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In its recent report, “Why Most Dining Loyalty Programs Fail,” Rewards Network cited the fact that restaurants that invest in loyalty programs have to focus on rewarding desired behaviors with meaningful rewards.
“Every business seems to have some form of a loyalty program,” Megan Flynn, Chief Partner Development Officer for Rewards Network, told Loyalty 360. “For the restaurant industry, that means punch cards, membership cards, vouchers, and scan systems, just to name a few. With all of these opportunities to earn rewards, why aren’t more customers actively using them?”
The bottom line, according to Flynn, is just having a dining loyalty program doesn’t mean a restaurant is focused on customer loyalty.
“We believe that is the theme behind the common mistakes most restaurateurs make with their programs,” Flynn said. “It has to be focused on the customer – on their needs and wants, on their time, on their terms, and based on their behaviors.”
Flynn discussed the biggest surprise in the report.
“If you are not easily accessible to mobile consumers, then you probably won’t be able to keep up with the competitors who are,” she said. “Today’s consumer wants information right now. The term immediacy has taken on a new meaning because consumers have the world in the palm of their hands, literally. Smartphones and tablets have changed the way they make decisions. It only makes sense that loyalty programs – and restaurateurs – have to change the way they communicate.”
In 2012, Nielsen revealed 95% of smartphone users conducted restaurant searches -- and 90% of those users chose to dine out within a day.
“Those numbers are staggering,” Flynn said. “It is crucial that websites and emails are mobile and tablet-optimized. Tablets are becoming more and more popular for web searches, yet only 7% of retailer sites were tablet-optimized as of this past year. Mobile apps are also a huge opportunity to drive in immediate business.”
Why do most dining loyalty programs fail?
“The bottom line is that most dining loyalty programs focus entirely on the restaurant, but not at all on the customer, when in reality, that’s who it is supposed to be about,” Flynn explained. “It’s interesting how many restaurants say they don’t need to reward loyal customers because they ‘come here anyway,’ and instead focus on acquiring new customers. A popular sound bite that everyone uses is it costs seven times more to acquire a new customer than it does to retain a current one; yet, so many restaurateurs don’t make it a point to work on retention. Instead they assume once a customer is in the door, they will return again, without an incentive beyond good food.’’’
Flynn said when a dining loyalty program is about the customer – and not the restaurant -- it, it takes into account their goals, their needs, and their behaviors.
“This means providing customers with their preferred rewards currency – not necessarily what the restaurant prefers to give them,” she said. “It is also crucial for restaurateurs to create a seamless process in order for customers to earn rewards without inconveniencing them. Restaurateurs need to talk to customers in a personalized way through the channels that are most convenient and relevant to them. By initiating a dialog with the customer and being open and receptive to what they are saying – and using that information to improve upon their customer experience – is how restaurateurs will win. Of course, restaurants must also be mindful of their customers’ behavior – their frequency and their spend – when motivating them to dine more frequently.”
One size does not fit all when it comes to a dining loyalty program, Flynn said.
“This can be a difficult concept for many businesses,” she said. “For the restaurant business, we say your loyalty program should be treated like the rest of your offerings – you customize your menu for customers, why not your tailor your loyalty program?”
Flynn shared what she believes are the missed opportunities in the restaurant loyalty segment.
“Restaurants need to meet the expectation of customers as individuals – not everyone should be treated the same – just as motivational factors and preferences are different for each customer,” she explained. “Utilizing data that is available to restaurants to make informed decisions about their dining loyalty program is a big opportunity that many restaurants don’t necessarily use to their advantage. This means restaurants must not only measure the success of their loyalty program, but it is equally important to understand their loyal customers’ consumption and how to further motivate their behaviors.”
For example, Flynn said restaurants should consider providing a different message and incentive to a customer who dines often, but doesn’t spend a lot, compared to a customer who doesn’t dine often.
“Customer behavior can be influenced with the right incentives,” she said. “Our data shows over a 22% lift in dining activity with loyalty members who were specifically targeted and rewarded to dine more often based on their past dining activity. Many consumers like the ‘surprise and delight’ reward that punch cards or an app-based program provides, but the strength in creating loyalty is understanding each customer’s behavior and the ability to alter or change that behavior, while benefitting both the customer and the business.’’’
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