The long-awaited joy of a bustling dining room has finally returned. Yet as the industry hypothesizes about the long-term impact of digital with the return to in-person dining, billions of dollars continue to change hands in a way that will determine the fate of restaurant brand equity for years to come — and it’s happening outside of the four walls of the restaurant.
The choices restaurants make today on how to invest in marketing and leverage various food sales channels will have profound impacts for years to come. Fortunately, many other digitally disrupted industries offer key insights on how to navigate the shift. Today we will take a look at how disintermediation of the guest has impacted hotels, airlines, real estate, movies, and consumer packaged goods.
We’ve been comparing the restaurant and hotel industries for several years as we see a similar storyline playing out in real time with restaurants, where third-party sales channels are rapidly capturing share and command of digital bookings.
The hotelier’s loss of the digital guest relationship is well documented and a cautionary tale for any restaurant brand that does not envision a future where marketing budgets are dominated by campaigns to win back the guest.
Next time you book a hotel, have a look at all the cues of the street fight that is going on for your business: loyalty points, complimentary amenities (such as speedy wi-fi and free breakfast), and priority upgrades all offered as “book direct” incentives.
An emerging metric of success in the restaurant analyst community will be surrounding “percent direct digital” sales. If restaurant brands can see the signs and incentivize guests to maintain a direct relationship with them today billions of dollars of promotional marketing dollars can be saved.
The concept of direct bookings long precedes the digital era in other industries. In the 1970s, Southwest Airlines sold tickets by phone, at airports, and at their offices to avoid commissions from travel agents and remain competitive with car travel routes.
Southwest has stayed true to this core strategy of controlling the guest interaction and purchase experience. Although there is an undeniable convenience of seeing all flight options in a single search pane, Southwest has opted out of appearing on aggregators, instead offering an everyday low price value proposition for booking direct.
Bypassing third-party fees means Southwest can pass cost savings along to the consumer, which is analogous to what some restaurant brands are already offering with a best price guarantee on the menu for booking direct. We expect tactics such as third-party menu markups to continue in the restaurant space and encourage brands to communicate these perks to guests.
Since the late 1800s, information about real estate listings has been socialized through a shared network of real estate professionals, eventually moving online into consolidated local and regional online Multiple Listings Service (MLS) databases with the rise of digital connectivity.
The battle over data flow and user engagement began playing out once third-party listings portals and aggregators grew in popularity. Data quality issues gave way to outdated and inaccurate listings, which sparked frustration among both sides of the two-sided marketplace of buyers and sellers. Meanwhile, sites like Redfin emerged to disrupt direct brand relationships based on strong user experience and search engine marketing chops.
The battle over accuracy led some MLS organizations to withdraw listings on third-party sites until the industry embraced APIs and industry-wide data standards. Today, with proper integrations, information is syndicated out in a way that reflects live inventory.
Without proper integrations and strong APIs, the third-party marketplace data question would have remained in the wild west scenario that it was a decade ago. The real estate industry’s transition to digital has reinforced the importance of data standards and information properly flowing through a single source of truth, much like it is for forward-thinking restaurant brands with a digital stack that is under control and managed through a single channel.
While the streaming revolution is the resounding headline in the film industry, we’d be remiss to forget a brick-and-mortar parallel that led to the convergence of online sales and the on-premise experience.
Going to a movie used to be much like the pre-digital experience of visiting a restaurant: arrive at the establishment, queue up with others with the same idea, get access if capacity permits, and hope you won’t have to step over too many people on the way to your seat. These models both revolved around delivering service in a restricted capacity space based on asynchronous consumer decisions to visit.
Fandango ticket kiosks arriving at theaters in the early 2000s were a dream for teenagers like myself who lacked the patience and time management skills to arrive early to get a good seat. The ability to order and pay online ahead of time, eventually with the added perk of selecting your seat location, added a crucial convenience for consumers and connected the film industry with crucial data collection and marketing opportunities for guests who were previously walking in unknown.
Theaters looked to create and market their own digital offering, but unfortunately did not win direct relationships fast enough. After a string of exclusive relationship contract wars, AMC’s creation MovieTickets.com failed to capture market share as fast as its rival and was eventually acquired by Fandango Media. Investing in a compelling digital offering and marketing to create consumer habits are key to winning the first vs. third-party digital race.
Consumer packaged goods of all kinds top the list of industries with digitally disrupted sales channels. CPG marketers used to spend their days focusing on market research with eye-tracking studies and lengthy negotiations with brick-and-mortar grocers and retailers to gain prime positioning on shelves.
Instead of focusing on optimizing for retail spaces, CPG marketers are spending more time these days designing their digital storefronts on Amazon and paying premiums for top positioning in the search results.
E-commerce retailers like Amazon have emerged as data powerhouses in understanding how buyers search for CPG, when items need to go on sale, and how price sensitive consumers are. If you’re taking NYU professor and technologist Scott Galloway’s position, these marketplaces have an unfair advantage over the brands using the marketplace as a sales channel. Galloway goes as far as to say that “if you own the rails, you’re not supposed to be competing with the end destination.” Amazon Basics’ high-margin items illustrate the story; Amazon’s batteries hold over a third of online battery market share while Duracell, Energizer, and others fight for position in an uphill battle with their new distributor.
Will the restaurant industry learn from these cautionary insights? Other industries have shown us that the value of each dollar in marketing spend to drive direct behavior goes far beyond a short-term saved commission. Making ‘order direct’ marketing investments and putting product program elements in place as savvy restaurants are already doing is a must to win the battle. Timing is crucial for restaurant marketing and digital executives to deliver on a digital value proposition and to incentivize guests to ride the direct rails into the restaurant.