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Are restaurant loyalty programs really customer focused?

Published October 30, 2020

In a classic episode of the American 90s sitcom “Seinfeld,” Elaine Benes is determined to fill out her loyalty punch card from a restaurant called Atomic Sub. She’s just one purchase away from a free sub sandwich. “I’ve eaten 23 bad subs! I just need one more. It’s like a long, bad movie, but you want to see the end of it,” she says. 

In 2020 can you imagine asking a millennial to buy twenty-three subs to eventually get one for free? Most of them would likely say “Tell you what. I’ll buy two subs if you give me a free one—and make sure you add a free cookie, too.”

Seinfeld’s fictional Atomic Sub was on the right track by enticing additional purchases from customers like Elaine, but the typical loyalty program in today’s restaurants go above and beyond the simple punch card.

Now your customers want a loyalty program that is human centered. They want to be recognized, understood and motivated and they want you to demonstrate that you know what they care about. And they want to use their mobile devices for a frictionless way to access and use your loyalty program.

And your motivation to get up to speed on loyalty should be clear. Because loyalty really means engagement today; it’s based more on experience—not just transactions. So, think of your loyalty program as your customer engagement program to start seeing the kind of results you want. Now, the return on your investment is even more powerful, with brand exposure, positive social media interactions and more on the line for your restaurant. And let’s not forget the opportunity for more sales. So, when you have a loyalty program with one-on-one engagements you’ll drive repeat visits, increase the amount that they spend which amounts to more profit for your restaurant.

Ways a loyalty program can add value

As a restaurant owner or manager, it must be inspiring to know that a new customer is enjoying the food and service from your restaurant for the first time. But you’re likely more excited to see orders from your repeat, loyal customers, and there is good reason for that. 

According to Neil Patel, cofounder of Crazy Egg, customer retention increases your customers’ lifetime value and boosts your revenue. He explains that most recent statistics indicate it’s easier and more affordable to focus on customer retention over attracting new diners. 

“For one thing, you’ll spend five times less money on customer retention. Additionally, at best, your probability of selling to an existing customer is at least 40 percent more likely than converting someone who has never bought from you before,” he says. 

That excitement of welcoming a new customer is justified, but remember that your investment in customer retention offers you better value over marketing to a new customer.

Here’s why you should implement a customer loyalty program:

  • Grow revenue. Using data, tailor your loyalty programs so they’re relevant to your customers so that they are likely to respond to your offers. Also, by cross-selling and upselling other menu items your guests like, ups your chances of them ordering and spending more money.
  • Reallocate your labor. By using technology to set up automated loyalty programs based on triggers or events you can free up your marketing teams so they can concentrate on other ways to promote and support your restaurant.
  • Protect your margins. A strong, well-planned program will include understanding and rewarding guests who drive the most value for your business. So, identify the customers who typically spend more and adjust your marketing dollars accordingly—think higher average checks and frequent visits first.
  • Boost customer lifetime value. When you can match the right loyalty program offer to the right guest, you can drive the right buying behaviors year-over-year.
  • Drive a deeper kind of loyalty. By truly understanding what guests care about and what motivates them will keep them coming for more—happy customers become repeat customers.

Ten tips for a successful loyalty program

How do you build on a positive customer experience with a brand loyalty program? You can’t just throw things at the wall and see what sticks—that’s messy and time consuming. 

To create loyal brand ambassadors and increase your sales with a loyalty or reward program, consider these tips:

1. Make it simple—your restaurant loyalty program must be easy to understand and access for both employees and customers. If it’s complicated or clumsy, your customer will likely abandon it and seek a reward by dining elsewhere. 

2. Don’t let a reward program slow you down—if your speed of service is negatively affected by the implementation of a customer loyalty program, figure out what specifically is slowing down your service. 

3. Shout it from the rooftops—what good is your amazing customer loyalty program if no one knows about it? Use social media and other channels to market your program.

4. Segment your customers—customer segmentation is a way of dividing and creating groups that have similarities like age, gender, what they buy and what they like. By using automated software to group your customers you can save a significant amount of time gaining good customer segmentation that you can then use to tailor the rewards you’ll offer each group.

5. Make it personal—by tracking customer data, you can tailor your customer loyalty program to their wants and needs. Personalizing a reward or offer can make your existing customer feel special, that you understand what they want (even beyond what you have to offer) and it will increase the likelihood of customer retention. 

6. Create a mobile app—nearly all of your customers say they want to use their mobile devices to access your customer loyalty program (a study conducted by Rewards Network in 2017 demonstrated that 85% of their respondents said they want “digital loyalty programs via a mobile app” but only 25% said they had access to even one on their device). With a mobile app not only will you give them the ability to access and use your loyalty program, you’ll demonstrate that you really do know what your customers want—and that you’re prepared to give it to them.

7. Make it valuable—again, your customers have plenty of choices. Make them feel wanted by offering discounts, exclusive deals, merchandise and more so they don’t stray to your competitors. 

8. Keep it in-house—you can find lots of third-party loyalty providers out there, but you’ll likely be better served by creating a customer loyalty program that you can integrate with your POS. With an integrated solution, your restaurant can track data, create email marketing campaigns and more.

9. Communicate—welcome your customers to your loyalty program when they join. Use social media or text messages to offer exclusive deals to members of your customer loyalty program. If your customer hasn’t made a purchase recently, send them a reminder of what they’re missing out on and how close they might be to redeeming a reward. Using your loyalty program as a channel for communication will create a positive customer experience that they will likely share with potential new customers. 

10. Think bigger. Loyalty today is about transactions plus a customer’s experiential and behavioral activity, so when restaurant brands create marketing campaigns it’s more targeted to how recipients have behaved and interacted. Then you can continue to create an engagement program that’s hyper-targeted to your guests’ actual behavior and likely future ones. 

Measuring customer loyalty

It isn’t enough to implement a customer loyalty program. You need proper benchmarks to ensure you are making the right choices to earn customer loyalty. Remember, your loyalty program is also a customer engagement program. And you can measure both.

The Net Promoter Score (NPS) is a metric used to measure the loyalty of a customer to a company. Your NPS is based on a simple question: How likely is it that you would recommend X restaurant to a friend or colleague?

Qualtrics, a company that builds technology to close experience gaps, explains NPS in great detail, including how you calculate your score:

  • Respondents give a rating between 0 (not at all likely) and 10 (extremely likely) and, depending on their response, customers fall into one of 3 categories to establish an NPS score:
    • Promoters respond with a score of 9 or 10 and are typically loyal and enthusiastic customers.
    • Passives respond with a score of 7 or 8. They are satisfied with your service but not happy enough to be considered promoters.
    • Detractors respond with a score of 0 to 6. These are unhappy customers who are unlikely to order from you again, and may even discourage others from ordering from you.
    • To calculate your NPS, simply subtract the percentage of Detractors from the percentage of Promoters.
    • For example, if 10% of respondents are Detractors, 20% are Passives and 70% are Promoters, your NPS score would be 70-10 = 60.

The higher the score on a scale from -100 to + 100, the better chance your restaurant has for repeat customers making repeat purchases. Using this simple survey question is one easy way to assess customer satisfaction.

Keep in mind that metrics are only one way to gauge the success of your loyalty program. True engagement involves a value-driven continuous conversation between you and your customers, understanding what matters to them and what motivates them. By using an automated platform you can  gain customer insights to take a data-fueled approach to track and report social media like, shares, clicks, email opens, website visits and more.

Out with the old, in with the new

By creating a customer loyalty program that is truly human centered, your restaurant will incentivize brand ambassadors, outpace competition and see an increase in sales. That starts by really understanding what your customers value—from the importance of convenience (their lives are hectic and they value saving time) to what they receive for the money they spend. When you get that right and you implement a seamless customer loyalty program you can up your customer experience all the way around. 

Remember that loyalty really means engagement. Start thinking of your loyalty program as a holistic customer engagement program that accounts for experience and behavior—not just transactions—and loyalty becomes a much more active experience that you can constantly measure and improve.

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