NPD: Loyalty is key to growth in the 'new normal' marketplace

With little to no growth forecasted for the restaurant industry in the next several years and consumer frugality being the "new norm," restaurants will need to cater to the needs of their cost-conscious customers to build loyalty and enhance value, according to The NPD Group.
NPD foodservice market research found that, although there were more than 61 billion restaurant visits in 2012, restaurant traffic counts have yet to recover to pre-recession levels, and it's more difficult now for operators and their suppliers to find growth paths in the "new" marketplace of less consumer demand.

NPD's recently released report, "Planning for Growth in the New Normal Marketplace," claims that there is now a different consumer mindset shaped by the hard-hitting Recession from which consumers are still recovering. Now, consumers have less confidence in their employers and their government and are spending less. According to the report, nearly three of every four Americans today consider themselves cautious and controlled in their spending habits.

More recently, the imposed payroll tax increase with its impact on wages, severe weather and rising gasoline prices are all providing added stress. The new consumer mindset has restaurant operators challenged to find ways to rebuild or enhance consumer trust in their brands and in the value of their offerings in order to grow at a faster pace, finds NPD.

The return in building customer loyalty for a restaurant operator is significant, according to the report. For example, NPD's QSR Market Monitor which tracks the correlation between loyalty and visits, finds that loyal quick-service restaurant customers visit twice as often as QSR restaurant switchers. Other advantages loyalty brings include:

Higher brand awareness requiring less costly marketing.
Loyal buyers bring in other buyers.
Loyal buyers tend to be less price sensitive and
Loyal buyers have a higher tolerance for mistakes.
"The current new normal marketplace requires operators and their suppliers to develop or realign their marketing strategies to address the needs of today's consumer, like incentives that keep customers happy and deliver perceptions of value," said Bonnie Riggs, NPD's restaurant industry analyst. "It's also important to keep in mind that there are other marketplace growth opportunities to leverage, and there will always be winners, even in a soft market."