Three Problems with Traditional Loyalty – And How to Combat Them

In the restaurant industry, loyalty is increasingly essential. While physical punch cards and business-card fish bowls may be relics of the past, restaurants of all sizes need to continue to modernize their programs. As brands launch new programs to capture data, drive first-party ordering, and grow customer lifetime value – loyalty becomes even more than just an added bonus or “nice-to-have”. Unfortunately, many existing programs remain entrenched in traditional loyalty pitfalls like the “spend X get Y” mindset, deep discounts, and difficult-to-engage digital touch points.

In an increasingly digitized and data-driven market, savvy restaurants are looking for ways to bolster their customer loyalty initiatives. Doing so allows organizations to gain a better understanding of buying habits—ultimately resulting in greater revenue growth opportunities with added financial resilience amidst economic turbulence. To achieve success, it is critical that modern loyalty programs can demonstrate their value explicitly–offering more than just discounts as encouragement for enrollment or adoption.

Traditional legacy loyalty presents challenges to the core components of loyalty, specifically in three areas. 

#1. Friction Fraught 

While punch card loyalty models have been phased out to make way for digital programs, similar friction still remains for legacy programs. 

Modern loyalty programs are designed to make earning rewards easier, but for many customers, the prospect of downloading yet another app adds an unnecessary burden. In addition, research has revealed that almost 80% of consumers prefer not to have to use mobile apps in order for them to benefit from a brand’s loyalty program or take advantage of digital purchasing options. This may explain why brands experience negative impacts on both revenue and engagement when using exclusively app-based solutions – ultimately falling prey to “App fatigue.”

The challenge of the modern restaurant industry is further compounded by antiquated loyalty programs. Check-ins, phone numbers for identification, and scanning codes are among a few challenges customers must endure in order to accumulate rewards or redeem awards. These actions often burden restaurant staff with one more task on top of their already heavy workloads. It’s time that legacy systems evolve alongside customer demands so restaurants can succeed without sacrificing convenience or efficiency. Valuable time is lost when staff members must ask every customer if they are a member of the loyalty program or convince guests to enroll. This means less productivity while negatively impacting table turnover.

To meet customer expectations, brands must make loyalty engagement (and digital purchasing) a convenient and enjoyable experience. Thanx leads in delivering easy to engage loyalty with our credit card linked loyalty technology. Easy to use interfaces is especially critical when considering the expansion of third-party delivery aggregators like DoorDash, GrubHub, and Uber Eats who heavily invest resources into making their digital experiences effortless for customers to use. Each time an order goes through one of these competitors it results in lost revenue due to commission fees as well as missed opportunities for data gathering; both often resulting in a weaker relationship between the brand and the customer over time (disaggregation).

#2. Over-Reliance on Discounts

Discounts have long been used by restaurants to attract customers. As loyalty programs have gained traction, offering coupons or freebies has been the primary tactic for restaurants to incentivize customers to overcome the traditional burdens and friction associated with signing up and participating in loyalty programs. The more friction, whether from app requirements or check-in procedures, the larger the discount needed to drive adoption altogether.

Amidst exponential operating costs and third-party delivery siphoning profits, restaurants must safeguard their margins. In an effort to do so, discounting may seem like a viable solution; however in reality it has become a vicious cycle, leading many brands into P&L disaster.

Airlines and hotels met with a harsh reality when online booking platforms emerged, stealing away customers while charging hefty commissions. In response, these companies reconsidered their approach to customer acquisition and retention. They instead introduced enticing loyalty programs that booking sites could not match – exclusive status benefits such as free Wi-Fi access or automatic upgrades for better seats and rooms. This gave travelers incentive to go through them directly instead of relying on intermediaries.

By shifting focus from discounts to customer experience, restaurants gain loyal customers through exclusive access and personalization. Loyal members might be rewarded with the ability to order off a special or VIP menu, or even receive exclusive merchandise for their patronage. Cultivating loyalty by offering events instead of coupons is another way for restaurants to stand out in an increasingly competitive industry.

One such example of the successful use of non-discount rewards in the restaurant space is with Thanx’s partnership with Eureka! Eureka! Restaurant Group recently announced its new loyalty program and mobile app to enhance personalized connections with its guests, both in restaurants and in the digital space. Eureka!’s use of non-discount rewards comes in the form of their “Friends with Benefits” program in which loyalty members receive complimentary truffle cheese fries, $10 for every $200 spent, early access to new menu items, birthday perks, and surprise rewards. With the enhanced loyalty program and app, Eureka! gains actionable insights into guests’ purchasing behaviors, allowing for more personal communication and sophisticated targeted marketing to encourage repeat visits and direct orders. This means it’s easier for Eureka! to deliver its unique brand of hospitality.

#3. Difficulty Driving True ROI

A successful loyalty program is all about maximizing return on investment. And that ROI needs to be clear and explicit to marketers and key stakeholders.

Traditional loyalty programs leave businesses juggling complex dashboards and overwhelming reports – making it difficult to accurately measure the metrics that matter. With inaccurate or incomplete data, calculating the return on investment becomes a near impossibility. Identifying how cost-effective each program is is an essential element of creating a successful customer retention strategy.

The lack of data paints is a big concern for marketers. While many restaurants have loyalty members, few users are active. Low engagement in these programs results in poor ROI, as well as too many discounts given to customers who may not need them. Without customer purchase information, a restaurant’s marketing efforts cannot be effectively personalized and tailored to specific customer segments – leaving much potential untapped.

Looking at traditional loyalty program metrics can be misleading. While they help to gauge the average spending and visits of members versus regular customers, it’s important to keep in mind that these members often already have a fondness for your brand which introduces selection bias when evaluating their behavior.

Restaurants need to go beyond “feel good” metrics and take a closer look at their loyalty program’s true impact. With an understanding of who your first-time customers are, marketers can then create 1:1 messages that drive customers toward making a second purchase. Additionally, pinpointing which customers have the potential to churn or could be motivated by rewards ultimately leads to meaningful revenue increases for each stage of the customer journey.

Data from loyalty programs can be your key to unlocking growth opportunities, and with platforms like Thanx, it’s easier than ever! Sophisticated technology makes harnessing the power of data more accessible for restaurant brands of all sizes – resulting in a highly visible, tangible return on investment.

Unlock the power of loyalty with smoother experiences and richer data. Leverage non-discounted incentive strategies to drive meaningful revenue, create personalized engagements for customers that build lasting relationships, and maximize your program’s ROI.

Interested in relying less on discounts and growing ROI for your loyalty program? Schedule a demo with our team of loyalty experts to see how Thanx can help deliver a frictionless loyalty experience for your brand.