Average Spend per Head
Here at CRM, we have a number of clients in the Leisure and Hospitality Industry with whom we are working to help make their numbers work for their continued success.
An essential metric we encourage these clients to measure is the 'Average Spend per Head', which measures the amount of revenue being earned on a per customer basis.
It is a Key Performance Indicator that helps to truly understand the performance of the business. In our view, it is also an essential metric for building an effective forecast as part of your business plan. You can more effectivley forecast the revenue and associated costs using this metric. For example, how many customers do you expect at lunchtime compared to the evening and what is their likely 'Average Spend per Head' at each time.
This metric is particularly useful when broken down by the area of the business (eg Bar, Restaurant, Accomodation, Wet or Food Sales), time of day, day of the week, etc.
By knowing your 'Average Spend per Head', you can make more informed decisions. For example, a new client was only measuring their 'Average Spend per Head' on a weekly basis, so they were not aware of how different days or different times of the day impacted their mean value. By helping them to understandi their underlying numbers, they identified that their customers spent more in the evening, towards the end of the week and when they were encouraged to stay longer. So with this information, they changed their promotional offers to encourage more visitors at the start of a week and solely for their lunch service. They are also reviewing their Table Turn policy to see the impact on this metric and overall profitability. The value of the promotional offer was also considered. The high discount offered for repeat business was based on the 'Average Spend' across the business, which was distorted for a lunch offer due to the higher spend in the evenings. From a review of the numbers, we established that they would be making an offer that would considerably impact the profit on their lunch service.
To measure the 'Average Spend per Head' you need two pieces of information. Firstly the 'Total Sales Value', which can be taken from your accounts information or the till system. The other information is the 'Customer Head Count', which may be taken from the till system, the bookings diary or a manual count. The calculate, simply divide your 'Total Sales Value' by your 'Customer Head Count'.
If you would like to discuss how we can support your leisure or hospitality business, then please call us on 01865 379272.