The 5 Most Effective Types of Restaurant Loyalty Programs

A good restaurant loyalty program is one of the best ways to attract repeat business. And thanks to rapidly advancing technology, restaurant loyalty programs are also amazing at gathering valuable customer data. 

Perhaps that’s why 67% of restaurants now offer some kind of loyalty program to their customers. Still, it’s important to choose the right loyalty program for your business.

There are several different types of restaurant loyalty programs that are both popular and effective. Our goal is to help you choose a loyalty program that matches your needs and goals.

Why Restaurant Loyalty Programs Matter

The right loyalty program can drive growth and improve the customer experience. You can use your loyalty program to give your customers exclusive rewards, discounts, and perks — while improving repeat business, raising the average check size, and gathering valuable data.

Here’s a closer look at why restaurant loyalty programs matter: 

• • Valuable customer data: These programs let you collect and analyze data on things like customer demographics (age, gender, location), contact info, favorite dishes, and ordering patterns. This means you can make data-driven decisions about outreach, marketing, menu offerings, and more.
  • Personalized customer experience: You can also use data on customer purchase history to provide individuals with special offers based on their favorite dishes. For instance, if somebody has a history of ordering hash browns with their breakfast, you might send them a coupon for a free serving of hash browns with their next meal. 
  • Customer retention: An effective loyalty program should keep your brand top-of-mind for customers. Use contact information to encourage repeat visits from regulars and engage customers who haven’t visited in a while. 
    
    

The Most Common Types of Restaurant Loyalty Programs

If you’re planning to start a loyalty program, you have a few options. But it’s important to choose the right approach for your customers, your market, and your niche. As you consider some popular restaurant loyalty program ideas, take a minute to think about the pros and cons of each one. 

1. Punch Card Loyalty Programs

Punch cards are a simple, old-school approach to customer loyalty. Punch card loyalty programs use physical punch cards to reward customers after a certain number of visits or purchases (e.g., get a free cup of coffee after 10 visits). 

Pros and Cons

• Pros 

• • Easy to understand
  • Low-tech
  • Quick to implement

• Cons 
  • Limited potential for data collection
  • Few ways to personalize punch cards
  • Physical cards can be lost or damaged

Best For

• Coffee shops
• Bakeries 
• Food trucks
   

2. Points-Based Loyalty Programs

With a points-based loyalty program, your customers earn points for every dollar they spend in your restaurant. Over time, these points may be redeemed for rewards that may include free menu items, discounts, or merch like T-shirts or mugs.

Pros and Cons

• Pros
  • Easy to personalize rewards based on individual spending habits
  • Perfect for promoting challenges, games and contests
  • Effective at collecting customer data
• Cons
  • Must be explained in detail to your customers
  • Requires precise cost analysis
  • Can only be managed using software

Best For

Restaurants that are looking for a scalable way to personalize incentives, including:

• Fast-casual and quick-service restaurants
• Small chains
• National full-service brands

3. Cashback or Discount-Based Programs

With cashback and discount programs, customers will receive rebates or instant discounts at signup. These rewards are usually based on a percentage of what customers spend during their first visit. 

Pros and Cons

• Pros 
  • Gives customers instant gratification 
  • Encourages bigger check sizes
  • Can be used to drive traffic during slower hours
    
    
• Cons 
  • May not create an emotional connection with customers
  • Can attract one-time deal-seekers rather than loyal patrons
  • Must be backed by additional restaurant loyalty program ideas in order to promote repeat business
    
    

Best For

• Startup restaurants 
• Small chains expanding into new markets
• National brands promoting their arrival in new territories

4. Tiered Membership Programs

Tiered membership programs offer even greater personalization by rewarding customers based on their level of spending and engagement. In generic terms, this might mean giving customers an opportunity to join at bronze, silver, gold, and platinum tiers.

In this type of program, customers who spend more can unlock higher tiers and enjoy more valuable rewards, discounts, and perks.

Pros and Cons

• Pros 
  • Encourages increased spending
  • Creates a sense of exclusivity 
  • Suggests prestige
• Cons 
  • May require detailed explanation
  • Could be alienating to new customers
  • Offers slower gratification relative to other loyalty programs

Best For

• Upscale restaurants
• National chains working to enhance their reputation
• Restaurants with high average ticket sizes

5. Subscription and Membership Programs

With subscription and membership programs, you customers will pay a recurring fee (usually monthly) in exchange for ongoing perks. Naturally, these perks must be good enough to incentivize participation. Perks might include free delivery of takeout orders, regular discounts, or priority reservations during high-volume shifts. 

Pros and Cons

• Pros 
  • Generates predictable, recurring revenue stream
  • Gives the customer a strong incentive to visit more frequently
  • Builds strong brand loyalty
    
    
• Cons 
  • Can require costly implementation
  • Requires an ongoing investment in marketing
  • Depends on the perception of value in what you offer subscribers

Best For

• Fast-casual chains
• Delivery restaurants
• Quick-service chains

Best Loyalty Program Types by Restaurant Model

How to Choose the Right Loyalty Program for Your Restaurant

Before you can choose the right loyalty program for your restaurant, you’ll need to think about a few important questions.

• Understand your audience: It’s important to choose a loyalty program that appeals to your customer base. A fine dining restaurant may benefit from a tiered loyalty program but may actually turn off diners by offering discounts. Make sure you factor your customer make-up and your brand identity into this decision.
• Make full use of your data: Data collection may be the single most valuable benefit of a good loyalty program. But you have to be able to use this data effectively. Look for a loyalty program that can help you collect and understand your data.  
• Prioritize customer service: Remember that technology alone will not solve all of your problems. You will need to make decisions over time about how to use and improve your loyalty program. That’s why it’s so important to choose a third-party loyalty program platform that is easy to use, highly customizable to your needs, and backed by strong customer service.

How Back of House Can Help Your Restaurant With Loyalty Programs

There are all types of restaurant loyalty programs available today, and a whole lot of third-party providers claiming their loyalty program is the best one for your restaurant. But it’s important to make this choice carefully.

Fortunately, you don’t have to make this choice alone. Reach out, tell me what your needs are, and I’ll walk you through your best options. Schedule your consultation today!