“Loyalty” programs may be the biggest misnomer in the restaurant business. If you are a member of more than one loyalty program – are you really loyal? These programs really should be called “frequent buyer incentive” programs. The incentives offered by restaurants for purchasing frequency are part of the value “halo” of the restaurant – meaning that every reward granted adds to the positive emotion that a consumer feels about the brand. That positive emotion is what helps the consumer choose your restaurant over another.

For the restaurant itself, these programs have many practical benefits.  A robust loyalty program will help you to better understand customer behavior and provides another direct marketing channel. These factors help you market and sell with more accuracy and penetration. So, your customers may not really be “loyal” to you, but the components of a strong program will drive revenue.

A Loyalty Report by Bond — a leading global customer engagement agency —  revealed that consumers spend more with, advocate for, and remain loyal to brands with customer loyalty programs with innovative personalized experiences in addition to points and discounts. A report by Forrester revealed that loyalty programs influence where members make purchases (60%) and what they buy (48%). Further reports have found that loyal customers spend 67% more at restaurants than new guests and 52% of consumers will recommend restaurants they are most loyal to.  And to top it off, 80% of the customers claim that they prefer brands that offer some kind of a loyalty program!

That said, according to Colloquy, 54% of loyalty memberships are inactive (almost all within the first year), and many restaurant programs are performing even worse. So, we know loyalty programs are good for us and we know customers want them – so why is it that a large percentage of loyalty memberships are inactive?

Two main issues are at play here. One, the method, and two, what’s actually on offer.

  1. With traditional loyalty programs a plastic-card or even an old-fashioned punch card have long been the gold standard for restaurants, but recent data suggests that consumers simply aren’t engaging with them like they used to. Today’s consumer relies heavily on his or her mobile phone, and if businesses want to reach them effectively and efficiently, that is the place to do so.
  2. Similarly, traditional loyalty programs put hurdles in place that make earning and redeeming rewards difficult and/or require a lot of effort. Forgot your card? Forgot to print out your coupon? Oops, sorry, no good. If a loyalty program takes effort, or doesn’t offer any value customers ultimately stop trying. Today’s consumer expectations have changed. They want smarter programs with personalized rewards, new loyalty currencies and “humanized” technology that makes the experience of earning and redemption convenient, seamless and personal.

The good news is that technology now offers all kinds of opportunities for businesses to reach and connect with customers authentically. New technology trends make loyalty a whole lot more accessible to your business and a lot less painful for customers. For instance, mobile and location-based tech can improve the customer experience by over 80% and customers who have engaged with loyalty technology say it has substantially improved their member experience.

A meaningful loyalty program can help you to better understand your customers and increase revenue. By exploiting the opportunities technology offers, businesses have the tools to connect with customers’ in a personalized way, build loyalty and ensure that they don’t just bring diners in for one meal but keep them coming back time and time again.