In our recent guide we’ve talked about using social media in order to market your restaurant which is basically free. Today we’re going to look at paid online ads and how they perform in the restaurant business.
First we’ve tried Facebook Pixel, which is a service provided by Facebook that enables you to advertise your products to a selected audience on Facebook and then track their actions on your website if they decide to visit it. We have an online order system on our website, so the goal was to get people to visit our website and make an order.
The key metrics for us were the number of impressions (how many people have seen the ad), number of clicks on the link (how many people came to the website), number of conversions (how many people actually made an order) and the return on investment.
We’ve decided to target only people in the 2 mile radius from our restaurant because that’s approximately our delivery area and we also believed that people from outside the delivery area living in a larger distance from our restaurant won’t be willing to come and get the food in person.
So we’ve spent $233 on a Facebook Pixel campaign and our ad had 14.475 impressions, which means it was shown to that much people. This makes it about $16 for thousand impressions (also called CPM). The price is so high because we’ve used the 2 mile radius – the more precisely you target your audience, the more expensive the ads will be.
Out of this 14.475 people that had seen our ad, only 189 visited our website, which is 1.3%. Therefore a cost for click (visiting the website) was $1.23.
What’s worse though is the number of orders that resulted from the 189 visits – only 11. So we’ve spent $233 to get 11 orders – that’s $21 per order which is several times more than our profit from the order. Not good.
Some people may argue that there’s also value in the fact that 14.475 people has seen the ad. This is not entirely true though: Just because the ad was shown to 14.475 people doesn’t mean all of them has seen it. Let’s be honest here, most of us ignore the Facebook (or any other) ads, so the real number of people who had seen the ad is much lower.
As you can guess from the number above, the Facebook Pixel ads doesn’t make any sense for us.
We’ve also thought about Google AdWords ads – they are the ones that appear on top and sometimes on the side of search results in Google and are labeled as sponsored.
Our PPC consultant checked the price per click for keyword “pizza delivery” in the Torrance, CA area where is our restaurant located. The prices ranged from $2 – $5 per click – and remember, that’s the price only for getting the potential customer visit the website.
Let’s say the average price for a click would be $3.5 and 33% (that’s very, very optimistic) of the potential customers who visit the website will make an order. That would make our cost to acquire a customer $10.5 which is basically a triple of the profit the customer would make us.
As you can see from our experience, paid online ads probably doesn’t make a sense to restaurants unless you’re an ultra luxury restaurant with margins so high that you could actually make a profit on the order (or booking the table) after paying a lot of money for acquiring a customer – and even then it’s questionable since you’re certainly not going to be the only luxury restaurant willing to bay big bucks to acquire a customer so the price could escalate pretty quickly.
The general rule is that the higher $ (not %) margin you have on the product, the more should PPC ads make sense financially. When your margin on a product is $2 or $3, it’s almost impossible to acquire a customer without sacrificing your whole margin, or even losing money.
Note: Our numbers and experience doesn’t mean that there isn’t a way to profitably run paid online ads as a restaurant. The results may also vary on many factors including location, attractiveness of the targeted keyword(s) and skills of your online marketing specialist.