🚀 10x your online reviews on autopilot with Review Automator. Check it out

5 Steps to a Profitable Restaurant Loyalty Program

Growth Strategies 15 minute read 25 October 2019

Competition in the restaurant sector has always been high, but something has changed significantly in the last few years: the customer journey.

If there’s ever been a time when the customer is the most powerful king, it’s now. They control their own buying journey and are far less likely to be drawn in by traditional advertising.

They’ll scour review sites, speak to friends, monitor hashtags and sign up to mailing lists in the hunt for the best possible purchase.

This is particularly evident in the restaurant industry. It’s thought that 90% of guests will look up a restaurant online before eating there. That alone indicates how the new customer journey is likely to start, because once they hit the internet and begin researching, there’s no telling which path they’ll take.

So, where does loyalty come into the equation?

With $1.6 trillion being lost every year due to customer churn, we now live in an age where wedding customers to brands is an essential marketing tactic. After all, if someone eats at your restaurant once, why should they return? For the great food alone?

Think again.

Studies show that 80% of a business’s future profits are likely to come from just 20% of their existing customers. What’s more, the same studies suggest that nearly 70% of customers won’t come back for more if they feel you’re not that fussed about them.

With 80% of consumers demanding a personalised experience from brands, it’s clear that restaurants need to do more than simply offer great food and service.

What is a restaurant loyalty program?

You’ve no doubt heard of loyalty programs, and you’re probably a member of at least one yourself, but it’s important to consider the full definition if you’re considering creating one for your own business.

If we consult Wikipedia, we’re informed that loyalty programs are:

“…structured marketing strategies designed by merchants to encourage customers to continue to shop at or use the services of businesses associated with each program”

But that’s loyalty in its most basic form. A better definition of loyalty is that it refers to structured rewards given to customers in exchange for a behaviour the business desires.

For instance, at a restaurant, that might be a guaranteed table with a view in exchange for a four cover booking made online. Thus, the guest receives the best seat in the house - guaranteed - and the restaurant gets four covers and some hugely useful customer data to boot.

The best loyalty programs concentrate on three psychological principles:

Why are loyalty programs important?

On the face of it, loyalty programs could easily be misconstrued for being simple, cheap ways to get more people to return to your restaurant, but they’re far, far more than that.

A well-structured, strategic loyalty program which offers genuine benefits for customers might have the following positive impacts on your business:

All of the above benefits should result in more profit and greater longevity for your business. What’s not to like?

3 things to consider before you start

There isn’t a restaurant out there which wouldn’t benefit from running some form of loyalty program, but there are three things to bear in mind before you start.

  1. Don’t assume you need loads of tech. If budgets are tight and you simply don’t have cash up-front to invest in a loyalty program that requires apps and systems (see point 2, however), there’s nothing wrong with going old-school. Some of the best loyalty schemes out there started life as paper fliers and punch cards - you can do the same.
  2. You may already have the ability to run a digital program. Check your POS system and restaurant booking application. If they’re modern and up-to-date, chances are they’ll have loyalty functionality built-in (or available as an addition).
  3. Spend most of your time planning the prizing and points. A loyalty scheme without a decent reward is useless, so make sure you spend the majority of your planning time thinking about those rewards. Will they be points- or prize-based?

A quick note on that last point above; it’s vital you think about your audience when considering the type of rewards you’ll be offering.

For instance, millennials are thought to prefer the idea of racking up points based on how much they spend, but you may have an older audience which would respond better to tangible gifts in exchange for their loyalty.

Big name examples of restaurant loyalty programs

Sure, the big boys of the industry have pockets deeper than the ocean when it comes to marketing and loyalty programs, but that doesn’t mean we can’t all learn from them when it comes to what works for customer retention.

Here’s two examples of food and drink based loyalty programs that have garnered huge audiences.

Starbucks Rewards (official site)

Starbucks Rewards

When the Seattle-based coffee giant launched its first loyalty program in 2009, it featured a card-based system and three tiers of membership. In 2011, it was extended to a mobile payment app and processed a staggering 42 million payments during its first 16 months of operation.

Starbucks now stores around $1.2 billion in customer-deposited money within their loyalty system. The success of its loyalty program is obviously bolstered considerably by Starbucks’ considerable standing in the market, but there’s no escaping the fact it’s about as simple as it gets in principle.

Spend more money at Starbucks, flash your card at checkout and you’ll eventually get free drinks and special offers. Simple.

Subway MyWay (official site)

Subway MyWay

One of the most recent big name examples of loyalty program prowess is Subway’s MyWay rewards system in the United States.

Launched in 2018, MyWay takes the lead of Starbucks but adds a few unique aspects. For instance, beyond points accumulation, members are offered a personalised experience thanks to their data basing used by the chain to track their purchasing habits and tailor the rewards accordingly.

They’ve even introduced something called ‘random rewards’, which scratches the itch of a gamified generation.

How to create a successful restaurant loyalty program

There’s no one-size-fits-all method for implementing a restaurant loyalty program, but there are a few things you can do in order to create a framework which won’t backfire on you in the future.

1. Give pre-existing systems a go

If you’re after the route of least resistance, this could be it.

There are a number of pre-existing loyalty systems that offer pretty much everything you need to get up and running with your own program, quickly.

Buzztime Business has a great list of some of the best, here.

2. Work on the KISS principle

Keep it simple, stupid (KISS), someone rather smart once said.

This is definitely the case when it comes to restaurant loyalty schemes. To create one that sticks and draws in the biggest possible audience, keep it as simple as possible.

You won’t get any members if the list of rules and regulations is as long as their arm, and the same goes if it’s ridiculously tricky to set up.

Set up your loyalty program in a way that would make you want to use it.

3. Gain staff buy-in and train them

The best loyalty program idea won’t work if your staff don’t believe in it.

If you explain to them that the reason for its existence is to bring in more customers who are happier and therefore capable of helping the business grow and make more money - everyone wins.

Back this up with extensive and regular training in the loyalty program’s mechanics and make it a big element of the induction process for new employees.

4. Focus on FOMO

Everyone who enters your restaurant should experience FOMO when they spot the rewards on offer from your loyalty program.

Don’t be afraid to shout loud and proud about it regularly on social media and within your menus.

Again, put your customer hat on and have a think about what would make you desperate to join your restaurant’s loyalty program. And implement it.

Next steps

In America alone, a typical business will lose 15% of its customer base every single year.

In the restaurant industry, that could be catastrophic, and that’s why loyalty is such a big deal.

Before you head off and plan your own loyalty scheme, here’s a few things to add to your to-do list:

Ready to get started with your loyalty program? Go find those members!

Weekly tips, advice and guides on everything hospitality, straight to your inbox.

Related posts