Marketing

6 strategies that could move the needle for loyalty programs

Exclusive perks, NFTs and AI are trending in restaurant rewards. But it’s OK to keep it simple, too.
Restaurant loyalty programs are getting more sophisticated. | Photo courtesy of Sweetgreen

The days of the old-fashioned loyalty punch card are long gone. But the restaurant loyalty program of the future is still taking shape. What will it look like? How will it work? There seem to be more questions than answers right now. But one thing seems clear: It will be far more sophisticated than it is today.

As restaurants continue to invest more in loyalty, “all aspects of, how do you move the needle on frequency, how do you move the needle on spend, those will come into more intense focus,” said Emily Rugaber, VP of marketing at loyalty provider Thanx.

Here are six ways restaurants are working to make that happen.

Exclusive perks

For a long time, restaurant loyalty programs gave people free food. These days, they are increasingly offering something else: exclusivity. 

That can include things like brand merch, premium tables or early access to LTOs. Members of BurgerFi’s rewards program, for example, can go to menu tastings that are off-limits to non-members. And at Sweetgreen, members of its Sweetpass program get access to special menu and merch drops, among other benefits.

These offers not only make customers feel special, but they can also be more profitable than simply giving people the occasional free item.

Many restaurant brands “didn’t want this feeling of, ‘We’re a discount brand,’” Rugaber said. “They’re looking for loyalty, but they want loyalty that is not heavily focused on discounts.”

One program, multiple brands

Many of the biggest restaurant brands in the U.S. are part of a family, like Yum Brands, Inspire Brands or Focus Brands. Most if not all of these restaurant groups have individual loyalty programs for each brand under their umbrella.

That could be changing. In August, Baltimore-based Atlas Restaurant Group launched a loyalty program that applies at almost all of its more than 30 restaurants. Customers can earn points for every dollar they spend and can also use Atlas’ app to browse its restaurants, book a table or place an order. It gives them an incentive to stay within the family when dining out. 

The strategy is common among hotel conglomerates like Marriott and Hilton, as well as restaurants overseas, said Olga Lopategui, founder of consultancy Restaurant Loyalty Specialists. “There’s not as much of that happening in the states for whatever reason,” she said. “That’s a trend that I don’t understand why it’s not here.”

Web3 would like a word

One could argue that the so-called new internet, which encompasses things like NFTs, cryptocurrency and the blockchain, is more fad than trend. But it continues to hang around in the restaurant loyalty conversation. 

Blackbird Labs, the loyalty startup founded by Ben Leventhal of Resy and Eater, relies in part on a digital currency called $FLY. It just raised $24 million to help bring its blockchain-backed program to more restaurants. 

And Wow Bao, the delivery-only dumpling concept, offers guests the ability to become a member of its exclusive Hot Buns Club by purchasing a $99 CollectaBao—a unique, collectible token that entitles the owner to special perks and extra loyalty points.

CollectaBao

One of Wow Bao's CollectaBaos. | Image courtesy of Wow Bao

It’s all very high-tech and sexy. But does it work better than an old-fashioned loyalty app?

“It all looks cool from the outside, but you don’t know how it’s performing,” Lopategui said. She acknowledged that things like NFTs might make sense for certain audiences, but “for the majority of the population, I don’t think it’s a good route.”

Build a better funnel

You know how every time you shop online, retailers will ask you to enter your email to get 25% off your order?

It’s a relatively seamless way for brands to get you into their loyalty database. But it’s only possible if a company’s ordering and loyalty systems are operating hand-in-hand, said Rugaber.

“[Ecommerce has] figured out that your online ordering channel, where people put in all their info, their credit card, the product that they like, is the single most effective marketing channel that you have,” she said.

Restaurants are not quite there yet, she said. Online ordering tends to be run by IT, while loyalty is usually marketing’s responsibility, which can lead to a fragmented experience. But they are working on it. Thanx has been particularly aggressive at turning restaurants’ online ordering experience into a loyalty funnel. 

“We actually automatically enroll every single person who places an online order,” Rugaber said. “We do not offer guest checkout, and it is definitively because it’s fundamentally the best way to improve your marketing efficacy.” 

Lean on AI

An article about restaurant technology in 2023 wouldn’t be complete without a mention of artificial intelligence. And AI will almost certainly have a role to play in loyalty programs.

On the surface, things like generative AI are already helping marketers create emails or website copy. (Tech supplier Square on Wednesday unveiled new tools that do just that.)

But Rugaber sees the opportunity for AI to do even more for loyalty programs. She is intrigued by using AI to help come up with new customer segments and determine the best ways to reach them. 

It could also be used for more personalized suggestive selling in online ordering. “What if you could offer something that you know that guest has ordered before when they have ordered that particular selection of items?” she said.

Keep it simple

Lopategui, who has worked in restaurant marketing since 2006, is admittedly old school when it comes to loyalty. For her restaurant clients, she likes to stick to “bread and butter” strategies like discount optimization and basic audience segmentation.

If those fundamentals aren’t in place, she said, it won’t matter if a restaurant adds other bells and whistles like NFTs and exclusive perks. “We strongly believe that most guests don’t have the headspace to fully engage with really complex programs,” she said.

The goal is to be effective, not innovative. “It’s very tedious, it’s very boring, it works like a charm.”

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