What Are Restaurant Loyalty Programs and Are They Worth It?

Marketing 13 minute read 1st June 2022

The idea of a restaurant loyalty program for your own establishment has been on your mind for a while now because let’s be honest, every big brand has one, and consumers that are part of high-performing loyalty programs increase 2x their purchases.

You’ve experienced it yourself. You get enticed by the points you collect and expect even more of the reward that comes with them. Which makes you want to visit that restaurant at every opportunity you have. You have to get those points after all.

And now, you thought to yourself, why not try it in my ‌restaurant?

Well, if you’re here to learn about customer loyalty programs for restaurants and if it’s really worth it for your business, let’s start with the basics.

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What Are Loyalty Programs in Restaurants?

Restaurant loyalty programs or restaurant rewards programs are a marketing strategy to boost the loyalty of your customers and generate more sales.

This strategy consists of your customers spending money at your restaurant to get item-based or point-based rewards. The more money they spend on your business, the more points they earn, and when they get a certain amount of points, they can claim a meal for free.

  • Item-based rewards are when you get a certain amount of points according to the item you buy
  • Point-based rewards are when you get a certain amount of points for every dollar spent

Now, it’s called a loyalty program because the more your customers visit you, the more points they get. This compels them to have your restaurant as the first option to appear on their minds when they want to go out to eat.

Why Are Loyalty Programs Important for Restaurants?

Loyalty programs are important for restaurants because they ensure you get customers coming more frequently than if they didn’t have points to collect.

This translates into your customers coming to visit often and becoming brand promoters through word-of-mouth; lowering the acquisition marketing cost and increasing profit. Which gives you the financial support to keep investing in your restaurant, make sure your employees are paid, and, of course, make money for you.

Another reason loyalty programs are important has to do with the perception of your customers.

When they get something for free after spending money (multiple times) at your place, they feel appreciated, rewarded, and as if they saved money on the free stuff.

This positive perception betters their experience in your restaurant and positions you, again, in their minds as the place to go and eat.

Are Loyalty Programs Worth It?

Yes, customer loyalty or rewards programs are worth it. Customers want to collect more points because they’re after the rewards, which is monetarily good for you. More visits, more money.

Starbucks announced that 40% of its transactions in the US were the result of its rewards program. That’s not half of their transactions but is still a big portion. And as a bonus, a restaurant rewards program can be used as a strategy for retention as well.

A loyalty program platform means your customers wouldn’t like to stop coming to your restaurant because the money they spend somewhere else isn’t being put into “good use” (they want the points and what comes with it).

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The small effort of retention strategies like this can generate huge returns. After all, increasing your customer retention by just 5% can boost your profits by 25%.

Now that the basics are clear, let’s go to the section you care about. Let’s create your customer loyalty program.

How Can You Create a Restaurant Loyalty Program?

Creating a restaurant loyalty program depends on your objectives and resources, but it also requires planning. This is a three-step formula to make your loyalty programs successful.

Step 1: Plan Your Return on Investment

Before putting your dining rewards program out, you have to analyze how to make it profitable for you, meaning you likely can’t maintain a buy one, get one free deal. That’s just going to ruin your business.

The simplest way to get started with a customer loyalty program is to test your buy one, get one free ratio with customer loyalty cards for one or three months and see if it works.

A healthy ratio is giving your customers something for free when they have already purchased between five and eight products at a standard price. And in some cases, this ratio might not work.

So, if you’re looking for something more specific, to make sure you have a good buy one, get the free ratio, and you can calculate your return on investment (ROI).

The ROI, as its name suggests, tells you if your revenues were higher than your costs.

Here’s how to calculate it:

ROI = Net income / cost of investment

  • The net income is the money you obtain from people buying from you and using your restaurant loyalty program to stack up points
  • The cost of investment is the money you “lose” in drinks and meals you give for free. This also applies to the cost of acquiring customers into your loyalty program and the cost of cards, the app, or the platform

Now, these are the three possible results:

  1. If your result is 1, your costs equal your returns. Meaning you’re just breaking even and you should probably raise your ratio of money spent to get rewards for free. This is, so all your effort isn’t for nothing
  2. If your result is less than 1, your costs are greater than your returns. Something you certainly don’t want as it means you’re losing money
  3. If your result is greater than 1, your returns are higher than your costs. And this is the outcome you want. But it’s up to you to evaluate if these gains are worth your effort

Step 2: Use Digital Loyalty Programs

There are three ways in which you can put your customer loyalty program to work. Either using loyalty cards, a loyalty app, or a loyalty software/platform. But, this depends on your restaurant.

A loyalty app is the best option as people nowadays rather have everything in a digital format; it’s understandable, it prevents customers from losing loyalty cards or forgetting them at home, it gives your restaurant the option of personalization, but an app is an expensive investment.

On the other hand, loyalty cards are cheaper, but not as fancy.

And as a middle option, you can use loyalty programs software.

These have the ease of a digital platform and are paid on a subscription basis. This means you don’t have to go through all the costly development processes of an app.

As a rule of thumb, a loyalty app or software works better with restaurants that have various locations (like a franchise) and loyalty cards with local businesses that are unique.

Step 3: Promote Your Customer Loyalty Program

No one is going to use your restaurant loyalty app if you don’t promote it. Here are some excellent ways to do it:

  1. Build a section on your website As always, your website must represent your business. That’s why when visitors land on your site, the option to join your restaurant rewards program must be there too.

  2. In-store promotions Tell your employees that you want them to offer the rewards program to every customer that comes in. Tell them to talk about the promotion on the app, to get them to sign up

  3. Run a digital marketing campaign Let your customers know about your new restaurant loyalty program. Be that by using emails, social media, advertising, or any other channel you use to reach out to customers. And remember to explain how your loyalty program works clearly and briefly.

  4. Exclusive offers You have to lure your customers in, and a good way to do this is by offering a promotion only available on your reward program app. It doesn’t have to be a lifetime promotion, it can just be live for a month, to attract your customers

Bonus: Provide Free Wi-Fi

If you used the loyalty app approach, offer free Wi-Fi at your restaurant.

Not having free Wi-Fi in an establishment where people gather is a missed opportunity.

According to Business Insider, 62% of businesses report ‌that customers spend more time at their establishment when free Wi-Fi is offered, which can also be translated into more sales.

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Also, if you offer a restaurant loyalty app, and when your customers are paying, they can’t use it, because there’s no Wi-Fi, it can harm the overall customer experience and can cost you a loyal customer.

Get Loyal Customers

It all goes back to your customers.

Being the first restaurant that comes into their minds when they go out for a special night or just to break the monotony is a huge advantage.

That’s why it’s smart that you keep investing in retention strategies.

Strategies that you can test and refine to make sure they’re good for your business (baby steps are always welcomed).

So, keep going.

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