COVID-19-induced restaurant shutdowns have made the online ordering landscape more competitive than ever. As restaurants were forced to pivot to online ordering and takeout service in an attempt to make ends meet, the quick shift caused many to outsource their online ordering and delivery capabilities to costly third-party providers. Now, as off-premise dining shows signs of continuing as a long-term trend, restaurants would benefit from incentivizing direct online orders as a way to cut back on third-party fees. What’s an effective way to drive direct orders? Loyalty programs.
First, it’s important to realize the impact that a powerful customer loyalty program can have on a restaurant. An extra 5% of customer retention, which a good loyalty program can comfortably achieve, can increase profits by 25% to 95%.
Second, restaurant owners should keep in mind that for every sale on Grubhub, Uber Eats, DoorDash, or any other third-party delivery app, they could be paying up to 30% in commissions. Additionally, with orders flowing directly to your POS system increasing accuracy and lowering costly errors, the switch to direct ordering is clear. The question that remains is how best to drive customers directly to a restaurant’s site and keep them coming back for more. To do this, restaurant owners need to first understand their customers.
How a Strong POS Helps Craft Loyalty Programs
The first step to any good marketing strategy is gathering strong data. This means that the customer data being captured is accurate and free of duplicates, false email addresses, or data-entry errors. If owners don’t know if the communications sent to customers are actually reaching them, it can be difficult to gauge the effectiveness of a campaign.
Ensure the quality of the data by investing in a strong POS system. From there, restaurant owners can analyze the data to craft a loyalty program that resonates with their customer base and demographic. Loyalty isn’t one-size-fits-all; therefore, it’s important to analyze customer trends and build a loyalty program accordingly.
For example, while a points-based loyalty program may work for a large brand like Starbucks, smaller operators will likely find more success in offering a free side item or discounts during peak hours. No loyalty program, regardless of how robust it is, will succeed if it’s targeting the wrong customer. Additionally, restaurants should keep track of their best customers and send monthly or quarterly discounts as a way to stay top-of-mind and continue to build brand loyalty. If a big customer stops buying, reach out with another promotion or an incentive that will catch their eye and drive them to redeem the offer through direct online order.
Remember: It costs five times less to retain a customer than to land a new one and returning customers spend 67% more than new ones. When that money is channeled into direct orders rather than third-party sites, restaurants can easily begin to grow sales over time.
How to Beat Third Party Delivery Apps with Loyalty Programs
While third-party delivery apps currently hold a lot of power in the online sales equation, restaurants can use their loyalty programs as another differentiating factor.
Consider, for example, including information about loyalty and rewards programs on all food packaging that leaves the restaurant. Or, use POS data to create email campaigns as another way to distribute loyalty and rewards benefits that can only be redeemed through direct orders. This will continue to reinforce buying habits from loyal customers while also attracting customers who may have previously used third-party apps.
Loyalty programs offer an opportunity for brands to test their understanding of their customer base: do restaurant owners know who their customers are and how to keep them interested? If so, the numbers should speak for themselves. An increase in direct sales means that a loyalty program is capturing, and retaining, the right audience.
When implemented correctly using real customer insights gathered from a brand’s POS system, loyalty programs offer a direct path to customer retention and an increase in direct sales.
Mo Chaar is the chief commercial officer for Givex, a leading cloud-based operations management system, offers insights to help restaurants avoid third-party delivery fees and increase direct sales.