In this two-part blog, I will share insights on how retailers are moving from the dark days of surveying to innovative and more accurate ways of capturing critical information about their customers.
One of the critical issues facing mature QSRs and retailers involves quantifying cannibalization from new stores. This is of critical importance since in many cases there are cannibalization limits written into franchise agreements and if the threshold is exceeded then the deal is killed. I have been involved in hundreds of sales transfer studies and understand the importance of getting it right and the impact this has on the lives of both franchisors and franchisees. Let’s take a step back and touch on how sales impact studies were, and in some cases still are, completed today.
The Dark Days of Surveying
Some of you just starting out in your site selection and real estate development careers may not appreciate what it was once like to capture customer information from which sales transfer/impact studies and sales forecasting models could be developed. It was slow, logistically and analytically complex and costly. Weeks were spent selecting a representative sample of the store network to survey, determining logistics around which days and times to conduct the surveys and how hard copy maps and surveys needed to be printed and shipped around the country. Because this would slow down the point of purchase process – asking questions, requesting a postal/zip code, address or phone number – you would then need to convince your operations team that surveys were needed, followed by the franchisee.
This intercept/exit surveying also involved hiring professional surveyors. This was a massive expense, and could not be avoided if you wanted to gather customer info face-to-face. The surveys ranged from nine to twelve questions capturing check size, party size, visit frequency, prior location, post location, some convenience questions as well as demographic details and maybe a question thrown in to appease marketing. They usually ran for 4-5 days including the peak sales day/week parts. Surveying would take place during a ‘typical average selling week’, not impacted by infrequent events such as Carnival, Mardi Gras, or NHL playoffs. The data would need to be tabulated and keypunched and in the end you would compile around 600 or so surveys per store.
This process was labor-intensive and, due to costs, it was impossible to survey all stores in a chain. The most I ever surveyed was 100 restaurants for a chain of 1,600 stores! Paper-based clipboard surveys were the norm for most of the history of intercept surveying. The cost was roughly $2,650 USD per unit to capture the data and another $3,000 to analyse and determine cannibalization impacts. This assumed you were not also surveying the drive-thru as well! If you want to include the drive-thru, the costs of data capture are doubled – ouch!
Moving into the Light
Thankfully, those days are gone. The proliferation of smartphones, apps and the way people now interact with mobile devices has dramatically dropped the costs for all retailers – large and small – to understand not only who visits their store, but also who visits their competitor stores. In the last two years, we as an industry have advanced light years in our ability to capture and convert customer movement data to better manage our real estate network. This has resulted in better locations, local store marketing and operations and a more accurate understanding of cannibalization, leading to higher profits and fewer costly real estate mistakes.
I have done many projects over the years using traditional surveying methods, but the high costs, limited positional accuracy, limited survey period, and impact on consumer experience were always a concern.
The convergence of multiple factors has revolutionized the process of capturing customer surveys. For starters, vast digital cell networks and mapping apps (APIs) abound and everyone carries a tablet or smartphone – or both. The survey that needed to be done in person can now we done on the web at a time convenient for the consumer. We now conduct surveys with restaurants large and small using the Tango web survey technology. Surveys can be completed using any device at very low costs. For restaurants that are more challenged when it comes to capturing customer data, this is a great option to gather detailed information about actual customers.
Part two of this blog can be found here.