Payments As A Service

Can Reservation Platforms Book Customers For Life?

Do restaurants understand their customers? Cancellations and failure to transform one-time visitors into regulars is eating into the industry’s $68 billion annual revenue. But deeper customer data insights can help restaurants improve engagement by targeting promotions to more loyal patrons, says Ben Leventhal, co-founder of reservation software firm Resy. In the latest Payments as a Service Tracker™, Leventhal explains how both restaurants and software providers can stand out in a crowded field.

 

It can be a struggle to get guests into a restaurant, and it’s an even greater task to convert them to regulars. Attracting and retaining customers is a pressing issue — one that restaurants in 2017 reported was their second-most urgent concern.

While some restaurants may rely on chalkboard sidewalk signs and greeters to engage with potential patrons, other venues have been embracing the digital realm to establish repeat customers. In fact, ambitious restaurant platform providers are betting that these issues — the start of the customer relationship and the extension and continuation of it — can both be eased with tech. To make their point, they’re providing everything from fast reservations to customer relationship management (CRM).

After all, if guests are a no-show, both their dinner dates and the restaurants that turned away customers to hold the table are left hanging. Cancellations, poor customer data and missed opportunities to turn a one-off dining experience into a repeat habit can all trouble the $68 billion restaurant industry.

Ben Leventhal, CEO and co-founder of restaurant reservation booking app Resy, recently spoke with PYMNTS about his company’s fine dining software solution — including its efforts to reach modern, mobile-hungry consumers and help restaurants build tighter customer bonds through loyalty programs and other features.

“There are lots of pain points related to how restaurants communicate with their customers [and] maximize efficiency and profitability,” Leventhal said. “We’re trying to solve all kinds of problems associated with shortcomings with the software they generally use to run their restaurants … We’re laser-focused on the connectivity between diners and their restaurants.”

 

Connecting with the Mobile Consumer

Today’s consumers are used to ordering any type of service at any time of day with just a few clicks, and they expect that same model when it comes to restaurant reservations. That means consumers who wake from a dream about grilled steak in red wine sauce want to be able to pull out their smartphones at 2:00 A.M. and instantly be set for their next dinner. They don’t want to wait until the next day to call the restaurant during operating hours.

For some, even the task of calling a venue to make a reservation — and likely being put on hold — is a deterrent. Modern consumers tend to do everything on their phones except talk, and handling a phone conversation with a stranger or having to call back if the line is busy can make potential patrons rethink their plans.

It can be challenging for a busy restaurant to designate a staff member to answer calls rather than assist with other tasks, though. This kind of phone-based solution can introduce other problems — for instance, if a customer calls to cancel her reservation, the restaurant is in trouble if it misses the call and ends up reserving the table for a no- show.

These examples and others are why restaurant-focused platforms seek to help clients meet consumers where they are: in the mobile realm.

“The 21st-century restaurant customer is mobile-first, often mobile-obsessed,” Leventhal said. “That’s a huge opportunity to attune the hospitality experience.”

That means not only offering a mobile reservation platform, but also two-way, real-time messaging between the diner and the restaurant for purposes like alerting staff of a late arrival or a cancellation.

“We understand the consumer is using a mobile device primarily,” he explained. “Two-way messaging is obvious when you think of the customer in that paradigm.”

It’s also leading platforms to recognize they need to get social. That means helping restaurants connect to customers on Snapchat, Facebook and other platforms.

“It’s table stakes to have connectivity out to the social platforms,” according to Leventhal. “It’s incredibly important today and will continue to be. It’s a place where consumers are making discoveries and choices about where to eat.”

 

Keeping the Customer Loyal

Mobile-friendly approaches to get customers in the door and reduce restaurants’ reservation headaches are just one step toward building up a customer base. Restaurants then convert their first-time customers into repeats by providing positive experiences and focusing on targeted retainment efforts.

Leventhal believes it’s more strategic to emphasize building loyalty and securing repeat customers rather than driving new traffic, and he sought to design his platform around that idea.

“The restaurant’s focus should be on getting customers back,” he recently wrote. “The longer a restaurant can retain a customer, the lower the per-meal cost of acquiring that customer becomes [and the] more profitable that customer becomes to the restaurant.”

Platforms seeking to help with these efforts are providing various customer relationship features, including optional customer profiles through which diners can list dietary restrictions, birthdays, allergies and other details. That passes the information more seamlessly to the restaurant staff and helps them meet diners’ needs.

Another tool intended to give restaurants better customer information and promote repeat experiences lets restaurants give ratings of customers. Resy’s website posits that a restaurant might want to offer special promotions to guests who have high user ratings. Leventhal noted this system helps restaurants reach out to repeat customers and offer easier reservation access — for instance, by holding aside a certain number of tables for loyal patrons.

 

Fee Exchanges

Payments that are easily made can also help customers leave on a positive note and keep restaurants happy. Resy is currently exploring options enabling diners to pay their full bills at the table through the mobile app.

It already takes payments on behalf of the restaurant for reservation or cancellation fees, pre-paid ticketed events and similar transactions. Many restaurants take advantage of the service’s ability to charge a reservation fee, thus helping customers think twice about cancelling.

While diners are mobile-savvy, Leventhal has found little demand for digital-based payment methods such as Apple Pay or bitcoin. Instead, the vast majority of users prefer to pay with credit card, and the service settles with restaurants through ACH.

 

Pricing Appeal

There are a variety of reservation platforms available, all jostling for restaurants’ business. To stand out in the crowd, Leventhal said platforms must consider their pricing model and what kind of relationship it creates between them and the restaurants they aim to serve.

Some major names in the space choose to charge restaurants a fee for each reservation made through their platforms, but he believes that discourages close provider-client relationships.

“When you charge restaurants per cover, we think it sets up a contentious relationship between our service and the restaurant,” Leventhal said. “It creates a dynamic where restaurants are de-incentivized to make full use of the platform. That’s historically something that’s been somewhat broken about how software like ours is priced.”

Instead, he advocates for offering software to restaurants for a monthly subscription fee, encouraging as much service use as possible.

Resy is keeping an eye on considerations like these as it works to both expand its offerings and continue its efforts to turn initial customer interactions into long-term relationships. That includes between diners and restaurants as well as restaurant clients and the platform.

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About the Tracker

The Payments as a Service Tracker™ is designed to give an overview of the trends and activities of merchant platforms that not only enable payment processing of new and old technologies, but also integrate with other features to improve the merchant’s experience, including customer engagement, security, omnichannel retail, analytics, inventory management, software and hardware management and more. 

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Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. Check out our April 2019 Unattended Retail Report. 

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