What’s Holding Restaurants Back From Greater Customer Loyalty

The restaurant industry has seen its fair share of tactics and strategies meant to inspire loyalty. Punch cards, BOGOs and coupons given out to everyone were meant to draw customers into their locations rather than those of competitors. Yet, as time passed, and sales stagnated or declined, it became apparent that these strategies weren’t actually motivating customers to increase their order size or frequency of visits. So what’s holding restaurants back from greater loyalty? Keep reading to find out.

The Problem: Cash

Every time a customer pays for their meal with cash, restaurants lose the chance to learn valuable information about them. This makes the job of the restaurant marketer near impossible as they have no information pertaining to what this person likes, which location they frequent, or the number of times per week they make a purchase. As long as the majority of customer transactions are done through cash, marketers will lack the ability to reach out and target them with relevant messages and offers.

The Solution: Mobile payment, online ordering

Starbucks is the perfect example of a restaurant using mobile payment and ordering to fuel smarter customer engagements. Starbucks gives customers the ability to order ahead and pick up in store, or to pay at the POS with the mobile app, making for a more convenient, seamless customer experience. These types of actions have become second nature to an increasingly greater number of people with 13% of all transactions at Starbucks being made via Mobile Order and Pay, according to QSR Magazine. This ability to get customers to pay through the app negates the limits of cash discussed above. Instead of having no understanding of what the customer has done, Starbucks is equipped with valuable data about customer preferences and behaviors that can be used to bolster marketing campaigns.

The Problem: Low app engagement

Developing a mobile app is a good first step in incentivizing customers to move away from using cash. However, just because there is an app doesn’t mean that customers know about it or care to use it. Even the CEO of McDonald’s admits that they have a “pretty low” adoption rate for their mobile app (Mobile Marketer). Rectifying this problem takes creativity, but is necessary in order to capture useful customer information.


The Solution: Utility and value for using the app

Getting customers to download and use a mobile app can be a tall order. To alleviate this pain point, customers need to be provided with utility and value for taking certain actions within the app. For example, McDonald’s is trying to increase their adoption rate by giving out free french fries when customers place an order through the app on a Friday. Hwy 55 Burgers, Shakes & Fries has increased mobile engagement and app signups by leveraging the increasing popularity of food holidays, such as National Hamburger Day, National Hot Dog Day, etc. to deliver deals available exclusively in the app. And on the extreme end…Einstein Bros Bagels gave out a free bagel to customers who had any kind of restaurant app.

These real-life examples underscore the fact that restaurants continuously need to persuade customers to download and use their mobile channels. By creating an easy experience for customers and rewarding them for taking certain actions within a mobile app, restaurants can ensure that this channel becomes a staple in their customers’ routines.

The Problem: Generic, earn-and-burn loyalty programs

Many companies in the restaurant industry have employed some kind of basic loyalty program in an attempt to increase sales and prevent churn. However, the usual suspects of punch cards, BOGOs and published loyalty programs fail to move the needle. The problem is that these earn and burn loyalty programs and generic offers simply reward customers for doing the same actions over and over again. To engender greater loyalty and share of wallet, restaurants need to find ways to motivate incremental behaviors. Discounting to those that would’ve purchased anyways is not the right avenue to go about this.

The Solution: Data-driven, personalized approach to customer loyalty

What loyalty programs really need are targeted ‘below the line’ strategies that drive incremental spend. Personalized product recommendations, tailored offers and rewarding purchase challenges make customers feel special rather than just ‘another customer served’. Loyalty programs done right encourage lasting customer engagement, which in turn provides a wealth of customer data that can be used to drive smarter and more profitable customer relationships. Starbucks, for example, turned a 14% increase in Starbucks Rewards members into a 40% increase in sales (Marketing Dive).

Ironically, the generic offers and earn-and-burn customer loyalty strategies that have been employed by restaurants have had an adverse effect on creating more loyal customers and boosting revenue. To turn performance around, restaurants need to drive incremental spend and high value behaviors. By putting customer data at the heart of their engagement strategy these companies can deliver the right kind of experiences to overcome the challenges holding them back from achieving greater customer loyalty.