Did you know that the restaurant industry has one of the lowest customer retention rates? A 2018 study found that while the media and professional services industry has the highest customer retention rates of 84 percent, the hospitality, travel, and restaurant sector have the lowest rate of 55 percent.
Another study conducted by Thanx, Inc., a loyalty and guest engagement platform, found that seven out of every ten restaurant customers never make a return visit to the same restaurant after their first visit.
Over the years, restaurant loyalty programs have proven to be extremely beneficial for restaurants, fast food chains, cafés, and diners when it comes to bringing in repeat business and boosting revenue.
This blog post discusses the benefits of restaurant loyalty programs as well as the different types of restaurant loyalty programs, with the latest examples. Read on and thank us later.
Benefits of Restaurant Loyalty Programs
Restaurant loyalty programs have proven to be a game changer for restaurants, eateries, and cafes.
1. Lower Costs of Customer Acquisition
In a restaurant, the cost of acquiring new customers is significantly higher than the cost of retaining existing ones.
That’s because the amount of money that eateries and restaurants spend on restaurant loyalty programs is only a fraction of what they spend on marketing and advertising costs.
In addition to that, the investments made in restaurant loyalty programs can be measured and monitored.
2. Greater Word-of-Mouth Publicity
The right restaurant loyalty programs will not only fare better than marketing and advertising campaigns but will also lead to more favorable word-of-mouth publicity.
When customers get meaningful and valuable loyalty rewards and referrals, they are more likely to spread the word about their favorite restaurants and delicacies. It results in a win-win situation for all—the restaurants, customers, and their family members and friends.
3. Higher Profits and Revenue
Higher profits and revenues are just a by product you register after attracting more new customers and retaining existing ones.
After getting positive word-of-mouth publicity, you will get more customers, and the majority of them will come to you repeatedly.
Not just that, many of them will also bring more customers to you and set off a virtuous cycle.
Suggest Read: 5 Effective Ways to Restaurant Create Value Restaurant Loyalty Programs
4. Higher CLV (Customer Lifetime Value)
A well-designed restaurant loyalty program will enhance customer lifetime value (CLV).
CLV is a metric that measures the total amount a business (in this case, a restaurant) earns from the average customer over the entire lifetime of their account.
If you succeed in creating and running effective restaurant loyalty programs, you will generate a higher lifetime value from your customers.
Apart from that, you will also have more responsive and adventurous customers, who will be willing to give feedback and try out new menus and dishes in your restaurant.
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Types and Examples of Different Restaurant Loyalty Programs
When it comes to restaurant loyalty programs, there are four main types. We have also provided suitable examples of each type of loyalty program.
- Points-based rewards
- Item-based rewards
- Subscription rewards
- Promotional rewards
1. Points-Based Loyalty Program
As you can guess from the name, members of this loyalty program get points for their transactions and interactions. Restaurants that offer points-based loyalty programs reward their customers and loyalty program members with specific points for specific spending or just for visiting the restaurant.
The biggest benefit of using a points-based loyalty program is that it’s simple to manage and track. If you intend to use points-based restaurant loyalty programs, keep your rewards simple. When customers know what they can expect from the points-based loyalty program, they are more likely to participate.
One of the best examples of a points-based restaurant loyalty program is Dunkin’ Donuts Rewards Program—DD Perks—which uses priority services as the main selling point. Under the program, loyalty members earn five points for every dollar they spend. They can use the points toward gift cards.
2. Item-Based Loyalty Program
As the name suggests, in an item-based loyalty program, customers get a free item after specific transactions or activities. A good example of an item-based loyalty program is providing a free food item after a certain number of purchases or taking part in some activities.
Some excellent examples of item-based loyalty programs are Starbucks Rewards for Green and Golden Status holders, which offer:
- Free add-ons, food, and beverages
- Free birthday reward every year
- Free refills on brewed coffee and tea
3. Subscription-based rewards program
Under subscription-based rewards programs, subscribers receive rewards for touching specific milestones. The biggest advantage subscription-based rewards program is that it enables restaurants and eateries to build long-term relationships with customers who will pay a recurring subscription fee regularly (either monthly or yearly) to consume their favorite foods or beverages. It also provides restaurants access to upfront cash.
An excellent example of a subscription-based rewards program is the program of Au Bon Pain, an American fast casual bakery, café, and restaurant. Under its subscription program, it provided unlimited coffee refills to the members of its Endless Coffee Mug club for a yearly subscription fee of USD 199. Apart from that, it also provided subscription members with an exclusive reusable mug.
Suggested Read: Robust, Fully Automated, And Cost-Effective Loyalty Program For Digisol
4. Promotional loyalty programs
In this type of loyalty program, members receive loyalty rewards with expiration dates that encourage them to tuck in or take away from the restaurant during a specific window of time.
Unlike other restaurant loyalty programs, promotional rewards don’t have to be pinned to specific programs. Many companies provide promotional rewards as surprise promotions to incentivize customers.
Some of the best examples of promotional loyalty programs are Pizza Hut’s Hut Rewards, Subway’s MyWay™ Rewards, and Famous Dave’s Rewards Program. Pizza Hut introduced Hut Rewards in 2017.
The restaurant loyalty program was designed to enhance the loyalty and visit frequency of Pizza Hut customers. Famous Dave’s Rewards Program is available on a smartphone, and it offers users a one-time gift after every download and a free burger with the next order.
To sum up,
Restaurant loyalty programs have revolutionized the way restaurants and eateries attracted and retained customers for a long time. Restaurant loyalty programs are among the best promotional and retention strategies for the hospitality and restaurant sectors.
If you’re looking for well-designed restaurant loyalty programs, don’t look any further. At LoyaltyXpert, we have designed and created extremely effective rewards programs for many reputable restaurants in the country as well as abroad. If you want to know how we can help, contact us today to get a free demo.