Whether resulting from inflation or supply chain delays, economic uncertainty remains — and restaurants must prepare. Food service businesses face the challenge of finding creative ways to increase foot traffic and drive sales even as consumers spend more cautiously.
Loyalty programs have become a powerful tool for businesses to counter rising costs and foster customer loyalty. Over 40% of customers spend more at establishments they regularly patronize, with more than 55% remaining loyal to brands that understand them.
However, as companies restructure their loyalty program point systems to address economic challenges, these adjustments may offer only short-term solutions. When restaurants must increase menu prices — leading to excessive discounts —the programs’ profitability decreases. Successful loyalty programs exhibit three key characteristics that bolster their resilience in tumultuous times.
They offer more than a discount.
A loyalty program aims to increase overall customer spending, offering incentives beyond simple discounts. While discounts can effectively drive short-term sales, a well-designed program should also provide additional value to customers by:
- Offering exclusive access to new products or services.
- Providing personalized rewards based on preferences and purchase history.
- Creating unique experiences beyond financial benefits.
- Providing charitable giving opportunities.
For a smooth customer experience, restaurants should customize their loyalty programs to be digitally led and blended with various online platforms, such as online ordering systems, payment gateways and point-of-sale (POS) systems. Incorporating these elements enables customers to easily earn and redeem rewards, make payments and place orders electronically. This level of convenience and efficiency encourages repeat business and increases customer satisfaction.
- 71% of restaurants are leveraging data gathered via the POS for digital engagement, according to HT's 2023 POS Software Trends Report
Implementing tiered memberships and challenges in a loyalty program can encourage specific customer actions. For example, varying membership levels based on customer engagement and spending can inspire guests to attain higher ranks and access more appealing rewards and benefits. This approach motivates customers to visit more frequently, order larger quantities or try new menu items. Challenges or gamification also encourage consumer activity through a feeling of excitement and accomplishment for each reward.
Other strategies exist to attract new customers, retain existing ones and sustain loyalty programs during economic fluctuations.
- Guests can earn rewards based on the number of visits rather than spending amounts.
- Brands can increase points needed to obtain a certain reward to keep up with inflation.
- Restaurants can offer banked rewards, such as $5 off after spending $100.
- Guests can receive “surprise and delights” — or unexpected rewards or perks — throughout the customer’s membership.
- Program benefits could include exchanging rewards for various enticing options like coupons toward menu items, swag, charitable donations or memorable experiences.
One restaurant group successfully using loyalty programs to enhance customer experiences is Fuzzy's Taco Shop, a Texas-based fast-casual chain. Fuzzy's encourages guests to try new menu items and uses AI-enhanced customer segmentation to offer tiered memberships and personalized communication, providing guests VIP treatment. They also involve loyal customers in new limited-time offers with a few even becoming permanent items, driving check-ins, sales and feedback through its loyalty program while continuously improving the customer experience. The goal is to create a positive and memorable experience for patrons and show appreciation for their brand commitment.
Programs update continuously to fit consumer needs.
Effective loyalty programs are flexible and adaptable. Just launching a loyalty program is insufficient; it must consistently evolve through new benefits, modified rewards and responses to seasonal demands for higher customer engagement and value.
Consider adding a subscription model. As subscription services become more popular in the US, integrating a subscription-based feature can attract and keep customers. This strategy ensures an up-to-date program and provides additional worth beyond the usual rewards presented in a typical loyalty program. You can offer extra customer perks by giving customers access to:
- Exclusive content or services.
- Early product releases.
- Ongoing discounts.
Dining establishments can generate a feeling of anticipation and exclusivity for their patrons eagerly awaiting the introduction of new benefits and features. A subscription amplifies the connection between your brand and customers, resulting in continued participation.
Adopting a subscription model gives the loyalty program flexibility to adjust to customer preferences and behaviors and to modify subscription benefits based on customer feedback, market trends or seasonal fluctuations.
They’re responsive to changing attitudes.
The Salesforce State of the Connected Customer Report states 73% of customers expect companies to understand their needs and expectations. Incorporating customer feedback and enforcing necessary changes delivers a customer-centric approach that will resonate with target audiences. By aligning the program with customer expectations, actively seeking feedback and adjusting accordingly, restaurants can enhance customer satisfaction, drive repeat business and mitigate the impact of economic uncertainty.
- Actively listen to feedback, conduct surveys and analyze customer data to align restaurant loyalty offerings with customer preferences.
- Modify the program — introducing new perks, adjusting rewards and updating program features —in response to customer input to stay relevant.
- Leveraging customer data and metrics to identify patterns, trends and opportunities for program optimization.
By consistently seeking ways to improve and innovate, restaurants can maintain a competitive edge and a fresh, engaging loyalty program.
Loyalty programs have come a long way from just encouraging customers to purchase through discounts. Today’s customers expect loyalty programs to enhance their relationships with their favorite brands. To meet these consumer standards, loyalty program initiatives should prioritize long-term value and offer diverse options — such as personalized experiences, financial incentives, support for causes they care about and chances to share their brand loyalty with friends — that cater to the needs of every individual.
With these pillars, a restaurant can ensure its loyalty program is recession-proof and continues to drive customer retention and grow revenue.
About the Author
Joe Yetter is the General Manager of Punchh at PAR Technology Corp., where he is responsible for business development, customer service, and company strategy. While at PAR, Joe has held roles as Chief Growth Officer (CGO), General Manager, and Chief of Staff, where he has spearheaded projects including the acquisition of MENU Technologies and Punchh, the revamp of the Brink business, and internal PAR transformations. Prior to joining PAR, Joe worked at Restaurant Brands International, where he held various leadership positions across franchisee operations, marketing, development, and finance. Joe received his B.S. in Economics from Duke University.