Taste is Just the Beginning: Creating Loyalty in the Restaurant Industry

It doesn’t matter whether they are shopping at a retail store, checking into a hotel or ordering takeout from a restaurant, anytime they’re shelling out their hard earned cash, people are simply expecting more from every experience. This puts a lot of pressure on industries that have traditionally relied on the quality of their products to make people happy, and nowhere is this more apparent than in the restaurant industry.

At 4% of US GDP in 2019, the restaurant industry is a significant part of the economy, but its struggles seem to be mounting as owners and operators try to adapt to changing consumer behaviors. Adopting technology and digital communication has been a big part of the strategy to compete, but limited resources, mounting costs and thin margins make choosing the right approach a manner of life and death for some business owners.

Loyalty and rewards programs are readily adopted by most major industries as a way to thrive in highly competitive markets. The expectation is that they will enable businesses to acquire and retain customers in an environment of exceedingly diverse choices, but expectations for those programs are changing as well.

Read on for a quick Q&A with Clutch VP of Marketing Kate Atty on some best practices to create a successful, results-oriented loyalty program in the restaurant industry.

What types of loyalty/rewards programs does Clutch offer its restaurant-based clients?

Clutch supports a variety of customizable loyalty and rewards programs to meet the needs of restaurants, but for many of them the main goal is to retain their loyal customers and keep them coming back. These programs can take the shape of basic points + punches or earn and burn programs, cashback as well as real time checkout discounts. VIP programs, experiential programs, as well as those designed to motivate specific behaviors like visits during slower traffic times, online reviews, increased order values, promoting new product lines, capturing new business through referrals, and more.

A lot of restaurants are interested in trying mobile or sms to engage customers on the go or when they are near a specific location. We can trigger or automate communications via sms, as well as email or direct mail to coincide with a member’s engagement in the program, also using segmentation to further personalize the experience for the customer.

In your opinion, what’s the key to a great loyalty/rewards program?

The best loyalty or rewards programs do two things really well: 1) they give the business a better understanding of their customers and 2) they are able to use that information to motivate future desired behaviors.

Of course, a good program must be easy to understand, simple to sign up for and the incentives must be easily remembered and redeemed. They must also feature compelling benefits that are aligned with what the customers want. This sounds simple, but often times businesses rely on standard earn & burn reward structures that don’t necessarily work to impact customer behavior.

For example, a program that offers the 10th coffee for free after 9 purchases might sound like it’s working to get that customer coming back to earn that reward, but the reality is likely that they would have come back for that 10th visit anyways because they regularly drink coffee, not because of the incentive.

A better option might be to offer two free coffees to someone who gets their friend to sign up for the loyalty program, or one that offers an incentive for someone who tries three new products like bakery items, an espresso drink or a smoothie. These options support new customer acquisition, increase revenue and provide data on the preferences of existing customers. Want more people to add a croissant to their daily coffee order? Give one away first!

What can restaurants do to better implement and execute their loyalty/rewards programs?

Having a simple sign up process and clear rewards are key, as well as educating front of house staff on the program. Mobile is an excellent channel for on the go customers to join a program, as everyone has their phone and can text to opt in and receive timely messages via sms.

For implementation, automating simple processes like welcome emails or messages, birthday rewards and reminders about points expiration or available rewards are really important, both for the business and the customers. Most restaurants have small marketing teams and limited resources, so a platform that can support automated engagement and the ability to set up everything at the start with minimal ongoing support alleviates some stress and frees up time.

Another benefit of automating some key communications is program engagement. The average customer is a member of 14 loyalty programs – so remembering the rules and when and how to use rewards is a big part of getting them to actually take advantage of the program!

In the past two to three years, have you noticed any trends with loyalty/rewards programs (specifically for restaurants)?

Restaurants are facing competition from delivery services like Grubhub, Door Dash and Uber Eats, as these services are engaging customers digitally and enabling them with on demand options, compelling incentives and services that are catered to their lifestyle.

As a result we are seeing restaurants trying to reclaim their own unique customer base, engaging them on a personal level and appealing to that core demographic of customers who represent their highest value audience. Loyalty is seen as a great way to do this because it gives the restaurant the ability to identify those customers and communicate with them directly, in a way that makes them feel appreciated and special. They can re-establish a direct connection through communication channels and learn what will keep them coming back, reducing the likelihood of that same customer electing to purchase through another channel or going to a competitor.

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