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8 Tips for Improving Your Testing Process

February 3rd, 2015 | Posted by Admin in Restaurants

Most restaurant chains use in-market tests to help inform decisions. But just running tests isn’t enough. Based on our work with dozens of restaurant brands, here are eight tips for improving your testing process.

1. Grow your innovation funnel. You should never be left with just one idea to try – if it doesn’t work, what’s left? Beyond menu item tests – already familiar to most restaurants – ideas for testing should span marketing, operations, pricing, and capital investments. Many restaurants generate these ideas from a broad range of sources, including talking to customers and managers in the field, competitor actions, and importantly, analyzing their own transaction and customer data more deeply. Often ideas are filtered through taste panels, focus groups, surveys, and the like, which can help weed out a fraction of the ideas that may not work.

Ultimately, however, all of the resulting ideas are unproven until they are tested in the real world. For example, new promotions could give away money to customers who would have paid full price for the promoted item, targeting Millennials could alienate other customer segments, etc. It’s easy to make any idea sound good and support it with customer feedback, management anecdotes, executive intuition, or survey data, but the reality is that many innovative ideas don’t work. Organizations need to have enough ideas in the funnel so that they can throw away the ones that don’t work and refine and target the ones that do.

2. Test in the right number of locations. Testing in the right number of restaurants is a critical component of a useful and efficient Test & Learn process. Tests run in too few restaurants are wasted efforts. Executives then cannot be confident in the results and often complain that “testing isn’t predictive.” Testing is predictive, if done right. Make sure you run tests in enough restaurants to measure a breakeven lift with statistical confidence. On the other hand, testing in too many restaurants is unnecessarily costly and risky.

3. Choose the right restaurants. Testing in just your company-owned locations in the market surrounding your headquarters is probably not the best way to go (sound familiar?) – the results simply won’t be applicable to the rest of your system. For example, increasing price only in your highest-volume locations will not help you understand the effectiveness of a price increase in a lower-volume location. The selected test group should be similar to the rest of your network based on such factors as local market demographics, the competitive environment, restaurant format, and volume. While there are often real world constraints, especially in franchised environments, leading Test & Learn restaurants have all overcome these challenges.

4. Have a well-matched control group. It isn’t a test if there isn’t a control group, as without a control you have no way of knowing what would have happened otherwise. Further, the selected group of control restaurants must look as similar to the test restaurants as possible, besides the action taken. Having the right control group ensures that you can isolate the true cause-and-effect relationship between the tested action and key performance measures.

5. Don’t stop at “did this work?” Many programs work well in some situations but not others. You should move beyond just measuring overall program effectiveness to identifying the types of restaurants and customers that respond best to a program. With this information in hand, you can target your programs to only the customers and restaurant locations that will generate a positive response.

6. Prioritize high-value, risky tests. It’s easy to use testing to validate ideas that you already know will work. While many changes should be validated through Test & Learn, organizations should prioritize tests that are higher-risk and higher-reward. It’s okay for most new ideas to fail (that’s why you tested it!) – if you’re able to identify the big winners, and quickly improve or discard the losers, the whole testing process will pay off. In fact, the only sustainable way to generate a competitive advantage is to test ideas that sound risky, are not being pursued by your competitors, and can move the needle on your profits.

7. Use your franchisees as a natural test vs. control environment. Big ideas often come from franchisees. SUBWAY’s $5 Footlong was the result of comparing the performance of some stores that tried the promotion to a well-matched control group of SUBWAY locations that were not trying it. This innovation changed the face of the brand. Smaller (but highly profitable) ideas can also emerge from natural variation in a franchised network. Examples include small changes in local marketing investments, pricing, and labor allocation. Organizations should identify all of these “natural experiments” and use a test vs. control approach to isolate their impact.

8. Use tests to generate hypotheses for future tests. The best Test & Learn organizations are always refining their businesses, and frequently use learnings from previous tests to fuel their next one. For example, if a 5% increase in marketing spend worked, how do you know a 10% increase wouldn’t work better? That’s a great test.

As SUBWAY CMO Tony Pace said in a recent Wall Street Journal interview, staying ahead is “all about testing and learning.” Testing and learning the right way is worth millions of dollars in added profits.

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