HomeMarketing TipsA Complete Guide On Restaurant Loyalty Programs

A Complete Guide On Restaurant Loyalty Programs

Who doesn’t like rewards?

As kids, we would be rewarded with a ‘star’ sticker or a ‘ribbon’ for participating in class discussions or good handwriting. Nothing much has changed as we grew older. The papercut stars get transformed into frequent flyer miles, hotel reward points, free meals at your favourite restaurant, etc

Rewards and Gifts have a great influence on the human mind and motivate them as well. Intangible rewards/upgrades or tangible cashback; a customer’s purchasing behaviour gets influenced when they enrol in any kind of loyalty program.

The global Loyalty Program market was valued at $172.5 billion in 2018. Having said that, although loyalty programs are not new to the hospitality business, many restaurants are found to neglect or are unable to understand their importance.

It is a full-fledged system dedicated to streamlining customer purchases into a unique reward-based system. But more importantly, it’s an elaborate business strategy. Loyalty Program thrives on customer database and their ordering patterns. A vivid picture of their food habits, the trends they are most attracted to, the preferred time of visit at the restaurant, etc. helps in reaching out to the best-valued customers.

Why Use Restaurant Loyalty Programs?

To understand how loyalty programs work and benefit your restaurant and brand, it is important to know the intent of such a service. A loyalty program works on two principles – Reward and Reinforcement.

An experience that is followed by pleasant consequences is likely to be repeated, and vice-versa. So when you reward consumers in exchange for desired actions, you can influence them to continue engaging in these actions. The main objective is to retain customers. The rise in your restaurant’s revenue directly depends on your customer base and how to retain it. A loyalty program gives your customers a reason to return.

Loyalty programs are also aimed to add value to your existing brand. Studies show that loyal customers are likely to spend more than other customers.

For example – Suppose, you are giving 20% cashback on an order value above 500 Rs then this would give a reason for the customer to spend more than 500 in order to get cashback.

Benefits Of Using Restaurant Loyalty Programs

benefits of using restaurant loyalty program

According to Bain & Company, a 5% increase in customer retention can increase profitability by 75%.

As more restaurants are springing up it is evident that customers have more chances to choose where to dine. With high customer acquisition costs, restaurants are compelled to re-orient their marketing strategies to keep existing customers while attracting new ones.

Analysts and academic researchers assert that it costs as much more to conduct business with new customers than with existing ones. Doing business with existing customers Reduces marketing costs, decreases price sensitivity and strengthens partnership activities. Loyal customers are less likely to switch and make more purchases than unfaithful ones.

Types of Restaurant Loyalty Programs

1. Standard Shopping Points

You can create restaurant Loyalty Programs that accumulate points in the customer’s account based on the amount they spend at your restaurant. They can collect a point on a certain amount spent. For instance, 1 point can be collected on every Rs 100 spent. Amount-based restaurant Loyalty Programs work best in the case of fine-dine restaurants and bars where the average spending of customers is high.

2. Special Rewards

Your loyalty program can also have special rewards on special days of the year. For instance, you could treat your customers with a discounted meal on their birthday or anniversary. Restaurants serve complimentary dishes to their premium customers. Visit-based restaurant Loyalty Programs work best in the case of quick-service restaurants and cafes where the frequency of people visiting your outlet is higher, but the average spend is less. You can offer a free drink or a complimentary item on every 8th customer visit. This propels your customers to come back to get that free item.

3. Prepaid Loyalty

The ‘Amazon Prime’ service saw massive participation throughout India. Not just that, but competing e-commerce companies were preferred less after customers enrolled for a prepaid loyalty program like this one. Market research shows that a prepaid deposit as low as Rs. 500 on loyalty programs will tie the customer to your brand. When a person enrols in any prepaid loyalty program he/she is not only a member or a participant but a subscriber.

reasons you should use customer restaurant loyalty program

How to Measure the Success of your Restaurant Loyalty Programs?

Measuring the impact of your loyalty program is essential to understand your ROI (Return on Investment), or if you need to make tweaks to increase loyalty.  To measure its success and gauge its future viability, you should be looking at the following:

1. Customer Retention Rate

The true success of a restaurant’s Loyalty Program is measured not by the rewards earned, but by the cash points burnt. Compare numbers like the sales over time of non-members and members and the rate of return for each group to watch for a developing trend in the right direction.

2. Negative Churn

Churn is the rate at which guests leave your restaurant, so to create a negative churn, set up markers to measure when guests become more invested in your restaurant. Tracking when loyalty members are returning more often, spending more in a single visit, participating in more events or higher-priced services and products are all ways to assess whether the program is working.

3. Net Promoter Score

This score is calculated by subtracting the percentage of guests that would not recommend your restaurant from the percentage of those who would. Using surveys is a clear-cut way to do the math here, but there are other less formal ways you can use the same principle to get helpful data. You could look at the percentage of positive vs. negative social media comments, for example. Even Zomato reviews could be a way to assess a “score.”

4. Customer Effort Score

This is how much effort a guest has to spend to have a positive experience or resolve a negative one, and this just might impact loyalty more than the “delight effect.” An efficient loyalty program that doesn’t rely on coupons or additional cards is a great way to streamline the effort your customers will have put forth to have a positive, rewarding experience.

problems using restaurant loyalty program

With help from your “negative churn” and “retention” data, you will want to consider guests’ activities within comparable periods of time. For example, if you are looking at total visits to your restaurant for a year-long period, comparing “months 1 through 6” to “months 7 through 12” should display an increase in loyalty program members in the latter months. It’s helpful to take note of trends and adjust your marketing if you don’t see positive results!

RECOMMENDED READ  6 Successful Email Marketing Strategies For Your Restaurant

Alongside its positive outreach, loyalty programs can go horribly wrong if the software and marketing strategy is not in place. Market research by KPMG points out a few limitations as well as winning points for a loyalty program:

While watching all of this develop before your eyes sound great, measuring correlations between your new loyalty program, your marketing efforts and the results is crucial to making that happen. Setting benchmarks and actionable goals and following through with them is the best way to keep those guests coming back.

Advanced software that analyses customers’ purchasing patterns is a must to maintain a strong and successful loyalty program. This might take away a lot of your time and energy from various other priorities you have as an operator.

Case Studies On Restaurant Loyalty Programs: 

Starbucks

With 12 million members in the U.S. alone, the Starbucks loyalty program is a well-known success story. The coffee giant launched the “My Starbucks Rewards Loyalty Program” in 2010. It’s evolved in the years since most notably to include a digital ordering component known as Mobile Order & Pay (offered only to loyalty members).

In 2016, it was reported that the company’s loyalty program held more money than some banks, with $1.2 billion in customer funds loaded onto plastic and mobile Starbucks cards as of the first quarter of the year. According to company filings, that number is now over $2 billion and has more than doubled in just two years (data shows the chain saw $621 million in funds loaded to the program in 2014).

Subway

Subway’s loyalty program has evolved considerably over the years. The Sub card eventually became a Sub card app, complete with geotargeted promotions as well as custom sandwich-builder and calorie calculator features. In 2015, the sandwich chain began testing a link between its loyalty program and access to in-store Wi-Fi, offering customers in some locations in Canada, a free sandwich if they logged into the in-store Wi-Fi network.

DD Perks

The DD Perks Rewards Program was launched in January 2014 as a way to reward guests with points toward free beverages for every visit they make. Three years later, the program now touts more than six million members nationwide. The use of the rewards program, and the chain’s continued emphasis on digital, appears to be leading to larger ticket sizes. The customers enrolled in their loyalty program get the ‘on-the-go ordering’ facility.

Restaurant Loyalty Programs Offer the Most Value to Those Who Think Strategically

Thus, designing attractive and valuable programs together with distinctive core products of restaurants can influence customer buying behaviour. Loyal customers are less likely to switch and make more purchases than unfaithful ones. 

Advanced software that analyses customers’ purchasing patterns is a must to maintain a strong and successful loyalty program.

The secret sauce isn’t just the increasing sales in the short-term but a better understanding of what a chain’s ideal customer looks like: when they come in, what they buy, and how much they spend.

Designing a restaurant loyalty program is a challenge, but managing it and ensuring smooth transactions of reward points is an entirely different ball game. With PetPooja’s Loyalty Program you can allocate points to your customers with a pre-set formula per rupee spent. The complete functioning of the loyalty system is controlled directly from the POS, and the reports are available right on the dashboard, allowing you to get a complete picture of your repeat customers.

Petpooja POS also supports other restaurant loyalty programs like Reelo, #loyalty & Bingage by simply integrating them with your restaurant.

Hope this helps! Follow us on Instagram for more restaurant updates.

Shaival Desai
Shaival Desaihttp://blogpetpooja.wordpress.com
Shaival is the Chief of Growth at Petpooja. Apart from jumping from one corridor conversation to another, you will always find curiously wandering about SaaS products, technology & food trends. Reach him at shaival.desai@petpooja.com.

RELATED UPDATES

Leave a Reply