Cooking Up a Successful Customer Retention Strategy for Restaurants

Customer retention is critical for boosting profits and building a successful brand. According to the Harvard Business Review, acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one. With competition coming from all corners, customer retention is especially crucial for fast casual and quick service restaurants. Not only do these businesses need to focus on retaining current customers, but also must be able to drive more incremental value out of each customer. Tactics and strategies should be specifically focused on two things:

  1. Motivating customers to purchase more frequently
  2. Incentivizing customers to purchase more each time they visit 

Easy enough on paper, but in reality quite a difficult thing to do. Consumers have too many options these days. I could visit my favorite spot for lunch or I could go to their competitor’s across the street, bring in leftovers from my dinner last night, pick up a pre-made meal at the local grocery store, throw a frozen meal delivered to my doorstep in the microwave, or pick from a variety of options through one of the countless 3rd party delivery services. 

The point is, I as the consumer have too many options, making it difficult for any restaurant to retain and drive more value from me. 

However, don’t put all your ingredients in the trash just yet; there are many strategies and tactics that can be deployed to reduce customer churn, transform light customers into more frequent ones, and turn regular customers into powerful brand advocates. 

Build a Loyalty Program to Collect Critical Customer Information 

Much has been made about the inability for loyalty and rewards programs to distinguish themselves from their peers across a number of industries. Forrester states that U.S. online adults belong to an average of 3.7 loyalty programs and only 44% of them say that programs make them feel more loyal to the brand. 

However, take a look at the impact Chipotle’s new rewards program has had. According to QSR Magazine the program boasts 7 million enrolled members, including 2 million members who have enrolled within the last three months. Even more important for the brand is that their “loyalty customers tend to be new and light users”.  

Simply having a rewards program in place won’t magically lead to success, but it will provide the perfect vehicle for getting customers to reveal valuable information about themselves. For Chipotle, they now have 7 million customers that have raised their hands and allowed the fast casual chain to use their data for more personalized marketing communications and experiences. It’s difficult to create a loyalty experience that stands out from the crowd (we’re here to help), but the opportunities it opens up are invaluable.  

Utilize the Data Collected to Incite Action with Gamified Promotions 

To move the needle, restaurants need to unlock the power of their customer data. Marketing to customer groups as a whole may have some impact, but to really drive performance more personalized experiences are crucial. Customers are inherently different, they live in different places, they like different things, they purchase from you for different reasons. Leverage the data collected to derive value out of different customer segments. 

For example, there may be customers in a loyalty program that haven’t made a purchase in the last month. Use this information to reactivate them through an exclusive promotion or a well crafted message. Perhaps there’s a new menu item being rolled out, provide bonus points or a free drink when customers purchase it. Different types of frequency challenges, spend hurdles, and product pairing promotions are great ways to keep customers engaged and increase their average order size. 

Create a Seamless Customer Experience

Reducing friction and providing customers with convenience is critical for retention in a digital world. People don’t like waiting in lines; they want to be able to pick up their order and be on their way as fast as possible. Making each customer’s life easier should be at the heart of any digital transformation. Ordering ahead enables customers to quickly pick up their order and be on their way. 

Look at the amount of restaurants revamping their drive-thru lanes to enable customers to order ahead, pick up their food, and go without ever having to step foot outside of their vehicle. We even live in a world where customers can now place orders through their smart device! (“Hey Alexa can you please order me a burrito?”) Consumers crave convenience, so ensuring that every interaction is as seamless as possible should be at the top of your list.  

There are many paths available to make a purchase, so making sure your customer has a consistent experience across all of them is essential to success. The loyalty program and all associated offers from it should be available no matter if I’m making a purchase through the app, online, in-store, or ordering through a kiosk. There’s a time and a place for generic messaging to the entire customer base, but to improve results customers should receive tailored messages and promotions based on actions they’ve taken (or haven’t taken). 

People love brands such as Amazon, Netflix, and Spotify because they’re incredibly easy to use, and provide guidance on what to do next based on personal preferences. Restaurants need to evolve their digital strategy to this level. Create convenience for customers, reward them for their loyalty, and interact with them in a personalized fashion. The secret ingredient to all this is customer data. The brands able to unlock data to improve the customer experience will find themselves on the same pantheon as the companies mentioned above.