6 Steps for Creating a Successful Rewards and Loyalty Program for Your Restaurant
Having a loyalty and rewards program is an important growth strategy for restaurants and cafes. Increasing customer retention by 5% can increase profit by 25% to 95% based on research done by Bain & Company. Plus, highly-engaged customers buy 90% more often and spend 60% more per transaction (Rosetta Consulting). Having a rewards and loyalty program is an excellent way of keeping customer engaged and interested in your brand, but running a successful program for your restaurant could be challenging. If not done correctly, a loyalty and rewards program can do more harm than good. We have come up with a list of 6 steps that you can take to make sure your loyalty and rewards program is working for your restaurant and providing your customers the best experience possible.
Simplicity is Key
People tend to use what they understand. That is true for loyalty and rewards programs as well. If you make your program too complicated, you are making it hard for your customers to understand it. This will reduce their level of engagement with your loyalty and rewards program and ultimately jeopardize the success of your program. Make your loyalty and rewards program easy to understand in both earning and redeeming points to increase your chances of success. For example, offer 1 point per $1 spent and offer an item for free for a certain number of points.
Incentivize the Right Behaviours
You can use your loyalty and rewards program to create the right behaviours in your customers. If your loyalty and rewards program rewards your customers for purchase of only some specific products, you are creating the wrong habit in them. This is a common mistake in many restaurants and cafes. For example, a lot of cafes have "Coffee Cards" or "Stamp Cards" that you can use to earn free coffee after you buy a number of coffees. This is signalling to your customer that they should not spend money on other menu items because they are not getting rewarded for that. If your goal is to increase your revenue, make sure your loyalty and rewards program is reflecting that. Create an incentive for your customers to spend more money, not just to buy specific items.
This approach can be used for many things that are beneficial for your business. For example you can use it to promote specific items, or ordering during your slow time of the day. You could even offer points to your customers to sign up for your loyalty and rewards program!
Don't Set Expiry Dates
Do not set expiry dates for unused points that your customers have collected. Not only that would make your customers unhappy or angry, but in some states that could become a ground for law suits. People hate to lose what they've been given so make sure not to take their loyalty points away. From a business liability point of view having a lot of unused points is risky. Instead of addressing that by setting expiry dates for points, try to find out why people are not using their points. Make changes to your redemption policies to create an incentive for customers to use their points in certain time-frames.
Offer Free Items Not Cash Discounts
Rewards and Loyalty programs are about showing your appreciation to your loyal customers. You should make sure that's reflected on how you are rewarding your customers. Associating their rewards to dollar amounts will make them think of your program as a cash-back program instead of loyalty and rewards. You are making them think about the financial and mathematical aspects behind your rewards program; that's the last thing you want to do. Show your appreciation of your customers by giving them free items that they love. You can do that by letting them chose any item they want from a category or even better having a smart program that offers them the items they've been purchasing most often. Our experience shows that rewards and loyalty programs that offer redemption of points for free items result in more engaged and loyal customers. This makes the program focused on your customer rather than money.
Make a Game Out of It
You can create a game out of your rewards and loyalty program to increase engagement levels in your customers but be careful not to make it too complicated. This can be easily done by having a tiered rewards system. This approach is used in a lot of games. The first few levels are very easy to finish. The next ones become harder, but at the same time more rewarding. That is exactly what you want to achieve with your rewards program. Start a tier that is easily achievable, so that your customers can taste the free rewards. Then create more rewarding tiers that reinforce their habits and creates more enjoyable rewards for them. This makes them want to get to the next level. The gamification of your rewards and loyalty program like this can lead to great results from increased volume of orders as well as frequency of visits from your customers.
Last but not least, you need to make sure your loyalty and rewards program is easy to use by your customers. Make sure your customers can conveniently collect points, check their balance and redeem them whether they are ordering in-person or online through your website or mobile app. When it comes to earning points, don't make your customers carry an extra card. People tend to lose or forget those cards and most of them don't want to carry an extra card in their wallet. You can offer digital loyalty cards that your customers can add to their phones or create a system where you can lookup your customers with a unique QR code or a phone number. This is where technology can be very helpful and give you an edge. You also need to provide access to your customers to check their points balance so they can see how close they are to getting their rewards. This encourages them to spend more and collect more points to get that reward. Make sure redeeming points is also simple and convenient for your customers. Otherwise, they will lose interest in collecting points.
Your loyalty and rewards program should create a positive experience for your customers who will in turn buy from you more often and refer you to their friends. It is important to keep in mind that your loyalty and rewards program must offer real value to your customers. Otherwise, not only it will not help grow your revenue but it will actually make your customers lose their trust in your brand. You need to ensure that your loyalty and rewards program is designed with your customer's interest in mind in order to be successful.