Are you creating loyal customers?
You can’t overestimate the importance of customer retention. Loyal customers come in more often, spend more money on each purchase and are a great source of referrals and positive reviews. Even small businesses are creating customer loyalty strategies with a wide range of options entering the space in the past 5 years.
It can cost five times as much to attract a new customer than to keep an existing one. Focusing more on customer retention a business can avoid the high cost to continuously acquire new customers to survive. It’s difficult to execute a strategy to grow if you’re constantly looking for new customers. Surprisingly, 44% of businesses spend more on customer acquisition and less than 20% focus on retention. Further, 40% of businesses focus equally on acquisition and retention.
New customer acquisition costs render many customer relationships unprofitable in the first year. In year 2-3, when the cost of serving loyal customers falls and the volume of their purchases rises, and these relationships can generate big returns. The bottom line: increasing customer retention rates by 5% increases profits by 25% to 95%.
All these numbers are the primary driver behind the flood of loyalty programs that have come into the market during the last 10 years. There are a lot of similarities baked into these programs and some significant differences. The salespeople don’t always paint a clear picture of the software’s capabilities and that can cost you more than time and money, it can cost you some of the customers the plan is intended to retain.
It’s a critical decision to choose a solid company with a solution that works for your customers and your goals.
When it comes to grading a program as a “success” or “failure”, it’s more about getting them to actually use the program to and get them to come back into your restaurant more. This is where most plans fail but a loyalty program is also not a stand-alone strategy. Customer loyalty programs are a quick win for restaurant owners who integrate into a larger customer retention strategy.
I know a lot about the restaurant and retail loyalty programs and held senior positions at two of loyalty companies managing partners, sales and customer success. Completing a competitive analysis of the landscape twice I came across misleading information often shared publically.
I decided to write this article after working with a 6-location restaurant that engaged a loyalty company that completely failed them. The loyalty company builds mobile apps as a part of its loyalty business. In fact, the only way a customer could join the plan is by downloading a white-labeled app with their restaurant’s branding.
The simple truth is few customers will actively participate in your loyalty program if they have to download an app to participate. How many local restaurant apps do you have on your phone? A branded app is nice to have but if it’s the only entry point to the program it’s narrowing your chances for success.
Secondly, the platform was not intuitive either and the support was very limited.
After the launch, the restaurant was on its own to get customers to download the new app and to manage the program. Seems logical but there is a lot of work that goes into getting downloads and managing a loyalty program.
The loyalty company suggested they roll out the program with a large incentive to get the customers engaged. This was a double-edged sword. More than 4,600 customers across all locations downloaded the app within two days. However, there wasn’t a dime of profit in any of these transactions and the app was deleted by over 3,000 customers within weeks of redeeming the incentive.
Finding a Partner
Restaurant loyalty plans can be an amazing tool if you can get your customers engaged and the way to do this is to make it simplistic for them to join and participate.
The more customers you have in the plan, the more data you have to create marketing strategies to bring them in more and to spend more at the restaurant. The best data comes from your POS. The loyalty software is simply organizing this data and providing the tools to use it for marketing.
If the software does not have a current integration with your POS you will be missing a huge opportunity. The data from the POS enhances the program’s effectiveness. If the offer you are sending to your customer is based on their purchase history, it will be more effective at drawing them back in. Sending an offer for a burger to a vegan won’t work. It may even work against you.
Look at your POS loyalty first and also the loyalty software partners they are integrated with.
With a table service restaurant, the best experience for the customer and the server is a plan where the member is identified through their credit card, so credits and reward redemptions are seamless. A quick-serve restaurant should enroll and identify members at the POS. The goal is for them to come back in and continue to spend money so the process tied to the loyalty should be seamless.
Research & Test
When you find a company and see a demo, don’t be sold on their “product road map and “what’s coming”. What they show you is all you will have to work with. It should be easy to manage and have dedicated support. Test it by joining the loyalty program with one of their existing customers in your market. Ask your POS rep to connect you with one of the customers using the loyalty software. They can tell you about their launch, the POS integration and the company’s responsiveness to issues.
Don’t be the” test customer”, no matter what deal they offer you or case study they have from half-way around the world. Implementing the wrong plan will be a bad customer experience and negatively impact your business.
Today, customers expect online ordering and it’s a lucrative part of a restaurant’s revenue. The ordering needs to be tied into the loyalty scheme. Find out who is managing it. Ask if it is proprietary software or third-party integration. You should absolutely test this or at the very least, speak to a business currently using it. There so many aspects to digital ordering that are not obvious and turning this on in your business without testing can be disastrous to your revenue. Keep any orders you can get from 3rd party services like Seamless or Caviar but don’t promote them on your website or app. Provide your customers with a way to order directly from you and reward the for it. The rewards you offer will cost less than the % paid to the 3rd party.
Ask if the digital ordering and POS integrations are direct or through another 3rd party like Omnivore or ItsaCheckmate. I have seen many issues when the POS integration is not direct.
A mobile-enabled site has become critical to search optimization. This is another reason, I wouldn’t want my loyalty company building and managing my mobile presence. It should be functional, engaging and represent your brand well. Ask for a list of other apps they built so you can download a couple and walk through them. If they all look the same, very little work goes into the development.
Gift cards, gamification, reward schemes, payment options (mobile wallet), customer support,…test it ALL.
This is a decision that requires research before investing your time and money into one of these programs. Choosing the wrong partner and implementing the wrong plan may take you a long time to rebound from.