How to Increase Restaurant Profits Using a Loyalty Program

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By Bo Ransdell, DCR Profit Control Systems

While the point-of-sale system in the hospitality environment offers a multitude of benefits, loyalty programs remain a seldom-used tool for a business’s success.  The added revenue opportunities for gift cards are an easily-understood component of any restaurant’s operation, but loyalty programs represent an even more valuable commodity, left untapped by most.  Just as the name suggests, these programs are built to inspire loyalty in the consumer, but the variety of programs and the true goal of such a program can seem esoteric by comparison to gift cards.  And yet, as the market continues to evolve, loyalty is poised to be a far more effective use of marketing resources than any gift card as a means to generate returns on investment.

Unlike gift cards, loyalty programs are not the simple financial incentive to frequent a business.  There is that component, certainly, but the larger goal is to take the first-time visitor and give them a reason to return.  This has been accomplished in the past by discounts based on the accrual of points for previous purchases, or free items when certain dollar goals are reached, etc.  This may reach the customer on a logical level, the savings being apparent for their continued patronage, but it does not extend far beyond this idea.  This leaves the consumer with only a more advanced type of gift card, when the aim is to generate an emotional response, a legitimate personal connection to the business.

So, what is this market today?  The millennial generation is filling restaurants in greater numbers than any other demographic, and they bring a new view of what to expect from their hospitality experience.  Millennials prefer the occasion of eating out as opposed to simply ‘grabbing dinner.’  They are looking for food as an event, an opportunity to share with their friends a moment from their lives.  Unsurprisingly, technology figures heavily into these expectations.  According to National Restaurant Association data, 64% of millennials and 68% of the older Gen Xers prefer restaurants with online menus as a means of deciding their destination.1  A related and fascinating trend is in video game technology, an industry that barely existed 40 years ago, but now 67% of American households own one of these consoles.2  With the barrage of technological opportunities for distraction, all of these devices, including cell phones and television, are constantly demanding attention from these media-savvy consumers.

So, what does all of that have to do with loyalty programs?  It is, ideally, a look through another lens at what a loyalty program can be beyond the collection of email addresses for marketing blasts.  If these consumers are looking for an experience with their evening out, why not employ the same philosophy to outdated loyalty programs?  

While not in the restaurant space, one of the better examples of this thinking is in the Regal Crown Club program, a loyalty program for the successful movie theater chain.  Yes, their program does provide discount rewards for previous purchases, but that is only the beginning.  Users of the program are given tiers, progressing from one level to another like a character in a video game.  The discounts apply to more than just tickets or concessions, but also merchandise.  There is a dedicated app, which sends alerts to its members advertising special events, or extra loyalty rewards for certain screenings.  It is an engaging, interactive program that has been very successful for the company.3

The question, then, is how to adapt a successful loyalty model from one industry to another, and, here, we can only speculate, but some lessons appear evident.  The tiered approach which offers the consumer some sense of progression is just one possibility in ‘gamifying’ your loyalty program.  Game designer Dori Adar states, “People who have made some progress toward a certain goal are more committed to achieve that goal.”4   This goes beyond the math of x number of purchases gives the member item y.  It is the larger sense that one’s interaction with a business gives them a visceral sense of satisfaction and of competition.  The psychological need recognized by Adar is easily applied to any loyalty program, where continued patronage gives customers more than just a discount – it gives them a sense of accomplishment.

Another takeaway is the variety of redemption options.  Why limit the redemption to a free item or a discount when a bit of creativity might result in greater engagement?  Perhaps membership in the program could be redeemed for a discount on special events tickets, or for preferred seating?  Or a special meal for two, complete with dessert and a bottle of wine?  Any way to create the “event” these patrons crave is an opportunity to further the engagement between your business and the consumer – and, ultimately, to make that relationship more than transactional, but personal.

While more advanced, a dedicated application for iOS and Android gives your business the ability to interact with your consumers on their primary means of communication.  When shopping for loyalty programs, see what offerings are available for mobile applications that can help push your message to your customers.  A dedicated application could also be used to host your menu, or possibly online ordering.  Integrating loyalty with your web presence can be a very powerful combination.

Finally, the marketing tools inherent in almost every offered loyalty program are powerful and important, but these tools, too, must be employed with some mindfulness to make full use of them.  Sending out a weekly email blast to remind customers of a happy hour or weekly specials is an easily dismissible message.  At the risk of repetition, creating the special occasion is statistically more effective in reaching this demographic.  One night only events and highlighting your business for holidays and special occasions, perhaps including local happenings, these are the things which will elevate a loyalty campaign into something worthy of their attention.  And this is the real lesson – personalization.  Catering to the desire for a night out, or even a brunch on the patio, to be a moment of their lives worthy of capturing and sharing.  

What is evident in all the latest research in consumer trends, the millennial generation is spending and the fight for their attention is only becoming more difficult.  To succeed today, one must adapt to the changes in technology and culture, and this should be true of every aspect of one’s business.  Adapting the tools available in loyalty programs to creative ends to connect with customers on a logical, emotional and psychological level can make your business exceptional in an increasingly-crowded marketplace.

About the Author:

Bo Ransdell has worked in the service industry for almost thirty years, and with DCR for more than a decade.  As a leading reseller in the Southeast, DCR is committed to finding innovative solutions in the ever-changing point-of-sale landscape. 






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