While the exact origins of loyalty programs are somewhat contested, they are an age-old concept that began somewhere in the 18th century – and have come a long way since. Today they are widely used by brands as a common marketing tool to entice customers to return. However, in the business world reward programs have often been reviled as cheap promotional devices, short-term fads, that give something for nothing. They believe that people are not really loyal but instead just chase discounts and therefore such programs don’t drive as much repeat business as you might think. Going off this estimation, it begs the question, are loyalty programs really worth the effort? Well, if the research is anything to go by, the answer is yes.
Are restaurant loyalty programs effective?
These days, everyone knows that an old customer retained is worth more than a new customer won. Corroborating with this well-known adage, a Gartner study found that 80% of future sales do in-fact come from current customers. As such it makes sense that a significant portion of your marketing income should be aimed at increasing the frequency of existing customers rather than acquiring new ones. Needless to say, loyalty programs are the best way to achieve this – and there are a multitude of studies to back it up.
83% of customers agree that having a loyalty program in place is what makes them continue buying from a certain brand. When it comes to dining, a report from the National Restaurant Association revealed that 57% of adults are more likely to eat at restaurants with rewards programs. A more recent report from PYMNTS and Paytronix not only supports this finding, but further research revealed that up to 70% of QSR patrons use loyalty programs in several of the restaurants they purchased from frequently. From these studies, among others, it’s safe to say, that customers who are part of a loyal program return time and time again to those eateries more often than those that do not have a program in place.
While a returning customer base is a significant benefit to any business, it is certainly not the only advantage. Various studies confirm that loyal customers spend 67% more on average than new customers. And it makes sense. If a diner regularly visits a restaurant, he/she will have tried and tested the menu so he/she knows his favorite menu items and what to spend money on whereas new customers are usually more cautious. For those who already had loyalty programs in place, this certainly paid dividends during Covid. Data shows that order numbers of register loyalty program members were much higher during Covid than the months before the pandemic began. In addition, such programs provide insight into guest behaviors and preferences – something that were hard to come by during COVID. Loyalty programs, helped, to some extent, replace the face-to-face engagement lost due to restrictions.
But Covid or no Covid, such data can inform marketing efforts and offer operators a direct line to customers, from push notifications to menu updates and more. Similarly, loyalty and reward programs indirectly create “brand advocates” – the ones who will refer your eatery to their friends and family. Past studies show that at least 92% of people trust word of mouth recommendations more than any form of marketing.
Loyalty is different for every business
There’s no debating that all the facts and figures stack up in favor of loyalty programs. So, it’s not overly surprising that 90% of companies already have some type of customer loyalty program in place. But having a program doesn’t necessarily mean you will reap the benefits by default. A loyalty program, like any other restaurant marketing strategy, takes some trial and error in order to get right. Similarly, loyalty is different in different industries, and how a loyalty program might work for a pizzeria might differ to that of a QSR or a casual branded restaurant.
However, whatever the program or method, the overall idea or objective remains the same: to target—and attract—valuable customer segments, drive desired behaviour, deepen customers’ commitment to your brand and in the process drive customer retention and increased sales.