New restaurants are popping up every day, which means restaurateurs face ever-increasing competition for market share. To make the landscape even more competitive, diners are also taking advantage of online ordering and delivery services at a rapidly growing pace.
Even if a first-time guest has a fantastic experience at your restaurant – your staff really brings their A-game and provides them with top-notch service and perfectly crafted food – there is no guarantee that they will return. There are simply too many options for consumers when they are looking to dine out.
To combat this problem, many restaurant owners are turning to loyalty and rewards programs to get guests back through the door and to turn them into regulars. The majority of programs use a rewards system that converts dollars spent into points. Once a guest obtains a certain number of points, they reach a point-based milestone and receive a reward in the form of a discount or freebie. Many studies support the effectiveness of loyalty programs in generating repeat business. According to a study by LevelUp, when a customer is close to unlocking their loyalty reward, they spend 39% more than usual. When customers redeem their reward, they spend an average of 19% more. In addition, visitation frequency increases by 75% between a customer’s first reward and their tenth reward.
However, simply introducing a restaurant loyalty program does not guarantee results. Not all loyalty programs are created equal and many restaurant owners do not understand why their programs are not driving the results that they expected. Below are five of the most common reasons loyalty programs fail to drive repeat customers and increased revenue.
1) No Immediate Incentive
Unless someone is already a regular customer who plans to continue to visit your restaurant regularly, it can be difficult for him to see the value in opting in to a loyalty program. In order to hook guests who are not already planning to visit frequently, consider offering an immediate incentive so that they are instantly rewarded for their patronage. Perhaps you give everyone who joins the rewards program a discount on their current meal, or a free appetizer on their next visit. This way, guests can see immediate value in becoming a member of the loyalty program.
2) Too Difficult to Join
If your guests need to fill out a physical form, or go online when they get home to provide you with the necessary contact and personal information, it can decrease their willingness to join. Instead of seeing the value in your program, all of the steps required to sign up make the loyalty program feel like a burden. Restaurants that use a POS system with a built in customer relationship management (CRM) system can easily capture their customers' information anytime they pay with a credit or debit card and request a digital receipt. When customers are interested in signing up for the loyalty program, they simply have to check a box and opt-in because the restaurant already has all of the necessary information about the customers in the CRM database.
3) Too Complicated
A lot of restaurant loyalty programs require guests to carry a physical rewards card, keep track of a punch card, log into a website, or scan their mobile phones on each visit. The easier it is for guests to participate in your loyalty program, the more likely they are to take advantage of it. The purpose of a rewards program is to reward guests for their loyalty, not to ask more of them. Make it easy to track your loyalty program by using a POS system that can use customers' credit cards to seamlessly attribute rewards points anytime they pay for a meal at your restaurant.
4) Not Personalized
One of the main problems with most loyalty programs is that they are too generic. Guests have to spend a certain amount of dollars to gain the designated number of points to receive a reward. If the rewards are not personalized to the individual guest’s preferences or they do not at least have some degree of choice in selecting the rewards that they receive, the loyalty program is likely too generic to appeal to customers. Provide your loyal customers with a few different rewards options or with the freedom to choose any appetizer, for instance, to ensure that they get rewards they actually want.
5) No Offsite Engagement
It’s not enough to promote your loyalty program within the walls of your restaurant. For your efforts to be successful in generating repeat business, you need a way to remind guests that they are closing in on their next awesome reward. If you have your guests' contact information, like their email addresses, or you are active on social media, it's easy to reach out to guests to not only promote your loyalty program, but to notify the ones who are getting close to reaching the next rewards. This way, you can incentivize them to return sooner and to spend more on their next meal in order to obtain the reward.