Restaurant Guest Lifetime Value

Restaurant Guest Lifetime Value

Every restaurant should work out how much the customer is worth to your business. This is known as the Guest lifetime value, or "GLV." Briefly, this is the value that a customer will contribute to the business until he is a active guest or a repeat guest.

You can calculate GLV using either historical data or any predictive analysis tools that considers previous transaction history as well as behavioral indicators. 

Unfortunately, many restaurants don’t collect enough data to calculate the customer lifetime value. It is a critical metric. 

Suffice to say; that this concept should be communicated to the team in several ways so that they are aware of the value of each guest and the criticality of guest delight of every guest every time. 

Guest lifetime value or Customer Lifetime value is a significant number to calculate since it tells you the amount of revenue generated by each customer, and gives you insights on how much you can spend to acquire new customers. 

What Is Restaurant Guest Lifetime Value And How To Calculate It?

(Similarly it can be calculated for a hotel or any other business). 

The factors to consider while calculating the Restaurant Guest Lifetime Value are –

  • Average spend of the customer
  • Average visits per year
  • Average no of accompanying guests per visit
  • Restaurant profit margin 

Restaurant GLV = Avg. Spend Per Month / Monthly guest Churn Rate

Churn rate is the percentage of customers that do not order from you again or return to your restaurant

Guest Churn Rate = (Guest at the beginning of the month – Guest at the end of the month) /Guest at the beginning of the month


How To Increase Your Restaurant Guest Lifetime Value?


A high restaurant customer lifetime value means the restaurant has a satisfied customer base. To achieve this, the restaurant owners should focus more on ways to increase the profits and foster repeat customers to decrease the churn rate.

1.    Restaurant Location : The restaurant should have a decent accessible location for high footfall and convenience of multiple visits. It should have adequate parking spaces which makes the customer visit you often without thinking of parking. Or have an efficient valet service. 

2.   Convenience: The new age consumers value convenience and the ability to place their order from anywhere which makes it essential to offer online ordering. It enables people to order from you even if they are unable to visit your restaurant. 

3.    Customer relationship building: Focused efforts should be made to constantly be in touch with the customer and to develop a personalized communication strategy. This will lead to brand loyalty and top of mind recall. The relationship is built over time by making the customer feel important eve time he visits. 

4.    Customer service: Needless to mention, this is a critical criteria for anyone to visit your restaurant. Quoting a cliché “people don’t remember what you do to them but remember how you made them feel” captures the essence of personalized guest service with utmost attention devoted to every customer visit. Remembering customer birthdays and anniversaries is a simple way of say ‘you are important to us’. You can go further and offer good discounts on these special days. 

5.    Engagement in social media : Your social media strategy and engagement often results in top of mind recall of your restaurant. Be active on the social media website where your customers are and listen to what they have to say and respond promptly. When you encounter a negative feedback take responsibility and own up and offer a service recovery. 

6.    Customer Feedback: Customer feedback is critical to any good operation. It is sometime the lifeline for you know the health of your business. Proactively soliciting feedback is critical and at the same time you need to act on any of the negative feedback instantly. This will also avoid bad publicity of the guest posts it on social media. Feedback also v=can be used to strengthen service and food quality according to the expectations of the market. Respond to all feedback , positive or negative and thank the guests. 

7.    Loyalty programs : Loyalty  programs not only build repeat business to your restaurant but also personalizes service by recognizing the guest. Today most of the program is web based and this give you an opportunity to push notifications and deals to stimulate demand for low periods. A good loyalty program makes te guest feel rewarded for his loyalty. This will contribute to the lifetime value of the guest. 

Ensure that everyone in your business understand and focusses on the GLV !

What kind of data does a restaurant/hotel bill gives you - person with family/friends/colleagues and how do you use that data

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Shiv Kiran Tatineni

Passionate Hotelier and Team Player

6 年

Nice insights sir

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Janmejay Upadhyay

Asset Management | Wealth Management | NBFC | Strategy | Operations | Process Excellence | Technology | Business Set-up | Program Management | People Management | Risk | Compliance | Governance

6 年

Interesting perspective Vikram..

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