Understanding & Winning Millennial Diner Loyalty

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Understanding & Winning Millennial Diner Loyalty

11/13/2015
Getting into the millennial mindset is a battle cry for marketers in all industries. For restaurants it is just as vital to address what this generation wants and expects – especially in terms of loyalty. Recent research from Software Advice, a site that offers comparisons of restaurant POS systems, reveals that 59% of millennials quit restaurant loyalty programs because rewards “aren’t valuable enough,” and 40% want to track/redeem rewards on an app. Insights like these can prove invaluable for operators as they plot out rewards programs.
 
Here, HT speaks with Justin Guinn, restaurant researcher at Software Advice, about the study’s focus and findings. Guinn also shares some insight and best practices for crafting loyalty programs that will resonate with millennial diners.
 
Why did you and Software Advice decide to focus on the Millennial generation for this new study?
We focused our restaurant loyalty study on millennials (16-35 years old) because restaurants have had a hard time achieving a loyal millennial customer base. There have been reports stating millennials are fickle with their loyalty and have none to give, but we found 96% of them have been enrolled in a restaurant loyalty program at some point. Also, millennials have now eclipsed Baby Boomers (51-69 years old) as the largest age demographic in America. So there’s a lot of value for a restaurant winning a loyal millennial following.
 
There's always a lot of talk that Millennials are “finicky” with that they want and that they'll drop a brand in a heartbeat. Did you find that to be the case in your survey?
While that’s certainly the perception, our report found that if a restaurant engages millennials with the right rewards and value props that they care about, there the loyalty will lie. For example, millennials are motivated by standard loyalty rewards programs, but they also seek a deeper, emotional connection to brands. Regardless of formal loyalty program offerings, restaurants would do well to find a way to identify with millennials on this level.

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What did you find makes the “ideal” loyalty program for Millennials, and what are the details that restaurant operators should know about?
We uncovered some impactful findings in terms of actual loyalty rewards programs for millennials. For example, our study found 37% of millennials prefer receiving discounts for their loyalty program reward while 30% prefer earning points based on the money they spend at the restaurant. So a rewards program combining these two rewards would be best for millennials.
           
Another key finding is that millennials are most incentivized to join a loyalty program based on how quickly rewards accrue (51%) and the variety of rewards available (38%). It seems as though this generation can ‘see through’ a loyalty program that is more interested in getting them to be a part of it, rather than how fast they can start reaping the benefits.
 
Essentially, the ideal loyalty program for millennials gives points quickly and often to be spent on discount and a variety of other options. That may take a little bit more effort on the part of a restaurateur, but retaining valuable customers should always be a priority for these business owners.
 
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Were there certain things that restaurants should avoid when setting up a loyalty program to not turn this demographic away?
We thought it’d be wise to learn not only what incentivizes millennials to join loyalty programs but also what deters them from joining. Our study found that the most common cause for millennials to quit a loyalty program is because rewards weren’t valuable enough or discounts weren’t high enough (59% and 57%, respectively). Following these reasons, 50% of millennials stated they quit a program because rewards took too long to accrue.
 
What advice do you have for restaurants where Millennials don't make up much of their current clientele?
As the data above shows, millennials are incredibly valuable to restaurants. Aside from them outnumbering Baby Boomers, other reports found that 49% of millennials eat out at least once a week and another 36% get takeout or delivery at least once a week. Thus, these are very active restaurant patrons, but millennials simply may not be the target demographic for some restaurants. That’s fine. It’s better for a restaurant to know their target demographic than operate blindly.
           
Still, there are plenty of restaurants looking to increase their millennial clientele. To do so, these restaurants need to engage millennials in the area and find an initial way to incentivize groups of millennials to patronize their establishment. Happy hours are a great idea, as is something community-based, like sponsoring a recreational softball/kickball team or league. Aside from that, restaurants need to be visible and active on social media; especially Yelp. Encourage customers to leave reviews and address any negative feedback head-on.
 
These are some great ways to get them in the door, then it’s up to the restaurant to keep them coming back with a loyalty program optimized to their preferences.
 
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Your study points to some tools that restaurant operators can employ to engage with and retain the millennial generation. Can you discuss what those might be on a simple level?
Our study examined three different options that restaurants can use to create successful loyalty programs. However, I only want to focus on one: a POS-driven loyalty program. I want to focus on POS because it can be a great platform to launch a loyalty program from, and it’s also an integral part streamlining any restaurant’s operations from top-to-bottom.
 
To our surprise, the study found that a shocking 63% of restaurants aren’t currently using a POS system. From a loyalty standpoint, a POS-driven program enables the restaurant to manage every touchpoint and interaction with customers. Whether it’s managing reward offerings, sending coupons, interacting with them via email, etc., it’s always the restaurant engaging with customers, not a third party.
 
Aside from the actual loyalty aspect, POS systems in general automate otherwise tedious manual process like counting stock and managing sales data. Many of the popular options of restaurant POS systems that businesses can choose from today, are great at expediting these processes, which enables servers and managers to spend more time building more meaningful relationships with customers. It’s these relationships that are the cornerstone to most loyalty programs, especially those attracting millennials.