Post-Pandemic: Will Loyalty Programs Experience a Renaissance?
As we continue to cope with the realities of a crippled hospitality industry within a struggling U.S. economy, many are looking to see where the industry will be when the restrictions are lifted and how to compete in a post-pandemic world. Unfortunately, it is possible that we may very well have COVID-19 for quite some time, and many experts feel we may never have a vaccination against the virus, only medications to combat the infection. These sobering thoughts have done little to encourage restaurant operators that the “new norm” will be an easy place to operate and be profitable.
However, with challenge, comes opportunity – yes, the possibility for some operators to thrive in a post-pandemic landscape. One area in particular where technology will help ignite growth: loyalty programs.
Loyalty Programs Pre-Pandemic
Let me start by being honest about my general feelings with loyalty programs: I don’t like them. For the most part, they show questionable ROI (Return-on-Investment) and when most marketing folks (and vendors alike) are asked for factual data to support or refute this claim, little can be produced. Most will speak to intangibles such as visibility, goodwill, and other fuzzy metrics that seldom make a strong financial case. In addition, many operators lack much creativity or imagination in their execution, resorting to using them to give away product in an industry with challenging margins to begin with. Points and award programs tend to teach the customer bad behavior and create a price-point expectation and a linear reward process that is difficult to unwind. Many will tell you that all it does is reward those who would have frequented your business even without the possibility of free items. So, the question is: Does loyalty drive frequency, or is frequency driving the loyalty program?
My skepticism is neither novel nor revolutionary, and those who share similar views have either marched on without one or have looked to leverage the tool in a different way. Many will talk about a “non-linear” approach to loyalty awards or a “surprise and delight” campaign whereby the guest is not programmed to expect free stuff but instead receives awards in what seems to be a random manner. We know that these awards are certainly not random, but to the consumer they appear to be and as such it removes the opportunity to time the awards and discontinue frequenting the restaurant once the award is received. Other operators will look to a loyalty program as more of a recognition program, indicating that it allows the member to receive special treatment or be invited to “members only” events to show their special-ness. This can be effective when properly managed but can easily fall into a massive database of occasional patrons and incomplete profiles unless regularly groomed and well executed.
So Why Now?
It is clear that restaurants in all modes of service will experience significant changes in the way they will be able to operate post-pandemic. Changes in employee and restaurant hygiene, food handling practices, packaging, back-of-house operations, and even menu options will dominate the conversation and will have operators retooling their business practices. As much as these issues will dominate the conversation, don’t forget another important aspect of the transaction: payments.
I may be overreaching with this next statement, but it is possible we may see a renewed effort on the part of operators to discontinue the practice of using cash as a form of payment. While some have tried this in the past, in order to improve efficiency, the battle cry now will be more around customer safety. Currency is far from a hygienic medium, with bills and coins in circulation for years; the sterilization of currency would be impractical, inefficient, and most likely expensive. It may be that the ends finally justify the means and renewed energy to eliminate currency transactions might actually stick this time.
While currency is poor, credit cards are not much better. We know plastic is a great carrier for germs and bacteria, so ideally, we will want to look at ways to reduce handing around credit cards. EMV will help, but the devices themselves would need cleaning after every customer to ensure person-to-person contamination does not take place. The ideal solution: stored payments. The ideal vehicle to store and drive stored payments: a loyalty system.
Loyalty Programs Post-Pandemic
In a post-pandemic society, loyalty programs make a lot of sense for a number of reasons. To start, those who have existing programs will need to lean on their database of customers heavily to try and get patrons back into their restaurant. Quite frankly, this will likely mean promotions, coupons, frequency discounts, and other traditional levers. For organizations that have this data, the time is now to groom this database (remove dupes and incomplete profiles) and begin to construct campaigns to entice your loyal customers back into the restaurant. Be ready to execute this strategy as soon as restrictions are lifted in your area.
For those who have never enacted a loyalty program, the time to do so is now. A well-designed loyalty application can act like a “tackle box” for managing your customer data, your restaurant-specific information (perhaps integrated online ordering) and most importantly the ability to link a mobile wallet. Customers will return to restaurants when the objections they have and concerns about personal safety are addressed; incorporating non-contact payments, online menus and ordering, along with the traditional capabilities native to a loyalty application, will go a long way toward checking many of the boxes. Vendors, are you listening as well?
Where are we headed?
The simple answer to this is: “We don’t know,” at least with any degree of certainty. Those of us in the operations-technology space are looking at social and economic cues on a daily basis to see where it may lead us. We know that whatever state the industry is in when the country begins to open up, technology will play a major role in improving efficiency, reducing cost, and managing customer objections. While the hospitality industry should always be a people-to-people business, we see technology expanding its role and value in order to keep that primary objective possible.
Toby W. Malbec is the Managing Director of ConStrata Technology Consulting and has been in the restaurant, hotel, and retail industry over thirty years. He manages ConStrata which is a “blue-collar” operations-based technology consultancy for these industries; the organization is an objective technology consultancy that neither sells nor endorses any specific applications or solutions. He can be reached at [email protected]