Customer Loyalty Programs: How to Attract and Retain Customers

Customer Loyalty, Restaurant Profitability, Technology

In a National Restaurant Association study, representatives from different types of food service businesses were asked what percentage of their revenue came from repeat business.

The answers ranged from 51 percent at fine dining restaurants to a staggering 71 percent at fast-casual eateries.

The lesson here is that restaurant owners absolutely depend on customer loyalty to stay in business. This is where customer loyalty programs come into play.

The competitive food and beverage industry is unique, in that restaurant owners depend on repeat business to stay afloat more than in any other industry. Why?

With fixed costs high, restaurant owners often use discounts to get customers in the door, lowering the profit margin on their revenue. Restaurants stay profitable by bringing these customers in again and again after their first visit.

What Are Customer Loyalty Programs?

A customer loyalty program is simply any strategy used to incentivize customers to visit your business. This can be coupons sent to subscribers to your email newsletters, or the old-fashioned punch cards that reward customers for visiting your restaurant a certain number of times.

Today, restaurant owners are choosing more and more to use mobile loyalty programs—customers show a coupon or code on their phone or another mobile device, and log their visit this way.

Customer Loyalty Programs Have a Great ROI

No matter what marketing channel you’re using, customer acquisition will always be more expensive than driving brand loyalty. Getting a customer to return is much more cost-effective than bringing a new customer in, which is why customer loyalty programs have to be emphasized in order to maximize revenue.

Your restaurant’s profitability often coincides with user experience (UX). You can have exceptional customer service and still not see a huge increase in repeat business, and this is because while customer service is important, repeat business is built more by what happens outside of your restaurant than while diners are there.

This means that loyalty programs make happier customers than great customer service. The idea is that diners are being rewarded for visiting your restaurant long after they leave, with coupons, news, and information about the restaurant. In turn, your guests have a personal connection with your business, which builds loyalty.

How to Attract and Retain Customers

Contrary to popular belief, loyalty programs aren’t only useful for customers who have visited your restaurant in the past—they can also be used to attract new customers.

You can use first-visit discounts to transition right into a loyalty promotion. For example, a mobile coupon offering prospective guests 20 percent off of their first meal if they enter their email address can instantly enroll customers into the so-called “loyalty loop” before they visit your business for the first time.

Loyalty programs don’t have to all take the same “buy _ and get _ free” format, either. In fact, it’s been shown by some of the biggest brands in food service that creative loyalty programs can be more effective.

Take P.F. Changs, for example. The restaurant uses a points-based loyalty program, not unlike a credit card, where diners unlock more and better rewards with points they save up from their visits. Starbucks uses tiers to encourage extended loyalty beyond just a few repeat visits. Creativity like this is what allows some restaurants to become much more successful than others.

To summarize, if you own a restaurant, repeat customers are crucial to your business. A loyalty program is a great way to engage customers, and give them an incentive to come to your establishment.