Organizations across all industries have Key Performance Indicators (KPIs) to monitor performance and achieve desired results. The data collected from measuring these KPIs can drive growth and aid in making key business decisions.
There are several types of indicators for retail and F&B and some of the common examples include gross margin, cost of goods, labor costs, and average spending per customer. With such metrics, organizations can quickly highlight areas that need improvement and benchmark themselves against competitors.
However, besides the common KPI examples, it is necessary to distinguish which additional metrics to measure are the most meaningful and relevant to your business and its overarching goals. We compiled a list of extra KPIs that we believe you should be tracking over this year – check it out below!
1. Product Affinity
Product affinity determines the link in purchases to study consumer patterns and behavior. A weighted score, also known as the Lift, identifies the likelihood of two items being sold together versus random purchases of either item. It enables restaurants and retail stores to gain insights into the purchasing behavior of their customers, develop cross-promotional programs, and redesign the store’s layout accordingly by putting items with high-frequency combinations together.
For example, a drop in temperature has led to a sudden surge in the sales of padded jackets. Running an affinity analysis will help your business determine what additional products were often purchased together based on the customers’ transaction history. The data will likely show that gloves have a high co-occurrent relationship with padded jackets. This will prompt you to strategically place them in the same aisle or near each other, hoping that customers will leave your store with these two or more items.
2. RFM – Recency, Frequency, and Monetary Value
RFM is a marketing analysis tool to segment your clients based on their visits and consumption habits. There are three key factors in the RFM model, and this includes how recently a customer transacted with a brand (Recency), how frequently they’ve transacted with the brand (Frequency), and how much a customer has spent with the brand during a particular period (Monetary). Leveraging RFM enables you to target each customer segment with personalized marketing campaigns based on past purchases and their RFM scores, leading to increased repeat visits, customer retention, and lifetime value.
For instance, customers with top scores for monetary value indicate that they are the big spenders of your products. Marketers usually target this segment with luxury offers or upselling to increase the average order value. On the other hand, customers with top scores for frequency often make purchases but aren’t necessarily the biggest spenders – consider rewarding them with similar offers or free shipping to keep them engaged and loyal towards your brand.
3. Menu Performance by Sales Channel
As more F&B players adopt omnichannel strategies to distribute their products, it is important to regularly analyze and monitor these sales channels to promote the right one. There are various ways to distribute food, classified as on-premises (in-store ordering) and off-premises channels (takeout/pickup, delivery, or catering). After having an overview of your restaurant’s sales channels, dig deeper into data by comparing how your menu items are performing based on the channel used.
Choosing the appropriate channel of distribution is critical for your restaurant’s success. It determines how your products are managed, the speed at which they are delivered, and how effectively you bring your products into your customers’ hands. Leveraging this learning can help you invest your money and attention in the right channel, reducing costs as you don’t need to spend on promoting channels that do not significantly contribute to your overall sales.
4. Waste and Packaging
One of the major concerns in the restaurant industry is wastage, leading to increased costs for your business. Monitoring waste will improve your restaurant’s production methods, serving sizes, and demand forecasting.
It is also necessary to consider the channels used to distribute the food. With this learning, you can make intelligent decisions regarding packaging. For example, spend on the packaging that fits just right with your serving size instead of buying larger ones that cost more and take up too much space in your store – this could reduce expenses, especially if your restaurant is partnered with a third-party delivery company, which already takes up 30% commission fees.
To wrap it up, consistent monitoring of your key performance indicators will help you assess where your restaurant or retail store stands and make informed decisions. Measuring KPIs is a proactive practice that increases your business’s success, from checking which products are highly complementary to keeping track of waste levels. These must be adequately defined and communicated across all internal levels to ensure your team knows the importance of these metrics.