A recent TouchBistro survey found that only 36% of Americans currently participate in a restaurant loyalty program. The younger generations, Gen Z and millennials, reflect higher participation, with about 40% belonging to these programs. That said, about 86% of those surveyed said they are interested in joining such a program, particularly if it offers coupons or discounts. According to Revenue Management Solutions, during the pandemic, one in four consumers joined at least one restaurant loyalty program.
This may reflect the current price sensitivity as about 20% of restaurant-goers reported increased menu prices left them reluctant to dine out, and 45% responded that rising menu prices somewhat impacted their decisions to eat out.
Additionally, the survey revealed that dining in still trumps takeout or delivery, with 44% dining in once a week or more and only 27% going with takeout or delivery once a week. Restaurant Dive reported on two restaurant chains experiencing a shift toward dine-in consumers. Applebee’s rising dine-in segment has resulted in higher beverage sales, and Wingstop reopened its dining rooms.
What do all these statistics tell us? That a loyalty program can be a game changer.
Today’s Loyalty Programs
Today’s loyalty programs increase customer spending and brand loyalty while at the same time capturing valuable marketing data. Restaurants also use these programs to boost customer acquisition. According to Paytronix, 57% of restaurants have a loyalty program in place and 25% plan on investing in them within three years.
The tremendous growth in loyalty programs is also due, in part, to the pandemic, a period that prompted consumers to get more comfortable engaging with brands digitally. As the technology has advanced, it’s also become more efficient and affordable, making it viable for smaller, independent operations.
Loyalty programs enable restaurants to collect data on the items a customer purchases, the locations they frequent, and the times they visit. This information is then used to target promotions and rewards, increasing order size, retention, and visits. According to Insider Intelligence, 68% of U.S. adults like loyalty programs that send personalized discounts and offers based on their purchase history.
As we all know, loyal customers are the key to a restaurant’s success. In fact, repeat customers spend, on average, about 70% more than new customers. A study conducted by Harvard Business School and often cited found that increasing customer retention rates by 5% increased profits by 25-95%. Customer loyalty programs can help bring customers back through your door, time and time again.
This focus on top-spending, frequent customers is nothing new but has intensified as this year’s challenges engulfed the industry. Instead of focusing on volume, establishments are incentivizing VIP and core customers with personalized offers. VIP customers are those who bring in the most value, with repeat purchases adding up to a high customer lifetime value.
They refer others, leave positive reviews, and their cumulative spending is higher than average. Once you know who they are, you can use data to determine what characteristics they share and where they come from. You can also hone in on similar customers. Once you get them in the door and gain their loyalty, it’s important to remember that 86% of consumers will leave a brand after just two poor customer experiences, and 86% of buyers will pay more for a great customer experience.
Loyalty programs that Work
Recently, P.F. Chang introduced a new loyalty subscription-based program called Platinum Rewards. For a monthly fee of $6.99, Platinum Rewards members earn 15 points for every $1 spent, get priority reservations, and pay no delivery fees when orders are placed on P.F. Chang’s website or mobile app.
TGI Fridays reward program entices guests to return, giving them one point for every $1 spent. They also earn points when a friend joins the program. In addition, after signing up, guests receive a free appetizer with their meal and free chips and salsa whenever they dine at a TGI Fridays.
At EMERGING, we provide customer analysis to help restaurants understand their current VIP and Core customers. This knowledge helps determine expansion plans and directs marketing campaigns. In the end, it mitigates downside risks and maximizes revenue potential. To learn more about customer analysis or to schedule a consultation, contact EMERGING.
How do restaurants create a loyalty program?
The two guiding principles of a restaurant loyalty program are reward and reinforcement. Rewards prompt guests to continue dining at your establishment, which is reinforced by additional rewards as they patronize your restaurant. There are several different types of loyalty programs, including reward networks, loyalty points, and tiered loyalty programs.
These may be paired with a referral program that incentivizes customers to refer friends, family, and business associates. In addition, most reward program software integrates seamlessly with your POS system, enabling you to track loyalty dollars and keep it simple.
What restaurant has the most popular loyalty program?
Starbucks is one of the most iconic loyalty programs in the nation. Their loyalty program grew by 3.2 million members to 27.4 million by Q3 2022. Chipotle launched its rewards program in 2019 and, three years later, has about 28 million members.