Loyalty programs are in the midst of a revolution. Sure, your favorite neighborhood cafe might still offer punch cards that’ll earn you a free cup of coffee. But many restaurant brands have evolved their loyalty programs beyond basic discounts in order to build deeper relationships.
“At this point, in the restaurant industry, we’re on track to every restaurant having a loyalty program,” says Zach Goldstein, founder and CEO of Thanx, a loyalty and guest engagement platform. “The brands that are succeeding are the ones that are really figuring out who their best customers are and how they can deliver unique experiences that make those customers want to come back to over and over again.”
Today’s consumers are more digitally savvy and convenience-focused than ever, making it a prime time to launch a loyalty program. But you’ll find yourself among plenty of competition. The average consumer belongs to 14.8 loyalty programs and is only active in less than half, according to a report by Bond that sampled 55,000 consumers.
Put in the work to stand out, however, and you’re bound to see the payoff. Nearly 80-percent of consumers say loyalty programs make them more likely to continue doing business with brands, and members spend 27-percent more when the brand establishes a positive emotional connection, showed the Bond report.
We break down the keys to creating a successful restaurant loyalty program in 2022.
Where loyalty programs have evolved the most is the move away from the one-size-fits-all, “buy one, get one” paradigm. While blanket discounts undeniably incentivize customers, they’re rarely an effective way to build long-lasting loyalty.
“Discounts are undifferentiated when it comes to owning your customer – for example, [if you’re offering a delivery discount], DoorDash can offer the exact same kind of discount, and it means that whoever's willing to spend more will win,” says Goldstein. “That's generally not a world where a restaurant, especially an independent restaurant, will win.”
Instead, more brands are enticing customers with personalized experiences. When loyalty programs excel in personalization, it creates a 6.4-times lift in member satisfaction and members say they’re 3.5-times likely to spend more with the brand (Bond). But what exactly does personalization mean?
It’ll vary depending on the brand and the target customers. But examples include offering member-only opportunities to sit at a front row table or to have the chef hand-deliver your dessert. It could also mean giving advanced access to new menu items or special dishes, like a signature sushi roll that’s on a members-only hidden menu. You might even revive a popular limited-time special, solely for VIP members. Maybe those VIP members are also given the ability to cut the line during peak wait times.
“Your best customers want to be treated differently and shown that you recognize them,” says Kellie Zimmerman, chief revenue officer of customer growth platform Brightloom.
More than 50-percent of loyalty members say they’re interested in using game mechanics (Bond), and coupled with personalization, it can significantly drive engagement.
One effective and straightforward way to employ this strategy is to build membership tiers. This creates an easy way to incentivize members to take certain actions in order to “level up” and earn rewards. There should be a clear distinction between tiers, with the ability to earn rewards at every level.
From there, consider what behaviors you’re trying to change, says Zimmerman, and tailor promotions accordingly. For example, to increase lunch traffic, you could try a loyalty promotion that incentivizes consumers to order ‘X’ amount of lunches. In exchange, customers reach the next tier and gain access to a reward, like one free delivery per month.
If your loyalty program isn’t intuitive, customers aren’t going to use it. That doesn’t mean you should revert back to a simple punch card. But how to earn and redeem rewards should be visible and easy to understand.
“Think in terms of designing a program for members with the shortest attention spans, who may turn to other programs if they find yours too confusing,” says Zimmerman. “And don’t forget to remind your customers of their status and what they benefit from for their loyalty – and even more so as their loyalty grows.”
Prior to designing the details, make sure your website is optimized for mobile. You’ll want to integrate your website with your loyalty program so that customers always have a quick and easy home base where they can discover rewards.
Loyalty programs gain you closer access to your best customers. And your goal, says Zimmerman, is to nail down who exactly each of these customers are by looking at factors like how often they visit, what they buy, their level of loyalty, and their preferences. This way you can put forth messaging (through email, SMS, digital advertising, etc.) that effectively identifies that you understand your customers needs.
“A lot of loyalty programs capture a lot of good information, but where brands fail is using that information to prevent customers from falling off,” says Zimmerman. “When you categorize and segment customers based on their general behaviors, then you have a baseline so that when they step out of that, you can incentivize them to come back in.”
Customer’s behavior should be analyzed from the very moment they sign up for a loyalty program. In fact, those first few weeks may be the most crucial.
“There’s no better way to drive lifetime value than getting a third purchase, so if you want to do just one thing, it should be to convert second time purchasers into third time purchasers,” says Goldstein. “In order to do that, you need to start developing the personalized factors that will allow you to talk to someone in a way where you stand out from the very noisy crowd.”
How do you easily identify customer behaviors and segment them into categories? Unless you’re a data and Excel wizard, you’ll likely want to seek out a loyalty technology partner.
“Loyalty and marketing in general are not set-it-and-forget-it tools. You don't just create a bunch of emails, and then have them sent out every month,” says Goldstein. “You have to constantly be working at it, and that generally means having a great technology partner because otherwise it’s too much work.”
With loyalty technology, there’s no need to manually download data and spend hours slicing and dicing it to try and understand your customers. These platforms automatically identify customer segments based on purchasing behavior, and provide insights and predictive analytics to help restaurants leverage the right incentives to drive real, and specific, behavior. Many partners also serve as advisors, interpreting data to help brands figure out what type of loyalty strategies are best (example: offering free delivery versus exclusive menu items).
By now, news is spreading of the first restaurant chains to create NFT programs and file for trademarks in the “metaverse”. These virtually immersive concepts might offer a glimmer of how loyalty programs will continue to evolve. But for the average independent restaurant, there are other forward-thinking strategies you can experiment with now to bring immediate benefit.
“I see loyalty becoming more of a two-way conversation with the customer, and brands using loyalty to ask for advice and feedback,” says Zimmerman. “What menu items they consider, where’s the next location – I see loyalty programs driving the center of that conversation.”
Encouraging your customers to share their opinions gives you the opportunity to build even richer communities around your brand. It enables customers to feel heard, and a little extra special, fostering the “loyalty” that a loyalty program sets out to create.
Grace Dickinson is a reporter at Back of House. Send tips or inquiries to firstname.lastname@example.org.
[Photo courtesy Thanx]