Expanded Efforts to Understand and Define Customer Loyalty in Restaurant Space

Unique challenges connected to customer loyalty can be found in a variety of industries.

Case in point: The restaurant industry.

Loyalty360 talked to Cogensia CEO Brad Rukstales about the state of customer loyalty in the restaurant space.

Can you talk about the current state of customer loyalty in the restaurant space?

Rukstales: There is a great deal of experimentation going on right now, and competition for the dining dollar is tough. While overall traffic is moderate, there has been a large increase in number of units, which squeezes unit traffic growth. Add to this the changing dining patterns of millennials, and you can see how restaurants are facing challenges on several fronts. Customer loyalty is critical in this environment.

Many brands have resorted to promotional and price-driven strategies, which becomes a race to the bottom.  We do see expanded efforts to understand and define loyalty at a brand level, and in our work with the top casual and fine dining brands, there is a focus on being able to differentiate tactics based on the value of the customer and the type of relationship they have with the brand.  Loyalty is less about points (although that is still a part for some brands), and more about convenience, experience, and access. In fine dining, this is recognition and service.

What do you think is being done well in this space and where do the challenges lie?

Rukstales: The industry is beginning to invest, but there is no silver bullet technology here. The good news is that the business challenges may be spurring the need for cracking the code on guest relationship management.

One challenge is Customer Identity Management. How do you define a customer? What data can be used? In our consulting work, we’ve identified several hidden gems of data that restaurants have, and organizations that are forward thinking in the use of customer data will be better equipped to execute a loyalty and experience strategy.  The world of consumer privacy is evolving, and there is a realization from consumers that their data is being collected. We always recommend offering customers the ability to not be tracked for marketing purposes. Companies that take a very tight stance on this front are not aware of the impact that has on the business. 

The second challenge, besides Identity Management, is knowing what to do next. OK, so a brand knows its top spenders. So, what? Do they offer the same discounts? Stop discounting? Discount some? The challenge is in having the right tools for personalization and a channel-agnostic environment to manage messaging across mobile, email, loyalty, and social, at a customer level. No one is there yet, but it’s only a matter of time.

With all the disruption in the space, what are the “winning” brands doing well?

Rukstales: Winning brands move on multiple fronts–and test into channels and segments with menu and value-add promotions to drive behaviors. Proper measurement, along with rolling out winning strategies, is the key to making loyalty and customer engagement profitable. There is a brand we work with on the data side, not loyalty. They piloted their loyalty program and perfected the interface, reward structure, and in-restaurant experience with the program for a year. That’s a long time and a big commitment, but when they rolled out they knew what to expect, and it’s been a great success for them.

What would be your advice for brands in this space seeking to enhance their loyalty offerings?

Rukstales: Step 1 is understanding who your customers are, from your eClub, social fan base, or other areas where you may have customer data. To the extent possible, this should be tied to behaviors, and analysis performed to understand standard Recency /Frequency/Monetary (RFM) metrics. This sets a baseline for funding, changes in behaviors that are realistic, and insight for creative development.

What innovations are currently directly impacting loyalty in the restaurant space?

Rukstales: When it comes to their dining experience, customers are seeking convenience and restaurants are actively testing a variety of approaches. Restaurants that are successfully providing convenient experiences are seeing great results. It is becoming more common for a customer to place an order through a mobile app for pickup, or asking the restaurant to deliver the order to their doorstep. 

While this has been common in some areas of the industry for decades, it is now becoming expected across casual and fine dining concepts. In-restaurant experiences are also innovating. Chances are you have seen a kiosk or a tablet in a restaurant that allows you to place your order and pay your check. These innovations are providing guests the convenience they are demanding, and the guest experience within these new digital tools is critical to building customer loyalty.  

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