Customer loyalty is a concept that is often debated. After all, if you have 10 loyalty cards in your wallet, are you really loyal? However, the pandemic is showing that the effectiveness of “loyalty” programs is more important than a philosophical discussion of the concept of loyalty.
COVID-19 has been a challenge for hospitality – to say the least. Stay-at-home orders and social distancing guidelines have meant many restaurants around the country have had to close. Many have had to rely solely on delivery and takeout services to stay afloat. But despite digital ordering, many QSRs still face cash flow shortages and decreased sales. It would be hard to find a restaurant that isn’t under pressure to boost sales
The Importance of Loyalty – Pre Covid!
For pizzerias, fast food drive-thrus, and other quick service restaurants, repeat business is critical for long-term success – and there is a ton of stats to back it up. Research shows that 25% to 40% of total revenue from the most stable businesses comes from repeat business. When it comes to customer retention, it can cost a business anywhere between five and thirty times more to acquire a new customer than it does to sell to an existing one. What’s more, existing loyal customers spend on average 67% more than new customers according to a report from Upserve. And finally, a mere 5% lift in customer retention can increase profits by a whopping 85%. Customers may not be “loyal” but repeat business is a real thing. So customer “loyalty” really does matter – and that was even before there was Covid.
Consumer Shopping Habits Have Changed
Compared with other industries, QSR customers are usually on-the-go and often spend limited time in the restaurant itself – which can make loyalty and engagement harder. Queue a pandemic and the task has become even more challenging. Restaurants can no longer rely on customers to stop at their restaurants in the spur of the moment. There are no more morning coffee stop offs. No one is popping out of the office for a quick lunch. There are no minivans full of youth soccer players who need dinner on the go. Instead restaurants have to count on consumers making a conscious decision to purchase food from their restaurants. This has been further complicated by the fact the pandemic has prompted huge shifts in customer behaviour.
A McKinsey report on consumer sentiment found that more than 75% of consumers in the U.S. have changed their shopping behaviour, with the majority doing so for value, availability, and convenience; one-third of consumers say that a loyalty program is one factor that influences their restaurant choices and a further 13% indicated that they are using the pandemic as an opportunity to try new brands.
Value and Convenience with a Digital Focus Drive Customer Loyalty
As a result, many industries experts agree that a strong loyalty program can mean the difference between brands that thrive in this crisis, and those that merely survive. Not surprisingly, there is now a growing number of restaurants embracing loyalty programs and reward incentives during the pandemic. In the most recent quarter, Taco Bell, Chipotle Mexican Grill and Starbucks all saw digital sales growth driven by record-high loyalty program participation. Similarly, early loyalty adopters in the QSR industry have seen the payoff in business growth. From 2017 to 2019, Starbucks Rewards membership increased by 25 percent and Panera Bread recently said its loyalty members use the brand six to 10 times more than non-members.
Hearing success stories like these, it’s no wonder other brands and well-known chains now want a piece of the action. McDonald’s and Burger King are two of the latest fast-food chains to establish and debut their own loyalty programs aimed at expanding its customer base and enticing existing patrons to be more loyal.
However, having a loyalty program in place is not enough to incentivize spending and increase your customer base. To be successful, not only do customers expect to be able to order digitally, a trend significantly accelerated by the pandemic, restaurants need to provide increasingly personalized product offers and recommendations. They need to remain agile when it comes to customer ordering preferences, provide value and stay up to date on the needs of customers to ensure they remain loyal and keep coming back – long after the pandemic is over.
In summary
Consumers attitudes, behaviors and purchasing habits are changing—many of which will remain post-pandemic. In addition, the pandemic has emphasized the need to leverage customer loyalty to drive sales. Restaurants should be focusing on loyalty customers communications, keeping up a regular cadence of emails and coming up with meaningful offers and rewards. And if you don’t have a program up and running, like what McDonald’s realized – better late than never! Just be sure your program is fully integrated with your POS so you can jump start your program with existing customer data.