What Makes a Successful Restaurant Rewards and Loyalty Program?

September 08, 2020

What Makes a Successful Restaurant Rewards and Loyalty Program?

During normal times, the general wisdom is that 6 in every 10 dollars spent in the fast-casual and quick-service segments come from repeat customers (source: National Restaurant Assoc.) . All signs point to this percentage being considerably higher during the Covid-19 era ( read our post on this subject). In this environment, having a systematic approach to connecting with new customers and building loyalty with existing customers is more important than ever. Having a digital relationship with customers has enabled restaurants to communicate updates in menus, service hours, and how they are responding to Covid-19 safety procedures. This type of progressive approach has enabled businesses to rebound considerably faster than those more reluctant to change.

Recognizing the immense potential of this marketplace, several companies have entered the customer loyalty and rewards space with services powered by digital technologies. The following article lays out the current landscape for restaurant rewards and loyalty programs and the questions you should be considering when evaluating options. Future posts will dive into each category giving examples and a perspective on their effectiveness. This is not a review of rewards and loyalty platforms, but more a review of the types of benefits they offer consumers and how they offer them. For a review of platforms see Capterra

The New Restaurant Rewards and Loyalty Landscape

In the last few years, response and loyalty programs have moved from discounts and couponing towards engagement. New programs are emerging with innovative or disruptive models, programs that include; mobile apps, digital coupons, membership tiers, digital rewards, electronic payment, and e-gaming. These models leverage technology to allow increased personalization, real-time earning and convenient redemption; a simplified user experience that removes friction points that exist in traditional programs; payment card integration, where programs partner with retailers and link credit cards for to generate meaningful data, and direct-to-consumer features for improved consumer experience.

What Makes a Great Loyalty Program?

Simply put, a great loyalty program generates repeat business and long-term profitable relationships with customers. Here are some characteristics that are important:

  • Customer and Restaurant Ease of Use: A loyalty program cannot be difficult for consumers to participate in, nor cumbersome for the consumer to use once enrolled. It is equally true that it can't slow down a sale or be difficult to administer – especially for customer-facing staff. If your program takes a lot of explanation or is cumbersome or complex to claim rewards, you are going to annoy your loyal customers and decrease the efficiency of your staff.
  • Attainability of Rewards: Rewards should be easy to attain to help encourage further participation. The first award tier should be attainable within the first 3 to 5 visits, assuming shopping for one. Getting penetration for your program is critical. Fast adoption drives staff familiarity and promotion of the program becomes part of the culture. It will also heighten customer excitement, breeding word-of-mouth, and social sharing. More people on the platform also gives you the ability to economically scale the platform. Do all that you can to generate early excitement at launch by making rewards attainable and fun.
  • Rewards Should Be Meaningful: PAYTRONIX, who offers a customer engagement platform, recommends that your first tier of customer rewards should represent between 4-8% of the customer outlay. They also, recommend designing your program to optimally reward "Silver Customers", or those in the 50 to 80th percentile, as there is an opportunity to drive more purchases and it still makes higher awards attainable for lower-tier customers. Silver customers should be able to attain between 8 and 14% in perceived reward value.
  • Programs Should Drive Engagement: Simply offering "points" towards dollars-off may not do much to engage consumers in your brand. Loyalty programs should strive to deliver relevant and meaningful experiences that complement the retailers' brand. Consider including games, competitions, elevated dining experiences, exclusive merchandise – look to establish an emotional experience with your members.
  • Social Integration is Essential: If someone has joined your rewards program and wants to tell their friends, show-off their membership level, brag about the latest reward they've received, or simply network with other fans you'd better make it easy for them to do.
  • Data is Gold: The restaurants that put the value of data at the forefront will have a distinct competitive advantage. Data can drive behavior-driven campaign execution so you can get the right offer, to the right consumer, at the right time. Integrating your loyalty program with your free store WiFi can provide a treasure trove of critical data. Getting a store-branded credit, debit, or e-wallet in the hands of your loyal customers can give you insights into your customers' shopping patterns – if they buy lunch from you, where are they getting their breakfast? Restaurants are learning of the power that machine learning and AI can bring to their marketing efforts and the marketing automation platforms that underpin their marketing programs are getting better at leveraging this data. Your rewards program can be a critical source of valuable data that can power profitable marketing programs for years to come. Plan now so that your data is not siloed and is available to these powerful tools.

Here are some questions to ask yourself before launching your rewards program:

  • How easy will it be to explain the program to staff and customers?
  • Will my loyalty program include tiers – Casual, Fans, Devotees?
    Think of something that reflects well on your brand, for example, Taco Bell uses "Hot" and "Fire" tiers.
  • Will the program interfere with the ordering and payment process?
    It should make it easier. In the Covid-19 era, apps that incorporate e-commerce are a godsend! They reduce in-restaurant contact and help eliminate paper waste.
  • What percent of a sale are you willing to return to your customers?
    You'll need a plan for each tier and how the program will evolve over time. It's best to kick it off generously.
  • What app features do you want to include?
    Supporting your program with a mobile app is essential. Beaconing is a powerful feature as it allows you to message in the app when a member is near one of your stores – might even be able to lure them away from a competing store with a targeted offer.
  • What Social Media Integrations are important for your business?
    Facebook and Instagram are table stakes, but if the experience you create is video worthy, and what isn't these days, then you may want to include YouTube, Snapchat or Tiktok integrations. Checking into your establishment via Facebook and having the app generate incentives is a powerful feature.
  • How will the program integrate with your current Email Platform?
  • Can you segment your user base based on their behavior? If you see a particular group of users visiting less and less often over time, promoting an offer on a new menu item might be really effective.
  • How will you provide customer support?
    Some apps can integrate live chat, phone, or and/or email.
  • What reporting data do you want or need?
    Do you need this data in real-time? Does the platform have an API or easy way to integrate with your marketing automation or email platform?
  • Does the program integrate with your POS?
    If it does, it will streamline purchases and improve analytics.
  • Does the program leverage your assets and your brand?
    How do you take your assets to reward consumers with rewards that have a higher perceived value than your actual cost? Jack in the Box fans went crazy over their antenna balls. Spindy uses gamification to allow purchasers to get immediate cashback, anywhere from 1% to 100%, so the thrill of playing the game creates more value than the amount won – unless you get 100% back of course.
  • Is your program fun?
    Programs that are fun and entertaining create more engagement and leverage word-of-mouth and social sharing. At spindy we have first-hand experience on what fun and excitement can do to drive sales and awareness.

If you'd like to read more about restaurant loyalty and rewards programs, here are some articles I found useful:

Please don't hesitate to reach out if you have any questions or if you'd like to suggest further articles.

Stephen Condon

Contact spindy if you have questions or comments about this article.