Grace Dickinson | November 30, 2022, 04:16 PM CST
While loyalty programs have been used for decades, the offerings have considerably evolved. Today, far more effective strategies are increasingly replacing the traditional, paper punch-card style of loyalty, largely thanks to technology that’s made it all possible.
“Loyalty is really about understanding the customer's behavior and then maximizing what you want out of that customer,” says Bailey D’agostino, director of small business for loyalty solution Paytronix.
Offering a “buy 9, get the 10th free” card universally to customers rarely builds the personalized relationships needed to drive specific behavior and stand out amid a saturated loyalty market. These days, customers want tailored rewards. As loyalty members, they want to feel like they’re part of a “special program designed just for them”, says D’agostino.
As a restaurant owner, you want a program that’s easy to track. This includes being able to monitor your ROI on loyalty strategies taken and also being able to track customer behavior to get insights on how to tailor your programming and messaging. Generally, this comes down to partnering with the right technology platform.
But that doesn’t mean there isn’t still a place for classic freebies in this new digitally driven landscape. Everyone loves a good giveaway. It’s just about making those rewards relevant to each customer.
We spoke with D’agostino about when and where freebies make the most sense and how to maximize the returns. Here are several scenarios to consider.
Common sense will tell you not to use your most expensive menu items for loyalty giveaways. Instead, look to lower-priced items or even experience-based rewards that’ll cost the restaurant minimal extra money. Then see how you can leverage those to drive further profit.
Let’s look at an example. Say you run a taco shop where 80% of your customers purchase a soda with every order. Sodas are relatively inexpensive, making them a good freebie candidate. And your customer data demonstrates that it’s a reward your average customer will like, increasing its value to drive people to your shop.
Now, in this scenario, you could offer loyalty members a “buy 9 sodas, get the 10th free” deal. Or you could drive more profitable and targeted behavior using the same freebie but a different deal: “Buy 9 tacos, and on your 10th order, get a free soda.” Here, you’re encouraging customers to purchase a more expensive item in exchange for an inexpensive freebie.
“You're satisfying that customer, it doesn't cost you a lot of money, and it gets people coming back to buy the items you really want them to buy,” says D’agostino.
Slow on Monday and Tuesday nights? Leverage loyalty rewards to build more traffic on your off days.
“It's all about segmenting your customer base, so in our platform, we can look at customers’ behavior by [factors like] date range, frequency, and how much they spend, and target our customers accordingly,” says D’agostino, nodding to the power of using a technology backed loyalty program to customize offerings. “So for customers that typically frequent the restaurant Thursday through Sunday, I can create a campaign that says, ‘Come in Monday and Tuesday, and you will get X’.
With the right loyalty platform, you’ll be able to collect and analyze customer data to create customer categories, and then tailor messaging accordingly. This enables you to drive visitors through the doors when you need them most.
The “We miss you.” message is among the most classic loyalty strategies of today and for good reason. Reminding customers that it’s been awhile since their last visit fully aligns with the core mission of loyalty – to drive repeat business and stay top of mind.
As such, incentivizing customers to return with some sort of freebie or reward is generally a worthwhile tactic. But it’s important to execute this strategically. Again, this is where customer segmentation comes into play. To make these kinds of campaigns more impactful, you want to tailor them based on customer frequency. Otherwise, you’re likely to miss out on key opportunities, says D’agostino.
For example, let’s say you execute a blanket “miss you” campaign among all customers who haven’t visited in the past 90 days.
“If I know that you typically come in once a month, I might have already lost you after 90 days,” says D’agostino. “At the same time, if you come in once a year, but I’m sending you an email after 90 days, it’s not likely to drive actual results.”
In general, your loyalty members are also your best customers. They’re often the ones recommending you to friends, visiting your restaurant over and over again, and the people helping you grow and succeed. A good way to show thanks is to reward them on special occasions, like birthdays or anniversaries.
Rewards should be brand specific but could include giving away a free drink or dessert, or creating an experience, like a seat at the chef’s table.
Celebratory incentives can help make customers feel more connected to your brand and also have the potential to make memories that might drive customers to choose your restaurant for future special occasions.
“You could even offer incentives to celebrate joining the loyalty program to begin with,” says D’agostino. “You’re saying, ‘Let's get you in that restaurant right away to reap the rewards of what you just joined.’”
Standing out among all of the other loyalty programs comes down to knowing your brand and what your customer base wants, and then using that to get creative.
“Back in the day I worked for a higher-end restaurant, and they’d reserve their entire dining room for Valentine's Day for their top 5% of customers,” says D’agostino. “Loyalty can really be whatever the restaurant is trying to achieve in terms of that connection with their client base, as long as you can track it – it’s all about tracking that customer behavior [to confirm your ROI].”
Whether you run a bar and give away free pool time or a fine dining establishment and give away primetime reservation slots, your ability to get creative is limitless, as long as it resonates with your audience. But if you’re not sure where to start, consider talking to your best customers about what would be meaningful to them.
“Asking the right questions before launching a program is really important,” says D’agostino.
If there’s one place where the simple punch card approach still might make sense, it’s at a coffee shop, says D’agostino.
“There are some establishments where a very straightforward ‘buy X, get something’ concept is still valid, like a place that just does coffee and wants consumers to choose them as their go-to every morning,” says D’agostino. “But I think the actual punch card is outdated.”
In a world where technology allows you to easily track the effectiveness of your loyalty program, paper punch cards make little sense. But there are easy digital swaps, like a swipe card you run per order that automatically shows when a customer’s earned their free coffee.
“When you give out 10 ‘punch cards’, but it’s a digital program, then from those 10 cards, you can see, ‘What was my return? Did I make more than I gave out? What was the change of behavior?,” says D’agostino. “You want to make that all automatic.”
Grace Dickinson is a reporter at Back of House. Send tips or inquiries to email@example.com.
[Photo courtesy Mikhail Nilov]
About The Author
Grace Dickinson is a staff reporter at Back of House. Prior to joining Back of House, Grace worked as a features and service reporter for the Philadelphia Inquirer.
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