December 11, 2018

How to Build a Cost-Effective Restaurant Loyalty Program

How to Build a Cost-Effective Restaurant Loyalty Program

Restaurants are always trying to not only entice new guests, but keep them coming back again and again.

Repeat business means your restaurant is doing something right, so that’s what restaurateurs continue strive for.

What better way to encourage guests to come back than with a good loyalty program?

The existing restaurant loyalty programs list is long — Upserve notes that 30 percent of restaurants have some sort of loyalty program in place. Successful restaurant loyalty programs can clearly be a benefit for restaurants — 57 percent of adult consumers say they’re more likely to dine somewhere when they receive perks for their loyalty.

However, with restaurant margins already razor thin, it can be costly to hand out free items and discounts as rewards. You’re missing out on business if you don’t have a loyalty program, but you also need to be able to afford to run that program in the first place. It’s a balancing act.

If you don’t have a loyalty program in place, it’s not too late. You can launch one now. The first step is knowing what type of loyalty program is best for your restaurant and your guests, how to launch it, and how to know if it’s successful.

Is technology necessary to run the best restaurant loyalty programs? 

Tech is not always the answer to creating successful restaurant loyalty programs. There are pros and cons to using the latest technology, and it may or may not be the right choice for your restaurant.

Choosing the best-suited loyalty program for your restaurant will take some research and understanding of your guest demographic. The first step? Knowing what types of programs are out there.

What are some of the best restaurant loyalty programs?

Before you can launch a restaurant loyalty program, you need to decide what kind of program will work in your restaurant. For example, a paper punch card system might work great for a coffee shop, but in a fine dining restaurant, that system may be a little inelegant.

Let’s explore some of the most common options.

Punch cards

How They Work

With every purchase, entree or amount spent, guests receive a “punch” on their loyalty card. With each punch, they get closer to a free item or other kind of reward.

There are also online options to consider if you don't want to print physical cards - plus, an online card will be easier for your guests to keep track of too.

Why They Work
  • Simple to implement
  • Low cost to start
  • Opportunity to encourage guests to try new items at your restaurant, if the reward is a free dessert or appetizer
Possible Downsides
  • Paper cards can be easy to lose or forget
  • Guests may not always carry these around
  • Cheaper for you at the cost of the guest’s experience (sometimes)
Tech Options


How They Work

Another low-tech and low-cost way to implement a rewards system is by using your receipts. You can offer a discount or free item if a guest returns with a receipt from a prior visit, or include a link on your receipts that directs guests to a website where they can sign up for your loyalty program by entering their receipt number.

If you go the online route, you can collect some guest data (say, their email address and birthday), while still avoiding the need for any special technology or a big investment at the start.

Why They Work
  • Many guests keep their receipts
  • Consistent reminder for guests about the program
  • Easy to use
Possible Downsides
  • Extra costs related to printing longer receipts or using software
  • Setting up the systems to calculate and redeem points
  • Doesn’t feel “exclusive” since everyone is getting rewards on their receipts
Tech Options

Loyalty or Membership Cards

How They Work

A step up from a basic punch card or a receipt system is a loyalty or membership card. Most POS systems can accommodate a loyalty card that’s swiped with every purchase and tracks each guest’s points. It’s a simple system, and if you already have a POS installed, doesn’t take much time or money to get off the ground.

Why They Work
  • Easy for guests to carry the card around along with other cards
  • Gives guests a feeling of higher status and special treatment
  • Simple to integrate loyalty cards into existing POS systems
Possible Downsides
  • Not all guests will faithfully carry your loyalty card with them
  • Costs associated with creating and maintaining all the cards
  • Investment in the software needed to process the cards
Tech Options

Automatic Rewards database

How They Work

If you have a modern POS, you may be able to implement an automatic loyalty program that signs guests up when they pay with a credit or debit card. This takes little to no work on the guest’s part, and allows you to collect valuable guest data while also offering rewards to your most loyal patrons. You can collect their email addresses and birth dates as well, so you can provide a more personalized reward system by sending out birthday gifts or holiday-related offers via personalized emails.

Why They Work
  • Seamless integration into point-of-sale
  • Ongoing reminders for guests about loyalty program
  • Ability to track guest behaviors and incentivize desired results
Possible Downsides
  • Some guests don’t want constant notifications via email
  • Privacy concerns with all that guest data being stored
  • Time and effort to train staff on how to use the system
Tech Options

Implementing A Restaurant Loyalty Programs: Step-by-Step

Ready to start a loyalty program at your restaurant? Here’s how.

Step 1: Decide whether or not you want to use technology for your restaurant loyalty program

Put simply, technology isn’t the best solution for everything. If you’re working with guests who aren’t tech-savvy themselves or just prefer to use that punch card when they come in every week, act accordingly.

If you’re low-tech/no-tech restaurant loyalty program ain’t broke, don’t change it!

But if you’re able to do some smart testing and have found an ideal tech solution for any challenges you’re facing with your current program, it might be time to make the switch.

Step 2: Research restaurant loyalty program providers and decide what type is best for your restaurant

The above list covers the basic types of loyalty programs that are available, but it is by no means exhaustive. The first step to implementing a loyalty program is to research your options to see what’s available within your budget.

Consider the type of restaurant you run, how much you’re willing to spend on your loyalty program, whether you already have POS that will support a digital loyalty program and how tech-savvy your employees and guests tend to be.

Step 3: Think about the best rewards your restaurant loyalty program can offer

Rewards don’t always have to be free items or discounts — and offering those may not be the most cost-effective way to run your rewards program.

Think about alternative rewards you can offer, like guaranteed spots at exclusive events your restaurant is running, members-only specials, or even members-only dinners.

Step 4: Engage your loyalty program members, and keep them engaged

Just signing up members isn’t enough for a loyalty program to be a success. You want to make sure members actually use your program.

One way some of the most successful restaurant loyalty programs accomplish this is by engaging members early on with sign-up bonuses. By offering a special reward at sign up or on the member’s first visit after signing up, you increase the likelihood that they’ll return to your restaurant and use your loyalty program.

Consider the reasons guests might quit your loyalty program, and design your program accordingly.

Gartner conducted a survey on millennial customer loyalty preferences that yielded insights into why certain loyalty programs don’t stick. For many guests, the rewards in loyalty programs take too long to accrue (48%). For others, it was about the discounts not seeming high enough (41%) and the rewards not seeming valuable enough (31%). Also consider not overwhelming your guests with too many messages (22%) or giving them a easy-to-lose loyalty card (21%) without some sort of backup (e.g. at many supermarkets, you can input your phone number when you forget your loyalty card).

Also, take a look at the data consider the form your loyalty program should take based on existing preferences among your guests. For example, here’s a breakdown of millennials preferred methods for tracking and redeeming loyalty points:

Step 5: Seek feedback and use it to create effective loyalty programs

If you want to create a loyalty program your guests will use, you need to understand what motivates them. The best way to find out, is to ask your guests what they want.

Use social media or surveys to actively seek feedback from your guests about the kinds of rewards they’d like to see. You could also speak to guests face-to-face and ask for feedback then, just be sure to write their feedback down somewhere.

Step 6: Consider a restaurant loyalty program software or restaurant loyalty apps

Technology isn’t necessary for the best loyalty programs, but it certainly has some benefits. As more and more restaurant guests are millennials or younger, they want mobile applications. The good news is that your POS may already be able to integrate a loyalty app.

There’s no need to build an app from scratch, either, as that’s a time-consuming and expensive project that requires significant expertise. There are already plenty of companies offering software and apps that your restaurant can use for its loyalty program.

How do you know if your restaurant loyalty programs are successful? 

Whether you decide to go high-tech or low-tech, as well as whichever type of loyalty program you choose, a key part of building a cost-effective program is knowing whether it’s successful. How do you measure the success of food loyalty programs?

One of the most important ways is to look at your guest retention rates.

Look at sales over time and rate of return for both loyalty program members and non-members, and determine which group brings in the most amount of sales. If the numbers show that members bring in more sales, it’s likely you’ve cracked the loyalty program code.

It’s also a good idea to track loyalty membership numbers over time, and see if new guests are signing up for your loyalty program.

Some other benchmarks to keep an eye out for:

Whether your loyalty program members return more often, spend more per visit, participate in restaurant events or try new and higher priced items. All of these would indicate that your loyalty program is a success.

As you’re building your loyalty program, keep in mind that it’s supposed to make you more money, not cost you money.

By doing your research and considering the necessary steps we've listed here, building a cost-effective program is doable, and it will benefit your restaurant in the long run!

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