Loyalty programs are vital to a restaurant’s success.
Unfortunately, many QSR chains haven’t fully capitalized on them. In this article, we’ll examine why restaurant loyalty programs are important, why they often underperform, and what companies can do to fix the problem.
QSR loyalty programs are more important than ever
For most of us, belonging to loyalty programs is a simple fact of life; we swipe our cards or enter our digits at the pharmacy, the grocery store, or even the car wash. According to Statista, American adults have about 16 loyalty memberships on average. However, most only actively use about half of those memberships. And about half of QSR customers participate in at least one loyalty program.
Aside from the fact that they’re an expected part of doing business, why care about loyalty programs? Customers who have enrolled in loyalty programs are likely to visit more frequently and to spend more on each order. And our research indicates that 55% of customers say loyalty influences their choice of restaurant.
4 reasons why restaurant loyalty programs fail
There’s another side to this story: sometimes loyalty programs don’t resonate as much as we think they do.
One of our clients thought their customers were loyal to them. But our research showed that many of their customers were actually members of a rival brand’s loyalty program. The customers’ decision about which restaurant to choose was based on which one had the best deal for that day or which one offered the best incentives.
This is a clear indicator that simply having a loyalty program isn’t enough; for it to be effective, it has to attract, engage, and retain guests. And that goes beyond just hammering out a few discounts now and then. Let’s look at four key reasons why loyalty programs fail to influence their target audience:
Lack of clarity and consistency. Perhaps it's unclear what users must do to reach a certain reward. Or maybe the method for calculating points is too complicated. Or there are a long list of exclusions and limitations on how to redeem rewards. Or not all restaurant locations in the area participate in the rewards program. Or the terms and conditions change frequently. There are many ways that a loyalty program can lack clarity and consistency. Whatever the scenario, a loyalty program that’s hard to use (or understand) will not inspire loyalty.
Value problems. The issues could come from the rewards themselves. They may not motivate the customer, or the point values assigned to them may make the rewards nearly unachievable. Another problem stems from having rewards that can’t be combined with other order items, which can cause the loss of upselling opportunities.
No personalization. In a similar vein, a lack of personalization can torpedo a great reward. For example, offering a vegan diner a free cheeseburger if they sign up for a loyalty card won’t do much good.
Technical/channel problems. Your loyalty program may be well-targeted, effective, and motivating. But what if customers can only redeem their points when using the restaurant app? Or only at certain locations? That’s another major problem. Customers expect a brand experience that’s seamless across all channels, whether in-person or digital. A loyalty program that’s only available part-time will not be very successful.
In our experience, these problems are very common among QSR loyalty programs. So, what can we do to fix them?
3 ways to fix your loyalty program
Often, a problem in one area (like personalization) can bleed over into other areas (like value problems). Likewise, a fix in one area can often impact performance across several areas that are critical to a good loyalty program. And chances are good that restaurant operators have at least some of these systems already in place. So, let’s see how we can use technology, awareness, and personalization to upgrade loyalty programs.
Use the right technology
Integrated tech is essential to the modern QSR environment, and that goes for loyalty programs as well. Your loyalty program should be tied in with your CRM tools so it can access valuable personalization data. It should work with your ordering system so that customers can enjoy a seamless experience when they order with points or rewards – and so that their order information can be used to fine-tune potential rewards. And loyalty points and access should be available across all channels, including apps, websites, kiosks, and at the counter.
At Tillster, we recommend using a loyalty platform integrated with a Customer Data Platform (CDP). A CDP allows you to create unified, data-rich profiles and use them to craft marketing outreach as well as loyalty programs. And it powers personalization by automatically collecting and analyzing data from various integrated sources. You can learn more about Customer Data Platforms here.
Build guest awareness
When should you start to build awareness of loyalty programs? During your guests’ normal, everyday interactions. Encourage crew members to mention the loyalty program; our research has shown that locations that made a concerted effort to do this had the highest program participation rates.
Use visual reminders: in-store signage, window clings, tray liners, tent cards, etc. Have workers wear buttons advertising the loyalty program. Feature it on your social media. Use emails, website banners, and push notifications to attract digital users. You can even embed loyalty programs into your restaurant app so that customers are automatically signed up when they create an account. All their purchases automatically earn them points – it really can be that easy.
But in other cases, you’ll have to bridge the gap between awareness and action. This can be done by offering a signup or welcome bonus. This could be a free item or a certain number of points. (We’ve seen offering “just enough” and “nearly enough” points to earn a reward both work nicely.)
Finally, make it clear from the start what customers will be getting when they join your loyalty program. This includes both how to participate (point levels for rewards, how points are accrued, etc.) and what to expect in terms of rewards and any limitations. Don’t change these terms too often, but do keep the rewards and the earning process fun and exciting!
Personalize for engagement
According to McKinsey, companies that excel in personalization can achieve a 5-15% revenue increase. Personalization is gold for marketing and engagement. We’ve covered how restaurants can use data to personalize elsewhere in this blog, so let’s just focus on what personalization looks like within a customer loyalty program:
Targeting rewards and bonuses to where guests are in their customer lifecycle.
Offering rewards for the days/times they’re most likely to order.
Creating rewards based on their preferred items/categories, order values, or ordering channels. (This is more effective than offering rewards for categories they don’t use.)
Developing personalized content informing them about bonuses and offers.
Just as in its other applications, loyalty program personalization is all about matching the right customer with the right motivator at the right time. And that requires data.
Data is critical to QSR customer loyalty programs
QSRs have been using loyalty programs for many years, but not always to the greatest advantage. The same four problems seem to crop up over and over again: a lack of clarity and consistency, poor personalization, ineffective reward choices, and technical issues can render an otherwise well-designed loyalty program inefficient.
As we’ve seen, the key to solving these problems is applying the data that most QSRs already have. Using a CDP as well as integrated ordering systems, CRM tools, and loyalty platforms can make gathering and analyzing data much easier. If you’d like more information on how to use data to charge up your loyalty program, improve your operations, or optimize some other process, contact Tillster today!
