Steakhouse Makes Customer Retention Its Newest Specialty

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After unsuccessfully using mass-market advertising to reverse declining sales, an independent steakhouse in Virginia has seen revenue climb through regular e-mail and direct mail contact with the 126,000 customers in its database.


"Before we adopted this guest-based marketing strategy, our sales had been flat or down for five years despite extensive radio, television and newspaper advertising," said Mark Tassler, co-founder and vice president of The Grate Steak. "When we switched gears and focused instead on building business from existing customers, we began seeing results almost immediately, and e-mail has played a central role in that success."


Sales rose 2 percent in 2001, 5 percent in 2002 and 10 percent so far this fiscal year.


With locations in Norfolk, Chesapeake and Hampton, The Grate Steak caters heavily to the military. About one-third of the names in its database are current or retired military personnel or military-related.


The Grate Steak uses software from ExactTarget, a Web-based e-mail design, delivery and tracking software company, to design an electronic newsletter that goes monthly to the 54,000 e-mail addresses in the database. Names were collected through customer comment cards given to customers with their guest checks. This information is entered into a Microsoft Access database daily.


Customers who do not provide an e-mail address in their comment cards can pick up a print version of the newsletter in restaurant lobbies or on tables at the restaurant.


Each e-mail newsletter includes a discount coupon offering a free appetizer or dessert for up to an $8 value, and the coupon is personalized with the recipient's name embedded in it. It also includes recipes, staff profiles, promotions and other restaurant news.


The Grate Steak sends other promotions as well. When customers fill out a comment card, for example, they are sent a thank-you mailing the first day of the next month, either electronically or in hard copy. The Grate Steak also sends a direct mail-only birthday mailing offering a free meal to those celebrating birthdays.


"We have to use direct mail for part of our campaign because not every customer provides an e-mail address, but e-mail is clearly a better choice because it is far less expensive, can be altered with just a few keystrokes and doesn't require printing time," Tassler said.


Discount coupons in The Grate Steak's e-mail offers, for example, are redeemed at a rate of 10 to 25 percent, generating valuable repeat business.


E-mail promotions also produce a higher check average than equivalent direct mail offers. For example, the average amount of a check among the three restaurants for customers using the e-mail coupon for May was $27 versus $22 for customers who used a coupon from a direct mail promotion.


Tassler also said that more people respond to the e-mail promotions. When he began sending the e-mail newsletter, only 20 or 30 percent clicked on it. Now, "[the click-through rate] is well over 50 percent, and I don't have nearly as many people coming back to me who say they want [to be taken] off my list or they want to unsubscribe ... People are getting used to it. They understand that we are trying to get them to eat with us more often."


Tassler encourages people to give their e-mail address. For example, coupons in the print newsletters are samples and cannot be redeemed.


"People who see the coupon say, 'Hey, how can I get this newsletter?' and [restaurant employees] say, 'Give us your e-mail address.' That's how I pick up more e-mail addresses," he said. "People want the coupon."


E-mail is also more convenient.


"I had a customer in the army who was in Kuwait, fighting, schedule a wedding reception dinner at my Norfolk restaurant for May 23 through e-mail," he said.


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