November 16, 2018
Fast & Cheap is gaining ground over Fine Dining
In the age of instant gratification, “Fast Casual” is the hottest restaurant genre: just last year, Fast Casual dining grew 10.4% (a staggering $3.4 billion increase), making it the fastest-growing segment of the entire restaurant industry. These fast casual brands invest heavily in savvy digital marketing techniques to keep customers engaged and loyal, and they have a myriad of options when it comes to retention and loyalty programs to drive repeat business from their best customers.
However, things are markedly different for Fine Dining establishments. Obviously, the goals are the same: customer retention and guest data gathering are foundational elements to any growing business. However, the same retention techniques the “fast and cheap” restaurants use to retain customers and collect data don’t really fit the Fine Dining experience. While many Fine Dining restaurants have tried their hand at loyalty programs, they’re understandably hesitant to go about loyalty in the same way that your local pizza shop does it (not that we don’t love our local pizza place… we just don’t take our mother there for her birthday).
When experience matters, traditional customer loyalty programs fall short
Where fast-casual brands can occasionally get away with asking customers to scan a plastic card or enter a phone number into a piece of hardware at the point of sale, Fine Dining absolutely cannot compromise experience. Imagine finishing up an elegant anniversary dinner with your spouse, then having the waiter ask you if you’d like to write your phone number down or “check in” with their app. Asking customers to jump through hoops is unacceptable in an industry where experience is everything.
For this reason, loyalty programs are woefully underutilized among Fine Dining restaurants. Only 33% of consumers participate in Fine Dining loyalty programs, yet the data show that 90% of consumers would sign up if their favorite Fine Dining restaurant had a program.
However, loyalty program memberships within the restaurant industry are up 107% in the last year — brands are beginning to understand that an investment in customer retention is an investment in increased customer lifetime value. So, how can Fine Dining keep up with Fast Casual’s aggressive customer retention strategies? As a Fine Dining restaurant operator, you must get competitive in order to prevent your best customers from choosing the fast and cheap option with increasing frequency.
Use customer data to identify your VIPs
An often overlooked aspect of customer loyalty is the guest data it provides restaurant operators. For Fine Dining, this is probably the essential component of a customer loyalty program.
Giving rewards or discounts doesn’t align with the elevated experience Fine Dining restaurants want to convey. For this reason, Fine Dining restaurants have historically been hesitant to offer discounts. There’s also the dreaded “Groupon effect”: As soon as businesses begin discounting via Groupon offers, the number of complaints received by those businesses skyrockets. When people pay less for things, they tend to value them less. Ultimately, a loyalty program that indiscriminately offers deals and free stuff is not “on-brand” for discount-cautious restaurants and fails to treat guests as individuals.
Instead of offering discounts to loyal customers, use data tied to individual guests to increasingly personalize their experience and offer VIP treatment. Identify your top customers by spend, frequency, or lifetime value and show them love with preferential seating, a complimentary dessert, or an exclusive chef’s tasting. Experiential rewards mean more to this demographic than “$10 off your next order!”.
Without a customer loyalty program, data is hard to obtain
Fine Dining brands have to get creative when it comes to gathering customer data — often relying on 3rd party systems like OpenTable. However, restaurants who rely solely on platforms like OpenTable to gather data are at a loss in a few ways:
- Restaurants entirely ignore customers who never use OpenTable – a significant percentage of crucially important patrons. If your 10 best customers make reservations the old-fashioned way, they wouldn’t exist according to your OpenTable database.
- Restaurants end up building a database of customers more loyal to the 3rd party system than the restaurant itself. For example, instead of booking their next dinner directly with your restaurant, they’ll go into OpenTable and find what’s available (and maybe offering them bonus points?!). This doesn’t build a relationship between the brand and the customer; it builds a relationship between the customer and the reservation software.
Instead of relying on 3rd party systems (also problematic when they become expensive) restaurants need to map data to their own customers. Card-linked offers technology works particularly well to achieve that end. By linking with customers’ credit cards and gathering data every time customers pay, Fine Dining restaurant operators can gather crucial data about who their customers are, how much they’re spending, and how to best keep them engaged — the best indicators for true customer loyalty.
Customer service should always come first
Your guests don’t want the hassle of carrying around a loyalty card or remembering to mention they are members of your program every time they make purchases. Beyond being tacky, it’s ineffective — each time a customer forgets their loyalty card or doesn’t mention the loyalty program to the waitstaff, you miss out on valuable customer data.
This also addresses the experience piece: Customers simply pay as usual, not having to worry about pulling out an app, scanning anything, remembering an additional loyalty card, or checking in. Your waitstaff doesn’t have to manually enter phone numbers, search a database to confirm that a guest is a loyalty program member or take any additional steps that would take them away from serving customers. As our merchant partner, Michael Mina Group remarked: “We needed an innovative way to engage our valued guests without disrupting service.”
Here’s how Fine Dining can win
Card-linked loyalty programs present a huge opportunity for Fine Dining brands to focus energy on customer engagement. Guests want deeper relationships with their favorite brands. Take, for example, the Nordstrom loyalty program, a similar profile of customer to those frequenting your Fine Dining restaurant. Nordstroms knows that their rewards members shop 3x more and spend 4x more than non-members, which is why they’re happy to continually invest in their loyalty program. They provide VIP experiences like private shopping events and fashion shows to keep their best customers engaged without actually having to discount product in exchange for ongoing customer loyalty. In exchange, Nordstrom customers are extremely loyal, and the brand has remained strong even as Amazon and e-commerce continue to challenge traditional department stores.
So, as a Fine Dining brand, there’s a huge opportunity to build a loyalty program that speaks to the elevated experience you want for your customers. Ditch clunky plastic cards, check-ins, and anything that requires your waitstaff to focus their attention away from customers. Instead, gather customer data based on actual transactional information (linking with customer credit cards is how brands like The Michael Mina Group do it), and use that data to craft exclusive VIP experiences for your best customers. After all, in an industry where almost 70% of your revenue is driven by just 25% of your customers, identifying and retaining your top spenders has never been more important.
To learn more, get our free guide: Customer Engagement: A Comprehensive Guide for Table Service Restaurants.