September 7, 2020
As a lover food (mean come one, what’s not to love), I’ve been watching the Virtual Kitchen and Ghost Kitchen space religiously. Mainly, I’ve been keeping a close eye on the marketing opportunities and challenges that come with trying to grow a Virtual Kitchen and Ghost Kitchen. The primary methods that virtual kitchens and ghost kitchens will grow are through marketing and market expansion. Similar to eCommerce/DTC marketing, the winners in the Virtual Kitchen space will be those that can own as much of the customer journey as possible.
When I reference third party apps, I’m referring to UberEats, Grub Hub, Door Dash and popular delivery apps. While these apps are attractive and helpful in acquiring customers, they cut tremendously into your margins. Uber takes 30% of your revenue when you use their service. While Uber takes upwards of 30% of your order which doesn’t include the one-time activation fee, we haven’t even factored in the operation cost for employees. This provides a challenge for virtual kitchens as the main acquisition channel for new customers will be through third-party apps. This is amplified as you add more services to your platform cutting further into your platform. So, what do you do? Crawl before you walk.
Before you go all-in on any platform. Test a few products on a singular platform before you go all in. The best course of action here is to implement a slow rollout. Identify your best performing menu items or what you’ve identified as in-demand menu items. Keep tabs on performance:
By using a test and learn approach, you can determine which platforms and which menu items perform the best. This sets you up for success before you spread yourself to thin across platforms or go into the red with your lower-cost menu items. Choose high priced items that are in demand and see how they perform. Test and learn across platforms before you go all in.
My friend owner of a successful restaurant and soon to be franchise is a marketing guru but has labeled a term called “hope marketing” when describing the marketing techniques for restaurant owners. Most brick and mortar restaurant owners simply put don’t have marketing strategies. They open a restaurant and hope people will find them. As you can tell this isn’t a marketing strategy. While brick and mortar restaurants have a difficult time crafting marketing strategies and being able to improve based on collected data (more on this in another post), virtual kitchens have access to data which means there is no excuse for them to create data-driven campaigns. The goal of any virtual kitchen marketing strategy should consist of the below:
While you should use 3rd party apps to acquire customers, you should also invest in paid media (FB and Google Ads) and organic content to acquire customers. In an ideal world, you’ll use paid media to drive traffic to your website and capture contact information before converting users on your own delivery service or a 3rd party app.
Similar to any SaaS company or your favorite brand’s newsletter, restaurants need to maintain engagement and stay top of mind. Most people eat every day, virtual kitchens much create engaging content that can be shared every day. Think IG stories/posts, Pinterest, Facebook, Blog, etc. Ensure there is consistent branding across these platforms and ensure you post as much content as possible. This is going to allow you to stay top of mind, lower acquisition cost, and drive people to order whether they’re hungry or not.
When it comes to profitable growth you must focus on retention. If you aren’t able to retain your customers your margins will be razor-thin due to the high cost associated with new customers. Additionally, you don’t have to market as aggressively to existing customers as they’ve hopefully already had a positive experience with your brand. Leverage your CRM, email marketing, loyalty programs, promos, and partnerships to increase your customer lifetime value (customer lifetime value).
When you can own as much of the above touch-points as possible, you’re creating a strategy that allows you to acquire customers at a lower customer acquisition cost and increase your customer LTV by driving higher AOV and LTV. Stop thinking a customer is simply a person that makes on purchase. A customer is someone who comes back to your business to make a repeat purchase. Through the use of data from our acquisition channels, engagement channels, and CRM, we’re able to continuously improve and refine our strategy. The less you can rely on 3rd party apps, the more you’ll be able to own your customer and expand your profit margins.
As I mentioned earlier in this piece, marketing is only one factor in how virtual kitchens will grow. The other side is market expansion and all menu testing. This is difficult for brick and mortar restaurants; however, through the use of data and regional trends, virtual kitchens will be able to identify new markets/verticals to venture into and new menu items to test. The biggest blocker facing virtual kitchens is that while VC’s and tech companies see the opportunities that lie at restaurants’ fingertips, restaurant owners are still late to the game. The winners in the virtual kitchen space are mainly going to be those that implement and refine their marketing strategies; however, as the industry matures, it’s going to be those key players that are open to expanding into new markets and testing new menu items.
You should join my weekly newsletter with over 200 subscribers. Every Tuesday I share updates on media, culture, growth and eCommerce.