How Red Robin is stealing customers back from competitors

Red Robin has been losing customers for about three years, a result of a tough economic environment that has kept consumers from dining out as much, and the resurgence of a key competitor in Chili’s.

Fortunately, the chain now knows where a lot of those customers have been going, and it’s starting to bring some of them back.

Data driven strategy

Since last year, the 500-unit chain has been using a group of data sets and algorithms to get more insight into customers’ dining habits. According to CEO Dave Pace, the data is not exactly proprietary, but when combined, provides a unique source of intel on customers.

“We know their behavior when they come to us. What do they come for? How long do they stay?” Pace said in an interview Thursday. “And then if they don't come to us, where are they going? And what are they going for?”

That has allowed the chain to identify its biggest competitors in each market and come up with ways to lure customers away from them.

By looking at the data, Red Robin can tell if consumers are choosing another brand for a bar occasion or for burgers, or if they’re looking for something more upscale. The chain can then turn around and promote a similar experience to them via digital advertising, personalized emails, or its loyalty program, a strategy it has called “micro-targeting.”

“Whatever it is, we can then target and message them directly with, ‘Hey, we have that, this is what our offer is,’” Pace said. “So we're trying to basically get ahead of it, and then steal those occasions back from the competition.”

That strategy seems to be working. In June, Red Robin gained 70 basis points of market share in areas where it competes directly with other casual-dining brands. In July, that figure rose to 80 basis points.

Sales and traffic growth

That contributed to the chain’s best traffic performance since the first quarter of 2023. Traffic was virtually flat in the second quarter (negative 0.2%) and turned positive in the last month of the period, while same-store sales rose 1.3%.

Some of the improvement has been driven by Red Robin’s flagship value offer, the $9.99 Big Yummm combo meal. Big Yummm has been a focal point of the chain’s marketing over the past year and has been a hit with price-conscious consumers, especially at lunch.

But data analysis has allowed the chain to put a finer point on its marketing efforts.

The pinpoint strategy is in some ways a matter of necessity. The 500-unit Red Robin does not have the same marketing muscle as a competitor like the 1,200-unit Chili’s, which has used a steady stream of national TV ads to support its comeback over the past several years.

“They can kind of go out and carpet bomb and know that they might not be as efficient, but they're gonna hit the mark,” Pace said. “We don't have that luxury. So we've got to make sure that we’re really efficient, and that our messaging and our offerings to our guests are being very precise at hitting the mark most of the time.”

Marketing investment

Red Robin does plan to spend more on marketing as it looks to continue driving traffic. Last quarter, it spent a total of $10.4 million on marketing, $4 million more than the year before, and that level of investment will continue for the rest of the year.

But it expects to get a lot of bang for its buck. Pace noted that, with one exception, Red Robin is the most efficient marketer in casual dining at the moment. (The data-heavy strategy has made it easier to track the ROI on those campaigns.)

Earlier this week, Red Robin hired Scott Hudler as its new CMO, replacing interim CMO Russ Klein. Hudler brings a wealth of experience from Whataburger, Cotton Patch Cafe, Torchy’s Tacos, and Dunkin’, and will oversee advertising, digital marketing, customer insights, and more.

“Our marketing approach is bringing in guests, and we see traffic lifts to the point where, in Q2, we outperformed the industry based on Black Box,” Pace said. “All of those things feel good. We're moving in the right direction.”

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