Do Restaurants Blacklist Low-Spending Customers?

I’ve been reading and enjoying Super Crunchers, the new book by Ian Ayres that we excerpted earlier on the blog. One section of the book deals with the data that firms gather on their customers, and how the firms can use that data to address customer habits:

Hertz, after analyzing terabytes of sales data, knows a lot more than you do about how much gas you’re likely to leave in the tank if you prepay for the gas. … Best Buy knows the probability that you will make a claim on an extended warranty.

This made me wonder further about a situation I’ve wondered about in the past: do restaurants ever blacklist their low-spending customers?

Let’s say you call to make a reservation at a fairly high-end restaurant. It can’t be that hard for the reservation agent to access the data on your past visits. Imagine that the last few times you went to this restaurant, you and your spouse ordered salads, split an entrée, had no cocktails, drank tap water instead of Panna or wine (click here for a discussion of wine markups), and had coffee with no dessert. And, for added effect, let’s say that you lingered for a while over your coffee, tying up the table for a potentially more profitable customer. Maybe you even registered a fairly serious complaint about your meal, as I once did.

What does the data-savvy restaurateur do with customers like these?

Perhaps someone out there in the business can answer the question: do restaurants turn down reservations for customers who have proven themselves to spend too little money? Perhaps it never happens (but I wouldn’t be surprised if it does); perhaps restaurants don’t have fingertip access to past-spending data (but I would be disappointed if they don’t).

If restaurants do engage in this practice, they certainly wouldn’t want to make it publicly known … or would they? If they did, word might get around that if you don’t order a bottle or two of wine, then you don’t get a table next time you call. Which might be the kind of strategy that makes a cold-hearted profit maximizer’s heart sing.


ils vont...

I would say the majority of restaurants don't have the technology to track every visitors spend and analyze it each time they make a reservation. The people who remember those little things are usually the waiters. Most restaurants don't turn people away because they are cheap, if they are smart. And usually a cheap table turns over quickly, which is a good thing. It really comes down to dollars spent vs time in the restaurant.

http://www.ilsvont.com

Thomas B.

OpenTable.com was written about here in the NYT a few months ago. Notes on customers are a big part of the value of the system. While the anecdoets in the article seem to mention pro-customer notations there is no reason to beleive that restauranteurs can't use the system to note the negatives as well.

http://www.nytimes.com/2007/06/18/business/18opentable.html

Sour Grapes

The guy who's giving out his phone number needs to stop it. I can see the number of who's calling me, and so can a restaurant. You're wrecking your own rep for some freeloaders, man. Why can't they reserve as themselves?

Here in Europe, anyone who keeps an electronic database on customers has to be registered with the Data Protection registrar, and I think that's a good thing. Otherwise why could they not also tap into the supermarket's database and see that I like this beer, not that one, and that my wife is likely to be menstruating so wheel out the dessert trolley?

Staff memory is something else. That's just good business. And a restaurant that can keep its waiting staff long enough to remember you from one visit to the next must be doing something right.

PS why does anyone think using a fake name when you reserve is a good idea? They'll find out your real name when you hand over your card, surely?

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Gastro Gastrofferson

Surely a restaurant that makes life less pleasant for lower-payers is doing so to signal to higher-payers that they are particularly appreciated: It's not enough to be seen to be a success (e.g. by splashing out in restaurants) - others have to be seen to be failing (or to be at least doing less well than truly successful people).

That's the kind of restaurant lower spenders should probably avoid anyway.

A really good restaurant will be more concerned with providing all customers with a nice experience.

gp burdell

there could be some other impacts: what if the customer who comes often but doesn't spend much raves about how they love the restaurant? would the owner/ manager be losing word-of-mouth advertising.

i agree with many, though, that you'd have to have some sophisticated data mining to really optimize profit.

that said, my sister used to work at a Tex-Mex chain. a guy (they called him "the burrito kid") would bring in his girlfriend every friday, order 1 burrito a la carte, 2 cokes and eat all the free chips and salsa they could. after a couple of times, they stopped giving him any refills on cokes and chips and eventually he stopped coming.

Magnoliasitter

I have served at a variety of restaurants over the last 14 years and I would like to second what has been said on this site. Open Table is a nice program and it does allow for comments, but nothing more elaborate then what you could write as a comment on a blog post. However, servers and owners are always aware of your customer status if you go to a restaurant with any frequency.

While everyone likes a table who will come in and spend loads of money and tip well, most servers are far more interested in being treated like human beings. If you are pleasant to serve and tip at least a minimum amount of 20% you will continue to get good service and people will consider you regulars. If you are a pain you will normally get treated accordingly unless the amounts of money you spend and/or tip are astronomical. If you know you are going to be frequenting a place I would highly advise getting to know at least one or two servers and throwing an extra 5% on the table. It normally isn't much money, but being known as someone who is nice and tips better then average will mean you get treated wonderfully even if you only come in for a quick dessert or always split entrees.

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Anna

The main reason European servers are content to let diners sit there for a long time is that they're not getting their wages from tips. Here in the U.S., it's legal to pay servers less than minimum wage because of tips rounding it up, so in effect diners are offering a wage subsidy. If you're a European server drawing a set wage or salary, who cares if the folks sit there all night? You make the same amount of money. But here, to linger is to eat into the next tip. (That's also why the worst tippers are always non-Americans -- no where else has this huge tipping-as-wage-subsity thing. I've had to push so many European friends and colleagues on this when the check comes, and gotten stiffed back in my server days more times than I care to remember!)

htb

#43: So if a person happens to remember your favorite brand of beer, then that's okay, but if he looks up the same information in the computer then it's a violation of your privacy?

What if he looked it up on a piece of paper instead of a computer?

A couple of decades ago, many high-end restaurants (and other businesses) made an effort to keep exactly that kind of information on paper. That's how the hotel "knew" your wedding anniversary, how the physician "remembered" that you changed jobs, and so forth.

Jezzah

20% tip? Holy cow! What ever happened to 15%?

dweeb

Regarding Michael in post 19 - why would a restaurant disdain a party of two on a Saturday night for a party of 4 or 6? On a weekend, a larger party is probably a family that won't spend much per seat and will be high maintenance, while 2 means a date - likely to "spend to impress" with the oldest of motivations.

There's one big reason restaurants probably don't engage in this practice - lack of data. These days, only trendy high end restaurants take reservations. Such places are unlikely to see a given cheapskate more than once or twice in the relatively short time they're in business. Their repeat customers are typically conspicuous consumption types. Cheapskates are likely to be unknowns to them, because most of the time, they eat at a casual dining franchise that doesn't take reservations

Rob

My wife and I are on the low end of spending. Just saldad and meal. No wine, drinks, or even soda. No dessert and rarely coffee or tea. But it's the waiters and waitresses who are most likely to remember us. Sometimes service is less than great the first time, since they figure we're cheap and will probably tip cheap too. But actually, we just watch what we eat. We're counting calories not pennies, and we usually leave a 50 percent tip on the bill, since our bill is half what other people are spending anyway. I So the next time around we'll get good service.

As for the restaurant itself tracking us... that's just one more reason to pay in cash, which we always do.

Webs

When calling for reservations, I'm almost always asked for the name of the party AFTER the time and seat count. So the decision of seating is based on time and number in the party.

And as far as the impromptu tipping survey goes, I'm at about 20% of the final total (including tax and booze), rounding down. That's usually pretty high, but then again, I usually have special allergy concerns.

TheJ

Dear Number 49 (Jezzah) - Um, YEAH. Welcome to this decade. You are the kind of diner who leaves me feeling let down and wondering where my great service could have gone wrong.

Dear Number 51 (Rob) - You are a rare bird, and you totally rock. You must have great karma by now.

And for the record, the place I work at (upscale-casual) has never even THOUGHT of trying to track poor spenders. I suspect that a handful of bad spenders will have a negligible effect on a restaurant's overall profitability - they will just give some unlucky servers some crappy shifts.

climbn

As someone who has been "supercrunching" in various companies for 15 years and who worked as a waiter before grad school, I'd say it's extremely unlikely that restaurants would pursue such a strategy. First, it's difficult (meaning relatively expensive) to implement, mostly because, well, good matchkeys are hard to find (as eluded to by several commenters), which in turn introduces a lot of imprecision, and thus creates something akin to costs associated with false positives. Not to mention the challenge of integrating several disparate systems in which most restaurants have significant path dependence. More importantly though, it's probably just a dumb strategy. In most businesses, the cost to acquire a new customer is significant, and rather than treating that as a sunk cost to be written off by blackballing the customer, a likely more wise strategy would be to use the data to identify strategies to increase the "spend" of the customer (and indeed, huge numbers of us "supercruncher" types are employed doing exactly that in other industries). Unless the variable costs aren't covered in serving the meal, you're almost certainly better off by investing in what is already a repeat customer than trying to replace them with a new customer.

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mdh

Comment #21 - I think I know which restaurant group you're talking about (it's one of my favorites). They keep track of you via your phone number and I have been able to 'build credit' with that group since I moved into NYC about a year ago. The service I have received has improved to the point where last time I visited one of their restaurants (I was taking my sister out for her birthday), I received 2 complimentary glasses of champagne, 2 complimentary desserts, and a few free truffles as well. Our full meal took about 3 hours and we weren't rushed at all despite a busy night. Tracking restaurant customers is like NYC installing cameras on every street corner in lower manhattan: it will only negatively affect you if you're doing something that you shouldn't be...

fkaJames

#53 TheJ -- I'd like to hear more from you (and others) on some sensible rules for proper tipping -- "[w]elcome to this decade" isn't really compelling reasoning for me. I usually tip 20% of the bill BEFORE tax (as I don't feel compelled to gross up my tax commitment), but will tip more or less based upon the kind of service I feel I should have received given the circumstances. For example, I'm less likely to reduce my tip in a diner, as I don't expect fabulous service and my bill is likely relatively low. In a fine restaurant, poor service from the server results in a reduced tip. Poor service from the kitchen does not (and, as the husband of a former chef, I know the difference most of the time), but does mean it's the last time I will spend my money in that establishment.

I'd be interested to hear what others do, especially outside of NYC (which has a different dining and tipping culture than most of the rest of the country).

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Here in Manhattan

"One in particular owns about a dozen restaurants throughout the city and they keep track of data by phone number."

You must be talking about the B.R. Guest restaurants. I usually go there with a gold digging date, so I must be listed as a big spender.

Jack

#21 nailed the explanation of what has crossed the minds of people for years. I think that this has partially contributed to the increase in the unspoken standard tipping percentage especially at restaurants that people frequent on a regular basis. People don't want to run into a waiter/waitress that they stiffed on a tip or complained about to a manager for fear of the very fact that restaurants will remember them. Keeping track on a long term scale just expands on this idea don't to the little nuances that occur between a restaurant and their customers, but to think that this is something new is a little nieve. I don't know how in depth certain restaurants/chains will go but as long as caller id has existed I have been identified by my phone number at restaurants/chains that I go to often.

Hellzkitchenguy

I can only speak for NYC but the answer is YES, they most certainly do. There is a widely used software for restauranteurs called OpenTable that contains guest records of every visit that they create a reservation for. Within it are guest codes... and they are very creative, usually, even if the customer happens to glance at the screen, you would not have a clue that you have been labled a "Pain In The Ass" or PITA..... It's a great way to help whoever is on the door to remember a guest or a particular problem that happened to them on their last visit. I would say that it is a very good tool for customer service, but if you are a problem causer... you will be notated that way. The restaurant industry is indeed an industry and they are there to make the most money throughout each time slot within the day...

Eric

The funny thing to me about all this is this: Tips are supposed to be in response to service quality -- bit if service quality is in response to tips, then don't we have a problem? If you get on the road to good service and tips or bad, you get pushed only further in that direction.

Obviously this has it's limits -- I'm very aware of expressing appreciation and generosity, but also a college student without a job, so my tips don't vary much because they run into the two guilt walls -- selfishness on the low end and need to be selfish on the high end.

The really interesting phenomenon for me is the coffee shop tip, because you haven't yet received the coffee (and i also never know what is appropriate -- the percent seems too high, the dollar figure too low. I usually tip higher percents for cheaper food though, because it makes no sense to pay somebody more for service because the ingredients and furniture cost more)

Lastly, do people really tip that much on service? I'm much more interested in the food (and find that the quality is much more variable, too)

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