Optimizing Menu Engineering with Data-Driven Insights
- October 2, 2024
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Nouhad Es-Said
As competition in the restaurant industry intensifies, it’s become more and more important for restaurants to tap into their reserves of customer data to drive their menu engineering processes. This may involve anything from analyzing sales data to using advanced analytics to create a menu that contributes to your business’s financial goals.
The term “menu engineering” refers to the process of designing and pricing your menu so that it maximizes profitability while keeping your customers happy and fed. By evaluating the performance of each item based on factors such as cost, popularity, and contribution margin, restaurant owners and managers can make strategic decisions about which items they should promote, modify, or even remove from their menu at any given time.
Table of Contents
- The Basics of Menu Engineering.
- How Data-Driven Insights Have Transformed Menu Engineering.
- Using Your Sales Data to Optimize Your Menu.
- Taking Customer Preferences into Account
- Using Advanced Analytics to Hit Your Pricing Sweet Spot
- Supy’s Role in Optimizing Menu Engineering with Data Driven Insights.
- Conclusion.
- About Supy.
Take the example of one mid-sized Italian restaurant in the US. Over a few weeks, the owner noticed that her higher-priced pasta dishes weren’t quite selling as well as they used to anymore. Upon reviewing the restaurant’s sales data, she discovered that her customers were actually more drawn to their lower-priced pizza options. By adjusting the menu price and promoting combo deals that included both items, the restaurant managed to increase its average order value while simultaneously satisfying their customers’ preferences!
In this article, we’ll explore how restaurants around the world can optimize their restaurant menu with key data-driven insights. Read on to learn more!
1. The Basics of Menu Engineering
As previously mentioned, the term “menu engineering” refers to the strategic process of designing a restaurant menu to maximize profitability and guide customer choices. To do this, you must first analyze the performance of every individual item on your menu based on its sales data and profit margins. Once this is complete, each item is then categorized into four key groups:
- Star items (high profitability, high popularity),
- Plow-horses (low profitability, high popularity),
- Puzzles (high profitability, low popularity), and
- Dogs (low profitability, low popularity).
This classification helps in the optimized placement and pricing of items.
The traditional means of menu psychology relied heavily on visually catching the customer’s attention, focusing on aesthetics and basic customer preferences. This was done by highlighting high-profit items through strategic placement (such as in the upper-right corner of the menu) and using headings like “appetizer”, “main course”, or “dessert” to organize these choices. It was also common to use charm pricing strategies (e.g., writing $9.99 vs. $10) to subtly influence one’s customers.
With new technology on the horizon, however, restaurant owners now have access to personalized data-driven insights that have changed menu engineering forever! By creatively banking on their sales trends and customer feedback, restaurants can now make far more informed decisions about how their business is run. Modern restaurant owners and managers now have access to a dynamic range of pricing strategies, as well as more ways to adjust items in real time according to live performance metrics.
2. How Data-Driven Insights Have Transformed Menu Engineering
There’s a new cool kid on the block, and its name is data! In today’s competitive restaurant industry, menu engineering has come a long way. New data-driven insights offer restaurant owners a new, revolutionary approach that allows restaurants to make informed decisions to enhance profitability and customer satisfaction. By leveraging advanced data analytics, restaurateurs can refine their menu design, optimize pricing, and strategically position dishes to meet their business goals while keeping customers happy!
There are several key types of data that restaurants collect for menu engineering purposes:
- Sales performance data is used to highlight which dishes are a business’ top performers, underperformers, or have potential for repositioning.
- Customer preference data can be collected through online reviews, loyalty programs, or direct feedback. This lets restaurants identify their most favored ingredients, flavors, and presentation styles.
- Industry and market trends also provide a broader context to anticipate future shifts in dining habits.
By collecting this data in real-time, restaurants can quickly adapt to changing customer behaviors, or factors like seasonality and market demands. It’s still important to keep track of your historical data patterns as well, however, since this can reveal patterns that can be used to guide longer-term decisions. For instance, by identifying what menu item outperforms the rest during certain times of the year, restaurants can create dynamic menus that change according to the month of operation. This tactic can help restaurants sell smartly and in turn maximize their profits.
3. Using Your Sales Data to Optimize Your Menu
Gathering sales data is an essential part of optimizing a restaurant’s menu. By analyzing sales figures, restaurants can easily identify the best-selling items that drive the majority of their revenue, as well as recognize those underperforming dishes that should probably get cut from the menu. By collecting and studying your sales data, you can identify trends in your business, such as consumers’ seasonal preferences, peak dining times, and item pairings. With this knowledge under your belt, you can work towards fine-tuning an all-star menu that keeps your customers (and money) flowing in!
Take the case of one restaurant chain that noticed several high-cost, low-performing dishes were dragging down its overall profitability. By analyzing their sales reports, the chain’s managers discovered that a few signature items were consistently driving most of their revenue. Armed with this newfound insight, the restaurant got rid of the dishes which weren’t a major favorite of their clientele and replaced them with variations of what was selling more. In the end, this adjustment led to higher rates of customer satisfaction, faster service, and an increase in overall revenue!
Sales data can also be used to inform other critical decisions, such as portion sizes, pricing, and menu item placement. For example, a dish that consistently sells out but has tight profit margins might benefit from being sold in slightly smaller portion sizes to reduce waste and improve profitability. Additionally, popular high-margin items can be placed in strategically high-visibility areas on the menu to increase their chances of being ordered. By simply making these small but tactful adjustments, you can enjoy positive effects on the overall business and customer feedback of your restaurant!
4. Taking Customer Preferences into Account
At the end of the day, as a restaurant, you exist to serve your customers. Many restaurant owners can gain a better sense of what their patrons want by asking for customer feedback or detailed reviews. By listening to their diners, restaurants can identify their customer base’s likes, dislikes, and dining habits. This information can help restaurants ensure that their menu reflects the needs and tastes of their target audience.
By incorporating demographic data, location-specific trends, and broader dining patterns into their business, restaurants can come up with a personalized menu experience. For example, a restaurant in a bustling city might cater to younger, health-conscious professionals by offering plant-based options, while another in a suburban area might emphasize family-friendly comfort food. Nifty owners can use their customers’ age, income, and peak hour preferences to optimize not only their menu items, but also the prices for each segment of their customer base!
5. Using Advanced Analytics to Hit Your Pricing Sweet Spot
Many modern analytics tools play a key role in optimizing your menu’s pricing strategy—aiming for that ideal sweet spot that gets both you and your customers the most bang for your buck! These analytics tools allow restaurants to go beyond traditional cost-plus pricing models in many different ways:
- Demand forecasting involves analyzing past sales data to predict future customer demand. By understanding which dishes are likely to be popular during certain periods, restaurants can adjust pricing and stock levels to maximize profits and minimize waste. For example, higher demand during peak hours can justify dynamic pricing strategies, where prices are adjusted based on real-time demand.
- A competitor analysis helps restaurants stay competitive by benchmarking their prices against those of similar establishments in their area. Advanced analytics tools allow for constant monitoring of competitors’ pricing strategies, making sure your restaurant never over or underprices itself!
- Price elasticity studies use data to determine how sensitive customers are to changes in menu prices. Armed with the true reality of their situation, restaurants can fine-tune their prices for optimal profitability without really making an impact on customer satisfaction. For example, if a price increase on a high-demand dish leads to only a marginal decrease in sales, this adjustment could improve overall margins.
- Finally, predictive analytics help forecast customer behavior in response to pricing changes. This allows restaurant managers to simulate pricing scenarios and anticipate how changes may affect demand.
By leveraging advanced analytics techniques, restaurants can set prices that balance their profitability with customer satisfaction for long-term success in an otherwise cut-throat market!
6. Supy’s Role in Optimizing Menu Engineering with Data Driven Insights
Supy is designed to offer several comprehensive services that can help you in your journey towards streamlined multi location restaurant management. Here’s how Supy may be able to help uncover data driven insights:
Monitor Recipe Profitability With Real-Time Ingredient Cost Tracking: By linking and regularly updating all ingredient costs to your recipes, Supy instantly sends restaurant managers alerts if ingredient prices increase and affect your recipe’s profitability. With just one click, restaurant leaders can identify the recipes that need their attention and to ensure you never end up selling at a loss!
Optimize Your Menu to Sell More: For any major business, it’s important to make a habit of monitoring your sales trends and profits. With Supy’s analytics feature, you can study your menu’s performance by checking out how well each item on your menu is performing. Supy’s dashboards make it easy to gain a profit overview per menu category, which makes the entire process much more streamlined for you!
Advanced Recipe Builder: Now you can make recipes that are precise, profitable, and easy to replicate with Supy’s advanced recipe builder! Simply specify what ingredients you have on hand and in what quantities you need them. With this feature, you can even pick between systems of measurement to make sure the process is a piece of cake!
Costing Simulator: With this feature, restaurant leaders can simulate their potential revenue to maximize their profits. Supy lets you do this by working in reverse—set a target food cost percentage to help determine the ideal price for your menu items. Then you can approximate the net revenue generated by each of your recipes to come up with that pricing sweet spot that satisfies both you and your customers!
7. Conclusion
There’s no question that leveraging data-driven insights is essential for the modern menu engineering process. By analyzing data and understanding customer preferences, restaurants can create menus that not only cater to their patrons’ tastes but also maximize profitability. A steady stream of continual data analysis allows restaurant owners and managers to quickly adapt to market trends and customer feedback, ensuring they stay ahead of the competition.
For those looking to stay informed about the latest trends in menu optimization and other restaurant strategies, why not subscribe to Supy’s newsletter? Additionally, you could book a free demo to see just how our tools are designed for restaurant success! Or head on over to the Xenia app for other ideas on how to improve your business!
8. About Supy
Supy is the best restaurant management software platform tailored for multi-branch restaurants and franchises. With unbeatable features like real-time inventory tracking, smart procurement systems, and advanced analytics, Supy helps restaurants manage their various demands effectively. Whether centrally adjusting stock levels or optimizing supply chain relationships, Supy provides the tools restaurants need to thrive in a dynamic industry.
For the latest expert insights, download Supy’s ebook: The Ultimate Guide to Reducing Food Costs in Multi-Branch & Enterprise Restaurants.
Ready to find out more? Schedule a demo with Supy today and take the first step towards a streamlined, profitable future.
