The Restaurant Loyalty Playbook: Winning Strategies from Industry Experts
Written By
Peyton Raleigh
5 minute read
TLDR: Elevate your restaurant loyalty program by shifting from spend-based rewards to value-driven benefits, investing in scalable technology, and boosting transaction tracking to at least 15%. By implementing these strategies and monitoring the right KPIs, you can build a loyal customer base that drives business growth.
In the competitive restaurant industry, loyalty programs are crucial for retaining customers and driving revenue. However, with rising food costs and changing customer expectations, it’s essential to adapt your loyalty strategies to remain effective.
Top 4 Questions in Restaurant Loyalty
1. Optimizing Discounts in an Inflationary Environment
With food costs increasing and menu prices rising, how can you optimize discounts without upsetting customers?
Expert Insight | Ellen Green
VP, Loyalty Strategy, Bounteous
Many brands are looking at more inflation-proof loyalty strategies that tie points to orders, items ordered, and/or personalized offers and surprises that are structured to drive incrementality.
Domino’s and Jersey Mike’s are good examples of programs within the restaurant industry that don’t reward members based on spend, which helps control program costs. But a successful strategy goes beyond points and the core value proposition. Leaders in the space explore what their member’s value outside of discounts to build a stronger connection with them.
Key Strategies
Access: Offer special menu items or secret menus.
Exclusivity: Provide limited quantity merchandise or experiences.
Convenience: Implement easy reorder, delivery benefits, or member reservations.
Unique Experiences: Allow members to choose their birthday gifts.
Status & Recognition: Celebrate customer milestones.
“To Ellen’s point, we are seeing more and more organizations pulling back on points or offering programs without points, all together. Instead, they are building challenges that further engage the customer and aren’t tied directly to spend or to a commitment to discounts. These challenges are often based on combination of interactions and transactions and the “reward” can be access, something exclusive, convenience, experiences or even partner experiences.”
“Making a strong generalization, most restaurants, especially QSRs started doing loyalty programs with punch cards. These programs celebrated and rewarded frequency. When technology became more advanced, these organizations took a similar loyalty program design and just made it digital. This was a big advantage for them because it cut down on fraud and made their programs more profitable. However, now, these organizations are ready to get to know their customers better and want to use their loyalty program to do that. This means that they need to move beyond a digital punch card technology and into one where they can collect more data and use that data to deliver more personalized experiences.”
Erin Raese, Chief Growth Officer, Annex Cloud
Critical Platform Capabilities
Scalable Loyalty Technology
Advanced Marketing Automation
Customer Data Platform Integration
Cross-Channel Personalization
Bottom Line: Invest in technology that scales with your business, integrates seamlessly, and offers advanced marketing and data capture and usage capabilities.
3. Increasing Transaction Tracking Through Loyalty
How can you track a larger percentage of your transactions through loyalty?
Expert Insight | Ellen Green
VP, Loyalty Strategy, Bounteous
Getting customers to identify themselves as a loyalty member is one of restaurants biggest challenges, especially for drive thru concepts. Restaurant brands on the low end of the spectrum are only tracking single-digit percentages in tracked transactions, with most averaging 20-40% tracked and industry leaders tracking above 60%.
Identification can often be a clunky experience that requires customers to download an app to participate.
The secret sauce combines:
Leadership Alignment: Ensure full leadership buy-in across all touchpoints.
Cultural Integration: Make loyalty a core part of your organizational culture.
Employee Advocacy: Engage employees in promoting the program.
Seamless Identification: Implement easy and convenient identification methods.
Compelling Rewards: Offer rewards that motivate customers to identify themselves.
“Restaurants have the opportunity to level up their loyalty strategies to truly engage their customers with a two way value exchange. Moving from a transactionally focused model to one that develops a more meaningful relationship with customers. Collecting more information about a customer to use in a meaningful way – by recognizing that customer and personalizing experiences for them, the program will begin to build more emotional connections and more loyalty, higher value customers.”
Erin Raese, Chief Growth Officer, Annex Cloud
Bottom Line: Increase transaction tracking by aligning leadership, integrating loyalty into your culture, engaging employees, and offering seamless and compelling experiences.
4. Tracking Performance That Matters
How do you know if your loyalty program is delivering real value?
The most successful restaurant loyalty programs track retention, participation, and ROI to understand their true impact on business growth.
Customer Retention Rate: Track repeat visits and frequency of engagement It’s a fact of life in the loyalty program world: not every member will stay active forever. Over time, it’s perfectly normal for your program to have more inactive than active users. Customer attrition happens for various reasons – changing needs, life circumstances, or simply forgetting about their membership.
Remember, a successful loyalty program isn’t just about acquisition; it’s about cultivating lasting relationships. While a high active user rate is ideal, don’t be discouraged by some inactivity. Focus on strategies to re-engage those lapsed members and provide ongoing value to keep your active users engaged.
Program Participation: Aim for at least 15% of transactions tracked. Most loyalty platforms offer helpful metrics to track program participation. This might be the percentage of transactions or the percentage of sales attributed to your loyalty program members. But here’s a key insight: until your participation rate hits at least 15%, your primary focus should be acquisition.
Why? Because at lower participation levels, even significant improvements in member behavior won’t make a noticeable dent in your overall sales figures. It’s like trying to turn a giant ship with a tiny rudder.
Make sign-up easy and enticing. Promote the benefits clearly. Once you have a solid base of members (that 15% mark is a good starting point), then you can shift your attention to driving engagement and increasing those member transactions.
ROI: Calculate comprehensive program value, including long-term customer lifetime impact Calculating the ROI for your restaurant loyalty program is challenging due to its multifaceted nature. The costs extend beyond visible rewards, encompassing technology and platform expenses, marketing and promotional efforts, reward fulfillment (including potential food cost increases), and staff training.
Measurement Strategies
Use control groups and A/B testing
Benchmark guest behavior before and after program enrollment
Focus on both short-term transaction increases and long-term customer value
Watch YOY lifts in average order value, frequency of purchase, and reduction in time between purchases
“Our loyalty solution and dedicated customer success managers help clients track behavior change over time. This allows clients to see who is participating in the program and if they have more incremental trips or higher AOVs because of the program. For example, we can see if members that are redeeming actually increase the amount of trips they make in a year.”
Alex Tavera, Head of Strategy, Annex Cloud
Bottom Line: Implement a robust tracking system that goes beyond surface-level metrics to understand your loyalty program’s true business impact.
To build a successful restaurant loyalty program, you need to adapt to changing market conditions, invest in the right technology, and focus on key metrics. Here are clear actions you can take:
Optimize Discounts: Shift from spend-based rewards to value-added benefits like access, exclusivity, convenience, unique experiences, and status recognition.
Invest in Technology: Choose scalable, integrated, and advanced technology solutions that align with your business objectives.
Increase Transaction Tracking: Ensure leadership alignment, cultural integration, employee advocacy, seamless identification, and compelling rewards.
Track Key Metrics: Monitor customer retention rate, program participation, and ROI to gauge program effectiveness and make data-driven decisions.
By implementing these strategies, you can create a loyalty program that drives customer engagement, retention, and ultimately, long-term business growth.
