Every restaurant should have a loyalty program, right? Not necessarily. While many restaurant owners find that loyalty programs play important roles in their marketing strategies, some establishments find that these programs aren't worth the time and expense. Let's take a closer look at restaurants with loyalty programs, how they work, and when they may not be a good fit.
What are Restaurant Loyalty Programs?
Loyalty programs, or food rewards programs, reward customers for returning to your establishment. The more often customers visit your restaurant, the more rewards they get.
Restaurant loyalty programs may:
- Award customers with points for every dollar they spend. Customers can "redeem" their points for free food, drinks, or any other available reward.
- Provide a reward for returning a certain number of times. Punch cards are an excellent example of this type of loyalty program. Each time the customer visits, they receive a “punch” in their card, and after so many visits, they get a free meal or another item.
Many restaurants find that loyalty programs are effective, and they help offset the costs of new customer acquisitions.
After all, repeat customers generate 10 times more revenue in their lifetime than single-visit customers. (Source)
Are Major Restaurants Offering Dining Rewards Programs?
Dining rewards programs are more popular than ever. In fact, 57% of restaurants offer loyalty programs, including some of the biggest restaurants in the industry.
- MyMcDonald’s Rewards has more than 20 million users. For every dollar spent, users get 100 points. In addition, points can be exchanged for free meals. The more points you accumulate, the more valuable the prizes available.
- Chick-fil-A One has a tiered loyalty program. The higher your membership tier, the more points you earn for each dollar you spend. At the starting tier (Member), you earn 10 points for every $1 spent. At the highest tier (Signature), you earn 13 points for every $1 spent. Members can redeem rewards with their points. For example, users can exchange 500 points for a free 4-count Chick-n-Minis.
- Starbucks’ loyalty program has more than 24 million users, making it easily one of the most successful rewards programs out there. Users can earn free drinks, add-ons, food items, and more.
- Pizza Hut’s Hut Rewards program allows customers to earn an unlimited number of points and even get a free pizza in as little as one order. Every dollar spent goes towards earning a free pie, but users can also enjoy other perks, such as birthday rewards.
These are just a few of the many major restaurants that have successfully implemented loyalty programs.
Benefits of Implementing a Loyalty Program for Restaurants
There are many benefits to implementing a loyalty program at your restaurant. These include:
Improved Customer Retention
The most obvious benefit of loyalty programs is that they improve customer retention. In order to generate points and get rewards, customers have to return to your establishment.
One study found that 45% of restaurant customers will choose an establishment if they are subscribed to their loyalty program.
Customers may also be more inclined to recommend a restaurant to their family and friends, especially if they earn referral bonuses.
Increased Order Value
Loyalty program members tend to spend more on their orders because they are rewarded for every dollar they spend.
Programs that allow for upselling and cross-selling opportunities also increase order value. For example, your rewards app may suggest adding a specific side or a drink to complement their meal. These recommendations encourage customers to spend more on their orders.
Greater Brand Awareness
Brand recognition encourages customers to come to your place of business simply because of the brand you built. You can use loyalty programs to help:
- Improve advertising
- Keep in contact with customers via email
- Send SMS or notifications to your customers
- Improve social media following
If you leverage loyalty cards for restaurants, it can help you build a stronger, recognizable brand.
5 Restaurant Reward Programs to Consider
Customer loyalty programs for restaurants can include numerous options, such as:
- Loyalty points, which customers can use to redeem free food or use towards their bills to save money.
- Free delivery is a good option for pizza places or other types of delivery-centric restaurants.
- Special discounts on certain days of the week, often the slowest days as a way to improve overall sales on these days.
- Referral programs, where people can refer their friends and receive some sort of perk for doing so, such as a free entrée or appetizer.
- Tiered programs that encourage customers to dine in more often for steeper discounts or other rewards.
When Loyalty Programs May Not Be Good for Your Restaurant
Rewards programs for restaurants may or may not be a good choice for your eatery. There are times when offering loyalty cards is a bad business decision. You'll need to consider the following:
- Expense: Restaurants with rewards programs often complain that starting and maintaining one is very expensive. First, discounts will start to impact profit margins, despite an uptick in customer retention. Working with a third party to create or implement the program into your existing system will also add to the expense. If you’re already struggling with tight profit margins, revisit this idea in the future when it’s more viable.
- Complexities: Loyalty programs for restaurants are very complex. You need to have the time and resources to analyze your program and refine it going forward. For example, many people abandon reward programs when they’re too confused or enrolling is too complex.
Of course, you also need to consider that restaurant loyalty cards are very common in some markets. You may be unable to maintain profits in industries where major competitors are taking a loss on their restaurant loyalty card programs.
Market saturation can be too high, causing a restaurant customer loyalty program to be unsuccessful.
For example, if every eatery in town is a loyalty restaurant, your hope of using your program to attract new business may fail. You need to consider all of this when deciding whether or not to add your own rewards program to your restaurant.
However, if all signs point to your area needing a loyalty card restaurant, this is a form of marketing that can improve customer retention and sales.