Why we recommend a loyalty program to all restaurants

Whether you operate a restaurant chain or a single-unit dining establishment, loyalty programs are always an excellent idea. From improving the ROI on your restaurant marketing efforts to increasing your customer retention, a well-executed customer loyalty program that relies on the latest advances in restaurant technology can be a complete game-changer for your establishment.


But before we delve into the specific details of why we always recommended implanting a program of this nature, it's worth running over what a customer loyalty program is and how it operates in the context of a restaurant setting.



What is a Restaurant Customer Loyalty Program?


As you'll probably already be aware, loyalty programs reward customers for their accumulated purchases, and they are utilized across a broad spectrum of industries. Within the restaurant business, they are offered through any number of qualifying criteria, such as number of visits, number of purchases, or dollars spent.


These restaurant reward programs are then tracked in several different ways. For example, you may have a physical business-card-style system that is stamped every time you visit. Other loyalty schemes work by asking customers to swipe a plastic card at the point of sale, which automatically adds the points or rewards.


However, increasingly the move is being made toward digital customer loyalty programs that are integrated into POS systems. These new types of loyalty or rewards programs save customers the hassle of carrying around an item with them to earn more points or rewards.


Now you understand how they work; it's worth exploring why they are so worthwhile for your restaurant.



Improved Customer Retention


Restaurant owners often find themselves bending over backward to try and win the patronage of new customers. But the secret behind the success of the best-performing restaurants is their ability to gain repeat business from their existing clients.


Contrary to popular opinion, your focus should be on minimizing the number of customers you lose (known as 'customer churn') rather than trying to tempt new ones into your establishment. A business with a 60% customer retention rate is actually losing three to four times as many customers as a restaurant with 80% retention rates.


So why should you become so obsessed with customer retention? Because existing customers are more valuable to you as a business. The statistics always support this assertion. Your regular customers are 50% more likely to try a new item on the menu and spend 31% more than new customers. Besides, did you know that it costs five times as much to attract a new customer as it does to retain an existing diner?


When framed in this context, it's easy to understand why the sharpest restaurant owners spend so much time perfecting their loyalty programs. It's to keep those existing customers coming back for more!


Better Data and Analytics


Perhaps one of the most underrated benefits of running a loyalty program is the amount of data you reap as a business owner. Restaurant data analytics are increasingly becoming a vital pillar of successful operations. But there's only so much data you can take from your sales alone.


However, customer loyalty programs let you enter the mind of your most profitable customers, helping you to better serve their needs and increase your bottom line at the same time.


By compiling and analyzing data from your POS-based customer loyalty program, you can start to uncover which dishes aren't even worth putting on the menu in the eyes of your target audience. By the same token, you can use the same data to cross-sell and up-sell the best-performing menu items. Using data and analytics in this way, you can effectively mold your restaurant to the preferences of your biggest spending customers to become even more successful.


Customer Loyalty Programs Help to Deliver Much Higher Returns on Marketing Investments


While customer loyalty programs are marketing initiatives in their own right, they can help you achieve much more through your traditional marketing channels.


Frequently, restaurants will waste hundreds, if not thousands, of marketing dollars on prospects that wouldn't come to their restaurant even if they offered a free meal. Whether they don't like the specific cuisine or don't like eating out period, the best restaurants ensure that every dollar spent on promotions and special offers results in more bodies in the dining room.


That's precisely what a restaurant reward program can achieve. As highlighted above, by digging into your loyalty scheme's analytics, you can segment your customers based on previous spending habits. If you've got a group of housewives who never miss 2-4-1 cocktails on Tuesdays, it makes no sense to market your weekly steak night to them. You're just pouring valuable marketing dollars down the drain.


Instead, you should tailor offers to each segment of your customer base to drive much higher sales. For instance, let's say you uncovered a group of customers who order a burger no matter what day of the week, whether it's lunch or dinner service, and no matter the time of year. You know that any personalized special discount on a burger arriving in their inbox is bound to have them flooding back in to spend more money with you. That $15 you just spent on emailing your burger-lovers is likely to turn into hundreds of dollars in revenue over the next few days. Better yet, it could cost you nothing if your POS system can send newsletters out to specific customer segments as part of the platform.


Restaurant Loyalty Programs Increase the Bottom Line


When it comes down to it, you're running a business to make a profit. By implementing a well-executed customer loyalty program, you're sure to dramatically improve your bottom line. Data from Annex Cloud has shown that loyalty programs increase overall revenue by 5-10%, members spend 5-20% than non-members on average, and members also buy 5-20% more frequently than non-members.


As if that's not convincing enough, consultancy firm Bain and Co found that increasing customer retention by just 5% boosts profits by 25-95%. It's not hard to understand why it's so effective. In short, it's because everyone, no matter their socio-economic status, loves something for nothing.


How many times do customers add an accompaniment to an entrée if it means boosting their reward points earnings? Or what about spending $20 on a visit to a restaurant, rather than their original $15 budget, in order to enjoy a complimentary dessert? The answer is all the time. By adding a restaurant loyalty program, you, too, can benefit from this type of consumer behavior, significantly increasing your bottom line in the process.


Implement a Winning Restaurant Loyalty Program with POSTRON


Here at POSTRON, we have helped numerous restauranteurs to implement customer loyalty programs through our POS management platform. With no need to carry around a plastic or paper card, customers can simply have their points added at the point of sale and receive automatic updates on their balances via email.


You can also benefit from the enhanced analytics and data reporting to find your most valuable customers and tailor your restaurant branding to guarantee huge returns on your marketing campaigns.


With the evidence so compelling about the power of restaurant reward programs, speak to POSTRON about creating a winning loyalty strategy while benefitting from contactless payment processing, inventory management, and the latest cloud-based restaurant technology.


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