Your best selling product may not be your best product

19sept

Over the years of working on creating a platform for restaurants to improve their customer retention, I have repeatedly heard a common theory which is:

The best selling product is the best product.

If something is sold the maximum every day, every month and every quarter, I will also believe that it is my best product.

The Product Sales Report, which every billing software and CRM provides as a basic feature became the most loved report for any operations guy or a business owner. They started using this report to plan a lot of activities like:

  1. Remove products from the menu (products which are ordered less)
  2. Promote best selling products online and offline.
  3. Manage inventory based on the products sold.

It does help them manage a lot of operations related issues but should the product sales report be the only criteria for deciding which product to promote or which product to be removed from the menu? It was a rhetoric question..the answer is No, the product sales report should not be the only criteria.

To give you a context, one of the famous restaurants in Delhi serving North Indian cuisine, 50% of  their main course orders would comprise of “Murg Makhani” or “Dal Makhani” and both the products combined contributed to 10% of their total sales in any given month.

Anyone who would look at the above numbers would advise to just push these products on every marketing platform as they are best selling products. But we at Xeno found that there is one more important metric equally important as Product Sales  to be looked at for taking business decision. We called it Product Retention.

Product retention: % of customers that returned after consuming/purchasing a particular product.

To show you guys the real picture of how their product retention performed:

  1. Murg Makhani : 53%
  2. Dal Makaani : 30%

To elaborate, 53 people out of 100 came back to the restaurant after eating Murg Makhani and 30 people out of 100 came back after eating Dal Makhani. The average retention for all products combined was 49%. So this means that Dal Makhani, which is the best selling product has a much lower retention on an average. So once again, we circle back to the same question…is my best selling product really my best product? and again the answer may not always be yes.

The best analysis which we found for this restaurant was that there were products with very few orders (less than 2% of total Main Course orders) but had a retention rate of more than 90% (We call them “The Hidden Gems”) which were never promoted and a few of them were going off the menu. It also gave them a better variable to work on to help them decide which products are to be removed from the menu (there were products with less than 15% retention).

This is not just applicable to restaurants, the similar logic can also be applied in retail and salon industry. A salon owner can identify that Hair Cut is the most consumed service. But, he can never visualise through product sales report whether the service is good or not. Through product retention report he will get a clear indication of whether the customers are happy with the hair cut or not. If the product retention is high that means the hair stylist is doing his or her job.

So attributing sales to customer data not only helps you in improving repeat sales but it also helps you in improving the products and knowing which products is making a difference in your current and future sales.

We at Xeno have created a concept called the Magic Quadrant which helps you segregate your products into the following parameters:

  1. Favorites (High Order and High Retention)
  2. Kill Them (Low Order and Low Retention)
  3. To Promote (Low Order and High Retention)
  4. To Improve (High Order and Low Retention)

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At Xeno, we help you understand the importance of these metrics which enable you to take better decisions for your business.

Now time for a 1 sentence sales pitch, if you’re looking to see how we help owners improve customer retention for their brands, click here to request a demo of Xeno.

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