What Makes Loyalty Programs Effective in Today's Restaurant Industry?

Brand loyalty

Loyalty programs are not a new concept. But, determining how to use customer collected data to customize the best loyalty program individually for each user, is still somewhat of uncharted territory for brands.

However, as technologies invade the restaurant space allowing for more consumer data to get compiled, the tech-savvy brands are going to use this information to create highly customized loyalty programs.

These programs are meant to reward those regular diners and keep them coming back for more. Most brands have some kind of rewards or points system. But what if the rewards are not something your customer really wants? A free soda with your next meal? What if that customer never orders soda?

Starbucks has a reward program that is solely based on building up points– the more beverages you buy, the more points you earn and the higher level of rewards you receive. Even though the brand does not tailor the kind of rewards to the user, the more you spend the more you get.The Starbucks App, which features online payment and rewards status, is the most downloaded app on the Apple App store in the Food & Drink category. 

So, what makes an effective loyalty platform? Is it the type of rewards? Is it the platform? 

Getting the Customer to Recognize the Value

Usually the first step of creating an effective loyalty program is actually getting the customer to sign up for it. If the initial reward to sign up is enticing enough, which is often a free item, the customer is likely to join. But if the program as a whole does not impress the consumer, they might not take the time to register. Not to mention– if registering seems like a long process, they may not have the time to even sign up.

This is where your staff comes in with an effective explanation of the program and how to easily sign up. “Educate your staff on the value of loyalty,” said Stowe Shoemaker, Dean of William F. Harrah College of Hotel Administration, UNLV. Encourage restaurant staff “to sell” the program to customer. Offering incentives to employees who get the most sign ups during their shift will encourage persuasive deliveries to get guests to join the loyalty program.

Using the Collected Data to Get to Know Your Customer 

Once you have recruited a customer to sign up for the program, it is time to learn about them and their dining habits. “Identify the customer, their frequency, and determine the reward,” said Stowe. This is where the brand can collect valuable data about the diner. For example, Mypanera Rewards are given to the member based on past purchases. So if I often order their “pick two” meals, a future reward will be $2 off a pick two. However, these are time sensitive rewards that are meant for the frequent diner.

The MyPanera Reward Card  | Panera.com

The MyPanera Reward Card | Panera.com

It is important to not only know what the customer often orders, but why they are dining at the restaurant. “The critical issue of the restaurant is to understand the purpose of the visit and to plan the service accordingly,” said Stowe. At casual dining and fine dining– it is important for the hostess and waiter to ask “what brings them to the restaurant?” Not only can the waiter then cater their guest’s dining experience to that, but that information should be collected about the diner and incorporated in the loyalty program.

Doing the Research

Is the program different from others out there? Will your customers be open to joining a program? “Do you have a customer-base that fits into a loyalty program?” said Stowe. If so, determine a reward program that is unique to your restaurant. “Make it different, not a “me too” program.” Take a look at what is out there. What are your competitor’s doing? Read reviews from their customers about the programs, especially those with mobile apps. The number one complaint about reward programs with mobile app is they are glitchy and not user-friendly. For example, the casual dining restaurant, Outback Steakhouse has the 365 mobile app which offers a new reward every day. It is ranked No. 92 out of all the Food & Drink apps. This is a great concept and in essence would be valuable to a frequent diner. However, most of the reviews of the app by consumers comment on the poor design, the frequent glitches, and that the local restaurant did not accept the offer. This is where beta testing for a mobile app is especially important. If the app is introduced to the public before it has been properly tested and it proves to not be executed properly, then the loyalty program loses its potential.

It All Comes Down to Data Alchemy

The brands that really want to understand and know their customers are going to be the ones that significantly invest in data analytics of their consumers. Because truly knowing your customer means you know what they want and what to deliver. Nothing increases brand loyalty more than when a restaurant continuously offers their regular customers rewards that keep them coming back for more.