Loyalty programs aren’t intended to generate immediate returns, but maintaining a strong customer retention rate is their ultimate goal.
After all, the probability of selling to an old customer is 60% to 70%, while the probability of selling to a new customer is as low as 5% to 20%.
Your existing customer is well-versed in your restaurant’s work standard, and if it has impressed them, they won’t hesitate to become a repeat customer of your business.
In this post-pandemic age, every business is competing for customer trust. They want to win it at any cost.
Meanwhile, loyalty programs emerge as an excellent source, which may be where your restaurant can also set some higher expectations.
But the question is:
- How do you build a restaurant loyalty program?
- How do you ensure the success of a loyalty program?
- What are the best techniques I can try to retain customers in my business?
Well, keep your eyes on this article if you are also excited for the best answer in response to the burning queries you have in mind. But before that, let’s become a bit clearer on a few things.
What Is a Restaurant Loyalty Program?
Restaurant loyalty programs are a marketing strategy used by over 57% of restaurants in the US. The program has been designed to reward customers who are loyal to a business or brand.
Simply put, if some people are repeat customers at your restaurant, you can either offer them food items at a discounted price or you can launch special offers under loyalty programs.
This will ensure that your existing customers keep coming back to your restaurant. The program will even prevent customers from being snatched by the competition.
Loyalty programs prompt a positive mindset in customers towards a restaurant as they provide them with a sense of fulfillment and make them feel proud of being valued by a brand.
However, such schemes must not be randomly built. Some early preparations are essential.
Therefore, before figuring out how to build a restaurant loyalty program, let’s explore some varieties first.
The Most Common Types of Loyalty Programs
Here’s a breakdown of the most common types of loyalty programs that you must know:
Amount-based Loyalty Program
Also known as a “monetary-based loyalty program,” this is one of the most widely used strategies to retain customers. After all, who doesn’t like money?
But it isn’t about giving money to customers.
Amount-based loyalty programs incorporate providing monetary benefits to loyal customers. Such as, “order the next food item at 50% less cost” or “win $5 cash back on the family pack” are some of the real-life examples of amount-based loyalty programs.
Visit-based loyalty program
Most restaurants track how often a customer visits the restaurant or restaurant website and places an order. However, manually, it is incredibly tough to identify and reward such customers.
This is where mobile applications are being heavily used by brands to facilitate an effective run of the loyalty program. Most restaurants utilize a point system to track activities and orders on their online applications.
For example, ABC is a restaurant that offers 10 points to customers each time they place an order. If the customer collects a total of 100 points, they will be offered a free dessert or snack in exchange for the points.
Similarly, you can also be a bit creative with the rewards. But make sure it doesn’t affect your profitability.
Membership-based loyalty program
Membership-based programs have thrived for many decades. Normally, customers need to pay an upfront fee for the rewards that come later.
For example, ABC is running membership-based loyalty programs for daily eaters. Based on this program, customers who are ready to pay a specific upfront fee for a month will access speedy delivery of their favorite food items.
Alternatively, they can also reserve the right to order each food item at a discounted price. It is even a helpful technique to turn your new customers into repeat buyers. They will be obliged to order food from your restaurant alone.
Free Item Rewards
Free items can be a reward in an occasional loyalty program. You can issue free rewards under lottery schemes. Alternatively, you can simply offer a free reward to your existing customers.
Such as, on Christmas, most online restaurants are delivering cookies or dessert along with the food orders. However, you can also set a limit on the order value against which you can afford to offer free item rewards to customers.
These loyalty programs are the most common ones, but they aren’t limited to their horizon. You can be a bit more creative and run a loyalty program that is attractive and equally profitable to your business.
Setting up a Restaurant Loyalty Program: A Step-by-Step Guide
Coming straight to the main topic now, how to build a restaurant loyalty program that’s effective and goal-oriented. Take a look at it:
1. Identify Your Customer
Customer identification is the first thing to do before launching a loyalty program. Ignoring the factor may result in severe business losses if things don’t work as expected.
As such, new customers can trick restaurant operators in the wake of loyalty programs to access rewards reserved for special customers only.
In most cases, eligible customers don’t benefit from the loyalty program because they aren’t tracked. Therefore, the customer’s identification should be taken into account beforehand.
However, manually, it is inherently challenging or confusing, but automation-powered tools deliver peace of mind. For example, if your restaurant accepts orders through online apps, you can ask customers to complete their profiles and get direct access to loyalty programs.
Based on the registration, you can generate a unique ID for each individual customer who could be tracked in the future.
The ID will direct restaurant-
- How loyal is a customer to their brand?
- How frequently are they purchasing?
- How much sales have they helped them in generating?
- Are they using the reward?
- Are they referring the rewards to other customers?
2. Some Groundwork
Some reports reveal that over 47% of diners never forget to use loyalty rewards, and 60% of consumers claim that they would spend more at a restaurant that offers them a loyalty program. They are even ready to stick with the brand in the long run if the program is attractive.
Therefore, it is worthwhile to learn the ideal type of program that will work for you. You can’t make a random choice. Some groundwork is necessary to carry out operations effectively.
Pay attention to the most common types of loyalty programs, as discussed before. Similarly, satisfy yourself with an ideal response to the given questions:
- How many loyal customers does your business have?
- Do you need to launch the program for only old customers or for everyone?
- Which program is more lucrative for your business?
- For how long is it good to run a loyalty program?
- When can you agree on closing the program if things don’t work well?
3. Embrace Technology
Tech integration into business operations is picking up traction. It is a secret that has been helping most international corporations flourish, allowing business operations to be done seamlessly.
By aligning technology with businesses, you can ensure the successful implementation of your loyalty program. Tech-related sources are obstructing errors, task repetition, and confusion in real-time operation handling. It can promise an effective run of the whole program.
Such data-powered tools are one of the most suitable examples. The tool facilitates smooth tracking of the business. Such as,
- How often is a customer coming?
- What is the most popular item on the menu?
- Are customers coming through referrals or directly?
- How much sales have been generated after the loyalty program?
- Is the program profitable and achieving the objective?
Such queries are effortlessly answered with tech adoption. However, you don’t need to invest a hefty amount to embrace technology. You can simply get an application or use online ordering systems and wait for the information to be accessible on the screen.
For the smooth running of their loyalty programs, restaurant operators even link their application platforms with POS (point of sale) systems to track and respond to actions.
4. Set a target
Target setting is a worthwhile consideration. It is a benchmark that will alert you to the positive and negative consequences of the following actions. You might have learned pretty well how to build a restaurant loyalty program, but it will only work if you consider some essential metrics beforehand.
If you have selected your loyalty program and are confident in it, set a target based on the following three metrics:
- Time
- Budget
- Sales
Loyalty programs must be time-bound if you are a bit inexperienced for now. You must have a clear vision for how long you can afford a smooth run of your loyalty program. By what time do you intend to achieve your target?
You should develop a clear mindset on time and be fully prepared to take timely actions before it’s too late.
Budget is another indispensable parameter when setting a goal. When testing out a marketing strategy, every company utilizes a specific budget and aims to achieve the target within that.
So make sure you aren’t using your entire capital and are using only a portion of your business savings. You should try to achieve that goal within the budget you have set, or else it can have disastrous consequences.
If you want to attract repeat orders with the loyalty program or you want to run the loyalty program against sales from selected customers, mention the anticipated figures for revenue and sales and set the target.
5. Keep your budget in mind.
Bear in mind. Loyalty programs’ main focus is to retain existing customers and keep businesses viable in the long run. So avoid using a monetary-based loyalty program if you are tight on budget, or try not to be too concerned about the budget if revenue from business is phenomenal.
Most B2B businesses use 2–5% of their revenue to test and run their business strategies.
But if you run a restaurant and sell directly to the customers, you can keep the portion higher, up to 5% and 10%, respectively. Alert yourself beforehand if you find your budget is exceeding the figures you had in mind.
However, budget shouldn’t be a big constraint if your loyalty programs exclude monetary rewards. You can use a membership-based model that will not just retain existing customers but also attract new ones.
6. Categorize Customers
A loyalty program is a strategic business technique and must not be mixed with “free gifts” or “free rewards.” You must be well-versed in your targeted audience. Such as, you must have a clear answer for “Who is my customer?”
- Above 5 years old (kids)
- Above 15 years old (teenagers and adults)
- Above 30 or 40 years old (elders)
Based on the given age brackets, you should build your loyalty program and anticipate better outcomes. Some loyalty programs are useless for people over the age of 30 or 40, but they are suitable for teenagers and kids.
Similarly, it can even disappoint some customers who were repeat consumers of your cuisine earlier but can’t say anything about the future. Moreover, you can even become a bit more strategic if your restaurant serves a family menu.
Such as, you can gift parent discounts or special offers on ordering your kid’s favorite. Another way to categorize your customers and identify their eligibility for the program can go like this:
- Customers with more repeated orders
- Customers with average repeat orders
- and customers with mostly new orders
Based on the given metrics, you can also set an errorless target and make it certain that the loyalty program will work out effortlessly.
7. Reward loyalty on each and every visit.
Customers never become repeat buyers with a one-time reward. If you want to retain them and don’t want them to leave at any cost, then try using a loyalty program that becomes a reason for them to make consistent visits to your restaurant.
However, rewarding loyalty to customers each day can become a costly deal in most situations. Therefore, you can avoid freebies or rewards.
You can use a point-based or membership-based loyalty program as an alternative that you can use to reward your loyal customers on a daily basis or as per their frequent visits.
If your restaurant operates entirely online, you can attract customers through scratch cards or jackpot offers. Not just because it is affordable, but because it is strategic to have customers keep coming into your business.
8. Track and Progress
Once your loyalty program has been successfully launched, keep a record of every activity. Analyze the response of customers and sales into the business after launching the loyalty program.
Normally, outcomes are apparent right after the launch if tracking is done with the mobile application. If positive outcomes are visible, you can think about investing in marketing and drawing more sales into your business.
Loyalty programs can also transform into revenue-generating loops because some of them can start inviting more new customers who might have been influenced by the existing ones.
Parameters for Prompt Success of Your Loyalty Program
It’s time to walk through a list of parameters to consider to transform your loyalty programs into a big success. –
Simplicity
The recent global survey conducted by Siegel+Gale found over 61% of consumers were more interested in recommending a simple brand.
People hate flashy items because of their branding. Bear in mind, your product is the super-king. If your food item looks good and tastes good, there is no need to make your loyalty programs too complex.
In the end, it is a sobering reality that your loyalty program will sustain your business in the long run, not the loyalty program itself.
It is just a way to express your gratitude and thankfulness to the customers who are your repeat customers, to make certain that they aren’t snatched by competitors.
Value
Try serving maximum value through a loyalty program rather than simply relying on monetary rewards for customers. They are helpful, but it’s worth keeping in mind that “you want them to be loyal, but not greedy.”
So be mindful of your loyalty program and put your best effort into making it more value-delivering than rewards-showing.
Loyalty programs are exclusively designed to be thankful to the old customers who have helped a lot in your restaurant’s existence and consistent growth.
Engagement
Best if you build engaging loyalty programs, which carry vast potential to keep customers for months and years. Normally, rewards are received and forgotten by customers.
But if your loyalty program is engaging and can keep them attached to the restaurant, it can aid in the further progression of your business. Membership-based programs combined with referral programs are the most appropriate example of a loyalty program. The program has vast potential to do that.
However, if your business can offer frequent discounts and free desserts, your business’s engagement level will automatically go up.
Branding
While running your loyalty program, consider promoting your brand as well. After all, you won’t be willing to attract only existing customers but also expect new customers to be drawn towards your restaurant.
Regardless of the type of loyalty program you have found fitting for your business, branding is still a critical metric for making people aware of your brand through your loyalty program.
For the objective, keep the logo and brand’s theme on the loyalty card or digital banner. You can even provide contact details. It is a smart strategy to collect people’s contact details to use them for marketing.
Staff Education
Your staff needs to learn about the loyalty program. How will it work? How will they need to use the program? How will they distribute rewards to loyal customers? After all, they will be actively responding to people’s queries about what your restaurant will be receiving after the successful launch of your loyalty program.
So make certain that no one on your team is unaware of it and that they are fully prepared to answer people.
Keep it digital
It can still be confusing for staff. Most restaurants will receive so many queries and orders after launching the loyalty program. But if some of them aren’t prepared to tackle the rising count of queries and orders, issues can arise.
No matter whether the staff is prepared and well-trained to take the job or not, confusion and errors can still strike with manual actions. That’s why experts recommend leaving the task of data collection and ordering executions to machines.
A POS system linked with a mobile application or online food ordering system can get it done reliably and faster. You can track, analyze, and distribute rewards more effectively if technology is involved.
Evaluation
Once you master how to build a restaurant loyalty program, try not to ignore the most important task—the evaluation. Evaluation makes it certain that the actions you are taking for the loyalty program are going in the right direction.
The success and failure of the loyalty program come to light after a brief evaluation of the whole thing. But before doing that, bear in mind that loyalty programs aren’t intended to generate profits, as they are designed to retain customers in business.
So avoid analyzing “profits,” but keep your eyes on the “expenses” to avoid losses.
Conclusion
After this thorough assessment of how to build a restaurant loyalty program, things must be clear now. You must know now how can you build the program and make things work for you, as discussed in this detailed guide above. But it is also necessary to note that such programs can derive faster and more reliable results if you integrate technology into the business ecosystem. As such, you must invest in a digital portfolio, e.g., a mobile application or website, to make your loyalty program reachable, traceable, and effortlessly awesome.
But in case you are short on funds, head to the online ordering system by App2Food, where restaurants are creating their digital portfolio online at nearly zero cost. So create your own digital restaurant and achieve success.