Algorithmic Intelligence brings quick-service restaurants back in the game quickly amid COVID

Soma Tah 

When the pandemic shut down the world last year, it did hit the restaurant business quite hard. Quick Service Restaurants (QSR) either remained closed entirely or were operating at reduced capacity offering takeout, pickup, delivery, and drive-thru due to countrywide lockdowns, and stringent social distancing  guidelines. The pandemic has upended consumer behavior, tastes and preferences also to a large extent. Preferences on brands, items, channels, peak times-all went out of the window as customers resorted to buying based on need, availability and convenience. Customers who were regulars for in-store dining moved to online ordering on the aggregator platforms. An increased Buy Online Pick-up in Store (BOPIS) tendency was also seen leading to many QSRs converting their existing outlets to drive-thru outlets. 

The sudden shift to digital by customers was hard to scale up for many QSRs and the result was broken digital journeys leading to churn. The pandemic opened a plethora of challenges for the QSR industry forcing store closures as they were not prepared to cater to online ordering or drive-thru due to acute staff shortage causing service issues. Supply chain disruptions meant frequent out of stock scenarios leading to dissatisfied customers and revenue loss.  

Many QSRs could not keep pace with the sudden shift to digital by customers. Broken digital journeys led to churn. Across the world, thousands of restaurants, including some QSRs, have folded up during the pandemic, as they were neither prepared to cater to online ordering nor drive-thru due to acute staff shortages causing service issues. Supply chain disruptions meant frequent out of stock scenarios leading to dissatisfied customers and revenue loss. 

However, unlike what most people think, COVID-19 is not the primary cause for the upheaval that the QSR industry has experienced, said Smitha BV, Associate Director, Product Marketing, Algonomy (previously Manthan-RichRelevance). Its algorithmic customer engagement powers digital-first strategies for retailers and brands. Many popular QSRs like Pizza Hut, KFC, Domino’s, McDonald’s, Starbucks are also among them.  

The industry, barring a few exceptions, has been a laggard in adopting digital technologies to streamline both front and back-end operations, said Smitha. This has hit the top line with high customer churn due to its inability to personalize engagement and the bottom line due to escalating costs arising from inefficient operations. This impacts business agility amidst any kind of challenge, explained she.  

However, this worked well for QSRs that saw an opportunity in this adversity and were quick to adapt to the fast-changing business environment, said Smitha. As the world around us started to embrace the ‘New Normal’, QSRs also needed to invest in a few changes to the business model. For example, they had to strike partnerships with aggregators for promotion and delivery. They had to invest in digital tools also such as sprucing up mobile app functionalities to make mobile shopping seamless. Many large QSRs started investing in building their delivery networks to avoid the increased commissions charged by the aggregator partners. 

She shares some survival tips for the QSRs and the technology-enabled business initiatives that are likely to provide the biggest payoffs going forward.

How did technologies help Restaurants/QSRs to stay afloat during this testing time? 

QSRs must realize that data is the new currency. QSRs that invested in acquiring and leveraging data to quickly respond to customers and their changing tastes and behaviors as well as to streamline their operations, inventory, stores, and labor to cater to the sudden change were the ones that were able to ride the wave and emerge successful. 

Marketing technologies such as Customer Data Platform, Personalization engines and Omnichannel Marketing tools helped QSRs show empathy towards customers and gain their trust in these difficult times. On the back end, Restaurant Analytics and Business Intelligence tools became the lifeblood of executives who relied heavily on real-time insights to optimize operations. Business Insights tools helped sales teams forecast accurately and operations teams leveraged that data to streamline inventory and optimize staff at stores. Decisions on what stores to keep open or close were also driven by data. 

What digital strategies should QSRs put in place for the New Normal?   

With digital sales soaring and forming over half of the total sales revenue, it becomes crucial for QSRs to improve customer experience on digital channels. Investing in AI-powered platforms that help understand customers as a segment-of-one and provide a deep understanding of their evolving tastes and preferences. The intelligence so derived must inform engagement decisions that personalization engines enable. The other trend that QSRs must pay heed to is the need for instant (real-time) and omnichannel engagement. Customers move from in-store dining to drive-thru, online and contactless ordering. There is an immediate need to invest in algorithmic solutions that enable real-time, individualized engagement across digital channels and stores, to keep them coming back for more. 

Another area of businesses that took a hit during the pandemic is operations and supply chain. Here again, the lack of accurate insights at the fingertips of business executives led to significant disruption in business. Whether it is to determine what stores to keep open or close based on forecasts, what menu items to continue or drop, what promotions to run and where- QSR leadership was grappling for insights to form their decisions. QSRs that had invested in algorithmic intelligence (restaurant analytics) showed resilience and were in a better position than others in riding the wave. 

However, it is not too late to make investments in some great technologies available in the market, such as Customer Data Platforms, Personalization engines, Multichannel marketing tools, and Restaurant Analytics and Business Intelligence tools. While making purchase decisions, it would be to start with the customer and work backwards, breaking the inertia to make disruptive changes. 

Could you please tell us about some of the innovations that you have done in this space? 

Our Algorithmic Customer Engagement (ACE) platform is an integrated solution consisting of a Customer Data Platform, Personalization and Omnichannel Marketing. The other solution that we offer QSRs specifically is our Restaurant Analytics. 

Our focus is on helping QSRs drive personalized experiences on both digital channels and stores. Some of the use cases we support include a personalized menu based on customers preferences, personalized email content at the time of opening the email – (the latest and relevant offer is displayed while opening the email and not the one that was sent earlier) personalized home page banners, cross-sell recommendations at checkout, etc. 

XEN AI, our open AI, ensemble-based, real-time decision-making engine, helps hyper-personalize interactions. It supports continuous algorithmic testing ensuring that the right decisions are being made automatically. It continually tests and evaluates 150+ recommendation strategies that are available OOTB (out of the box) to determine the winner for each user interaction and business KPI. The models adjust for subtlest changes in behaviour, inventory, pricing, etc. It provides complete AI transparency into why a decision was made.

Our platform also enables QSRs to continuously assess and re-calibrate journey performance to drive higher conversions and optimum purchase trajectories. It provides A/B testing, algorithmic testing and optimization to identify the ideal creative treatment, headline, copy, send time and channel mix that will elicit a maximum response.

By leveraging these algorithmic capabilities, our customers which include Pizza Hut, KFC, Domino’s, McDonald’s, Starbucks and others have been able to personalize engagement across stores, mobile apps, e-commerce sites, contact centres and other channels leading to an increase in conversion and revenue. 

How has Algonomy adapted itself to the survival needs of the customers and how the solutions have helped QSRs so far?  

Algonomy helped QSR brands address the need to understand their customers by unifying customer data across all their disparate source systems, applying advanced algorithms to glean out deep insights and helping them connect with them in a personalized manner.  

We helped QSRs scale their digital channels to ensure they were up and running. It enabled many of our customers to stay afloat and survive the pandemic blow. On the business intelligence side, we provided real-time insights on sales for better forecasting, menu mix modelling to ensure the right menu items were available at the store, inventory forecasts to reduce wastage and out of stock issues. All of these steps have led to a significant impact on the bottom line.  

Almost all of the top QSR brands, Pizza Hut, Domino’s, McDonald’s, Chipotle and others were adept at investing in enhancing their mobile engagement capabilities and leverage customer insights to personalize CX. We saw vegetarians seeing only-veg items at the top of the menu in the app and BOGO (buy one, get one free) offers were sent to couples and large combos to families. We were able to do all of these and more with the power of data alone.

McDonald’s was quick to expand and leverage its drive-thru format to cater to the sudden shift from in-store dining to BOPIS – a data-driven decision. Nearly 20 per cent of their sales come from digital channels and they have invested very wisely in 3Ds - drive-thru, delivery, and digital. McDonald’s claims to have shaved 30 seconds off its drive-thru times using voice technologies. 

A leading pizza chain in India derived 3.5 per cent incremental revenue from personalized mobile marketing. Another multinational conglomerate that operates many globally renowned QSR brands enjoyed 1.5 per cent reduction in food costs, 4 per cent reduction in wastage and 25 per cent increase in productivity with our Restaurant Analytics solution. A global QSR brand in Indonesia enhanced its active users by a whopping 260 per cent and app installs by 26 per cent. These are a few examples of the kind of impact we have made for our QSR customers with our ACE platform and Restaurant Analytics.