Since 2020, the restaurant industry has seen a huge resurgence in loyalty. Despite the popularity and efficacy of loyalty programs to grow revenue, the reality is that most restaurants are measuring the effectiveness of their loyalty programs inaccurately. Many brands are guilty of touting superficial vanity metrics, which at first glance may sound impressive but ultimately do not translate into actual business success. There is no denying the importance of loyalty programs in the restaurant industry, and it is crucial for businesses to adopt a more strategic and accurate approach to measuring their impact on customer retention and engagement.
Many brands point to data showing how loyalty members spend more and visit more frequently than non-loyalty members. However, it is important to acknowledge the selection bias inherent in this reporting. For instance, those who enroll in loyalty programs are already predisposed to be more enthusiastic about the brand, and therefore, may not be a representative sample of the general population. Additionally, while cumulative “loyalty members” may seem like a desirable metric to track, it is a rather superficial one. This metric fails to account for how active or engaged these members actually are. Therefore, it is crucial for brands to take a more nuanced approach to evaluating their loyalty programs. Instead of focusing on feel-good metrics, they should strive to answer more meaningful questions like “Is my loyalty program resulting in more customers making their third purchase faster?” By emphasizing these types of outcomes, brands can gain a richer understanding of both the benefits and potential shortcomings of their loyalty programs.
To truly understand the impact of your marketing and customer engagement efforts, it’s important to look beyond just the number of customers reached and focus on a more insightful metric: Capture Rate. This represents the percentage of revenue earned from known and reachable customers, such as those in your loyalty program or CRM.
Also known as the participation rate, Capture Rate is a critical metric in measuring the success of a loyalty program. A low Capture Rate means that a brand cannot build a direct relationship with a large percentage of customers. Without significant Reach, it’s challenging to move the needle on other important metrics like churn or third purchase conversion. In other words, if customers can’t be reached, brands can’t be expected to change their behavior.
This is why Thanx leads in comprehensive loyalty reporting. With our new capture rate report, brands can get a clear and immediate look and how much revenue can be attributed to known customers.
For any loyalty program to be truly successful, achieving a wide reach, or Capture Rate, is paramount. Even if your loyalty program is performing exceptionally well in terms of engagement and retention, it won’t make a significant impact on your bottom line if only a small number of customers are part of it. The number of signups your program achieves in a year is not a reliable metric to determine its effectiveness, as many of these customers may have joined merely to take advantage of a discount or offer and have never returned to use the program thereafter. In other words, the true measure of a loyalty program’s success is the percentage of customers who are active and engaged in it over a sustained period of time. Therefore, it’s crucial to design and implement a program that resonates with your target audience’s needs and preferences, is easy to use, and incentivizes them to stay loyal and invested in your brand.
A low Capture Rate, say 5 percent, indicates that the vast majority of your revenue is coming from anonymous customers that you have no direct relationship with. No amount of flashy technology or clever marketing strategies will change this reality. On the other hand, a high Capture Rate of 50 percent or more means that the majority of your revenue is generated from customers with whom you have established a meaningful connection. By leveraging your understanding of their spending habits and preferences, you can create more personalized interactions that improve your bottom line.
Data shows that segmented, personalized communications are six times more effective than generic email blasts. By prioritizing customer engagement and developing thoughtful campaigns, you can dramatically increase your Capture Rate and unlock a wealth of benefits for both your business and your customers alike.
Effective loyalty programs not only attract new members but also retain them by engaging them in a way that is compelling and valuable over time. This is particularly critical, as the Capture Rate can decline if the program fails to deliver on offering engaging offers and programs. However, when a brand’s loyalty program is executed correctly, it can drive a significant increase in Capture Rate. Thanx customer, Kneaders, a fast-casual bakery and cafe, implemented a new dynamic points structure for their loyalty program that resulted in a 50% surge in average weekly enrollment, along with month-over-month online sales growth. Customers are able to redeem their points for a variety of rewards via Thanx’s rewards marketplace with over 3 million points already redeemed.
Another example of a successful loyalty program can be found with another Thanx customer, Velvet Taco. The brand’s “Velvet Room” program, which recently launched a limited-time, hidden menu available only to members wrestling in a surge of 5.5K sign-ups per week, with 13% of members increasing their spending to qualify for the elite rewards tier. By providing added value and exclusivity through this unique approach, Velvet Taco’s loyalty program not only drives customer engagement but also differentiates the brand from competitors, resulting in greater customer loyalty and increased revenue.
What can brands do to improve their Capture Rate? First and foremost, they must prioritize streamlining the enrollment process and ensure that ongoing participation in the program is seamless. Scanning QR codes or filling out lengthy forms to enroll in a loyalty program can deter customers from signing up altogether. Loyalty platforms, like Thanx, that enable automatic enrollment on digital purchases and offer credit card linkage are more likely to attract customers and boost loyalty. By reducing friction and making participation effortless, brands can improve the overall customer experience and boost customer lifetime value.
The benefits of frictionless loyalty cannot be understated. For example, Velvet Taco achieved a Capture Rate of more than 30 percent in their first year of using a frictionless loyalty program. By leveraging technology that made participation effortless, they were able to drive customer engagement and build brand loyalty. Brands that invest in the fundamental elements of their loyalty program to ensure ease of use are more likely to see success.
Achieving a high Capture Rate is critically important for any restaurant loyalty program. However, getting it above 50 percent requires a unique and well-executed strategy that stands above the competition. With the rapid growth of the restaurant industry, capturing and retaining customers has become more complex and requires continued optimization innovation in guest engagement.
Want to learn more about Thanx’s capture rate report and other new innovations in loyalty? Request a demo here!