, boosting customer
satisfaction scores.
Digital ordering has other benefits, including faster throughput
inside the stores and higher average tickets for delivery orders
as customers have easy access to the entire menu.

14. Domino’s, Starbucks & Taco Bell Same-Store Sales

15. Coffee, pizza chains may have easier time with mobile adoption

16. Most consumers are likely to keep just a few restaurant apps on
their phones giving chains with a higher frequency of customer
visits, including coffee and pizza, a greater likelihood of mobile
app adoption than other restaurant types.
Heavy users of Starbucks and Dunkin’ visit the stores more than
once a day and Domino’s customers eat pizza 22 times a year, with
the chain capturing about half of that. Restaurants that generate
fewer visits must get creative to entice customers to download and
use their apps.

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