Restaurant Rewards: Building a Better Loyalty Program

By Jennifer Wiebe

I had a call from a customer last week looking for help setting up a new loyalty program. There’s a lot to consider in building a loyalty program, but the best starting point is a good understanding of where your revenue comes from and how a rewards program can make you more.

Choosing your target:

Where do your sales come from? Which customers have the biggest potential to make you more money?

Most businesses find that the top 15% of customers are responsible for a third of their revenue. Want to jump start a new program or pump up your results fast? Target these top-tier customers when you promote your loyalty program. Start by running a Frequent Customers report from your POS, and mail or email an invitation to your best customers to join your VIP club.

It may seem counter-intuitive to focus on people who are already your best customers. But think about it: these already loyal customers are also the most likely to respond positively to a loyalty program by ordering more frequently and spending more. And frequency and order size are where the money is.

Participation drives results:

To make your program successful, you need customers on board. Lots of customers. Preferably your best customers. So promote your loyalty club actively—with great signage at the point of sale, highly visible online advertising, and direct mail or email promotions.

Give customers a reason to join. A point bonus is a great way to drive enrollment and engage customers in the program right away.

Consider making membership a "reward" for something else (like registering for online ordering). Some restaurants even charge a fee for membership, then offset it with an equivalent food credit or bonus points. It’s another way to get customers invested in the program.

While you’re at it, build your customer database for future marketing: Get a mailing address and email information from every club member in the enrollment form.

And get your staff engaged in enrolling customers in the program. Explain why it’s important, give staff marketing tools to use, and offer incentives to enroll customers. Try a staff contest. Discuss club enrollment, new rewards, and results with staff often.

Driving order frequency:

Research by the Wharton School of Marketing shows that the closer customers get to receiving a loyalty reward, the more often they order. Map out regular email or direct mail reminders to customers who are approaching a reward threshold. A program like the new web and social media marketing dashboard we launched with eThor at Pizza Expo will help you schedule these in advance.

Keep in touch regularly with club members, but don’t send the same message to everyone. Target loyalty messages, reminders, and rewards based on factors like point threshold, length of time since last visit, lifetime points/dollars spent.

SpeedLine user? The "export" version of each customer report in SpeedLine includes loyalty point balances, so it’s easy to target very specific groups of customers with a direct mail or email campaign.

The Wharton studies also show that when progress is measured by points rather than dollars spent, customers try harder to reach the program goals. So base your program on point accruals.

Rewards that deliver:

How much do you need to give up in rewards to see the results you want?

A successful rewards program gives your customers enough to motivate while making sure that you’re still making money. The industry average is about 5 percent, but that leaves you lots of leeway in the types of rewards you offer.

The key is perceived value. Another advantage to promoting your loyalty club to your most loyal customers is that they generally order because they like your pizza, not your discounts. So reward them with free food or merchandise rather than dollars off.

Consider a choice of rewards.

  • A free item: again, the key is the perceived value, so high-margin menu items make attractive rewards that let you keep more of the profits.
  • A free sampler of some kind can encourage customers to try new menu items.
  • Partnering with another local business to offer a gift certificate or other freebie adds interest and helps keep your program costs down.
  • People love surprises. So surprise frequent customers with a free dessert or a free drink randomly, or after a certain number of visits.
  • Recognize birthdays too, for a personal touch.

Make rewards attractive and attainable…but do the math, and make sure the program will make you money.

Do you have a loyalty program in place? What’s been the impact on sales and profitability?

Posted on Sat, May 26, 2012 @ 09:05 AM.
Updated on April 16, 2019 @ 3:20 PM PST.

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