Loyalty Lessons
Recently at the MURTEC conference, Hospitality Technology magazine hosted a panel discussion on loyalty and gift card programs. At a time when fewer than 38% of restaurant operators have a loyalty program, the session proved that some of the most innovative loyalty programs are coming from small restaurant companies.
Participating in the panel were Alex Birnbaum, senior director of IT at Gordon Biersch Restaurant Group's brewery, Matthew Calabrese controller at Nick's Pizza and Pub, a family-style pub and Eric Spitz, president and co-CEO of Know Fat Franchise Company, a quick service health-food restaurant with co-located retail operations. The following transcript is a condensed and edited version of the panel discussion. To hear the original and unedited session in its entirety, including the audience question and answer, go to htmagazine.com and download the HT Podcast Series, Vol. 1: Loyalty Lessons.
Hospitality Technology: According to the findings of the latest Restaurant Industry Technology Study, most restaurants collect very little data about their guests. What do you know about your guests?
Matt Calabrese: We collect names, addresses, email address, birthdays, anniversary dates. We use Aloha eFrequency (radiantsystems.com) to offer different types of rewards to the 14,000 members of our loyalty program. We can offer specific rewards if guests come in the week of their birthday or anniversary. We track where the guests are coming from, how often they come, what food they are eating and what beverages they are drinking, which is far more valuable than having a marketing consultant talk to 50 guests.
Eric Spitz: We only collect a small amount of information including name, address, phone number, birthday and email address. In addition to being a restaurant, each of our units houses a retail store that drives 35 to 40 percent of the volume into the store. The important part of that is we use the data on an individual consumer level to understand who that consumer is by what they are buying.
Alex Birnbaum: Gordon Biersch loyalty program has been around since 1988. It started out with people filling out cards and sticking them in a fishbowl for free lunches to see who our customers were. We brought that all the way forward into the 21st century with online email campaigns and we now have 100,000 email addresses. We ask for name, address, phone number and email from our loyalty customers, but we are still collecting that information physically on a card as well. One of the things we have been dealing with lately is how to collate the information and make it all useful. Our loyalty program has 15,000 members, but we have email addresses in the loyalty program in one place, another database with loyalty information elsewhere and gift card information in yet a third place.
HT: Alex, Gordon Biersch is in the process of changing its loyalty program a little bit. Can you tell us about its current set up and where you would like it to go?
Alex: We currently have a closed point-based system. Members accrue points and automatically get a coupon. The initial program is you buy in for $20, and on your first visit we give you a $20 coupon back, so it is a buy in and a bounce back program right off the bat. After that point you accrue 350 points and receive a $25 gift certificate. It is easy to understand, relatively easy to manage, but we found that it wasn't really inspiring people.
What we have decided to do is go to an open points-based system, meaning you can accrue points towards a reward. The real interest here is, we think as a brand we can offer people things that are not common. A $25 gift certificate is nice, but we can offer people something like a brewers dinner for 3000 points. By moving to an open system, we are hoping to reenergize that loyalty base and have more people who are willing to buy into it.
HT: Eric, why does KnowFat! push guests toward the retail side?
Eric: Frankly, because we believe that this is the core unique element that we have in our business. We have a restaurant that drives 500-700 consumers a day through it, and we have a retail channel that is notoriously undershopped, and we believe that the main reason is that people don't know what they should be buying or are intimidated.
We break down that barrier automatically. It is a natural goal to attempt what we call conversion with every customer. Right now we are converting one in five customers to the retail side. Our aim is to double or triple that. There is no limit to how much retail we can sell. In a traditional restaurant, there is a limit to how many people you can drive through your restaurant. There is no limit in retail. If you are going to push something, that is what we want to push. We feel that we have a great restaurant business and the challenge is to get this conversion up to a point where it is really singing.
HT: Matt, you said you had 14,000 members. For a two unit restaurant that is a fairly significant number. Can you talk about what some of the strategic goals with developing your loyalty program and why you think it is so successful?
Matt: Our goal going into the frequency program was really to focus on lunch sales. We have a slamming dinner, especially on the weekends, but lunch sales were where we saw an opportunity. We offer double points to weekday lunch guests to drive frequency and to get folks in on a business lunch. We did see that happen. Our average year over year comp growth was three percent and since we started the frequency program, we saw it rise to eight percent. I believe our success in getting this out to so many guests is really actively marketing the card. We would go out to restaurants in the area that would have loyalty-based programs and weren't marketing them when you were in the restaurant. When you went to the website you could see it. Our service team offers the card to every guest. It is a free card and when you receive it, you earn points on that visit. If you spend enough on that first visit, you could earn a discount when you sign up. It is really an enticing program for the guests.
HT: What kinds of changes or enhancements are you planning for your loyalty programs?
Matt: We currently are in the process of changing our program. Right now it is a closed points program where you go through the points and every time you hit a certain level, you get a discount. One of the pieces we were really excited about when we first started was offering real-time discounts--just swipe the card and the system automatically gives the discount.
What we are going to now is not quite a real-time discount because we don't want 100 percent redemption on the spot. It makes it more like a gift card that will bring the guests back. It's not open, but the system will have tiers so at the beginning, a guest might get 500 points and get a $20 gift certificate. We might get up to 500 points and receive free pizza or free dinner for four, and we may get up to spend 5000 points and get a free banquet for up to thirty people. We think that is really going to create some energy with the guests.
We are also hitting the key areas of business that we want to accentuate: lunch and carry out. We are developing two plans based on frequency--every tenth lunch and you get a free sandwich, for example. For carry out, every 15th pizza you buy you get a free pizza. The way we structure it, you could have all three plans going at once so a guest comes in at a lunch on carry out and they earn points on everything. We think being able to do multiple plans at once will create a lot of energy with guests.
Alex: It is interesting because we went through similar ideas on how to structure a program. We use Ernex (ernex.com) for our loyalty program and they do a great job for us. One of the things we talked about is that we have the opportunity to do swipe and win. Vendors have a lot of great ideas out there, but it is really only by creating your own program that really fits your company.
Eric: It is interesting that you say that. You ask the question, is there anything more flexible and my answer would be we are ultimately flexible: you get money. You can spend money any way you want and that is the basis of the program. We are sorry you can't spend it on the restaurant, but we have this great retail store we want to expose you to and there is plenty of stuff there for you to buy.
We don't feel like we need to do anything more than that for the guests, but do a lot more. We put out a new product, new burger or a new salad, so we sent out an email to the entire loyalty community with a coupon on it. We are about to redesign our website. It will provide an opportunity for consumers to take the next step and become more involved with us as a brand by giving us more information in exchange for more information back.
What do I mean by that? We have a program that will allow customers to customize their diet. They can chat online with one of our nutritionists who can help with goals and then the system will be able to record what you've ordered, and keep it for you so that you can go back and get that nutritionist to look at what you did well and what you didn't do well. One of the things we have been working with xpient (xpient.com) on is a receipt program that actually spits out the nutritionals for every item you've bought. Right now when you walk in the store, the receipt tells you that you had the cheeseburger and if you left off the turkey bacon it will subtract the nutritionals and tell you what exactly you consumed, assuming you ate everything.