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Restaurants are putting a lot of faith into loyalty programs to help drive traffic in these trying times. But they are starting to go about these programs differently.
Portillo’s caught our attention last week when it unveiled its first proper loyalty program, Portillo’s Perks. The head-turner was not that the Chicago-based hot dog chain is finally offering rewards, but that the program will live in customers’ smartphone wallets rather than in a mobile app.
The chain believes a digital card will be more convenient for customers because they won’t have to download an app and search for it every time they come in. But it will still allow Portillo’s to send messages to customers, furnish rewards and, most importantly, get their data.
“We will use data over time to drive the timing and the relevance of these offers so they become more and more material to our guests and incentivize them to visit,” said CIO Keith Correia while introducing the program during the ICR conference last week.
Customers can scan their digital Portillo's Perks cards to record their visits and redeem rewards.
This no-frills format gets closer to the heart of what loyalty programs are really for: to learn more about the people visiting your restaurants. How often do they visit? What do they order? How much do they spend? At the end of the day, fancy app-based systems with points and tiers and challenges are just window dressing for those questions. And they add another layer of software that a restaurant has to maintain.
But more chains are starting to pare back their approach to loyalty.
To get customers into its database, 7 Brew, the fast-growing drive-thru coffee concept, simply asks them for their phone number when they enter the lot. That number creates a profile for the customer and allows them to get free coffee every 10 visits and easily re-order a past order. Though 7 Brew has said it plans to launch an app eventually, the current system is working quite well: an incredible 92% of its transactions come from known guests. (For reference, loyalty leader Starbucks sits at about 60%.)
The Cheesecake Factory also recently finished rolling out a no-app loyalty program. Members get access to reservations, a free slice of cheesecake on their birthday and the occasional surprise reward that is based on their previous ordering behavior. “No points, just rewards!” the program’s webpage promises. The chain has said that early results from the program have exceeded expectations.
“We now have acquired a lot of data about people. We know their behaviors. We hadn't known that historically,” said President David Gordon during the Morgan Stanley Global Consumer & Retail Conference in December. “So, if we want to drive incrementality to a specific daypart, we can do that now.”
Daytime-dining chain First Watch doesn’t have a loyalty program at all. Its strategy has been to go straight for the customer data. It does have a mobile app where customers can order online and join the waitlist. It also offers pay-at-the-table, which provides another source of data to work with. It plans to use that data to fuel targeted marketing efforts that it believes will drive traffic. But it has said a traditional loyalty program isn’t part of its plans.
“I don't see loyalty as something that we'd be launching anytime soon, certainly not in the way that the industry talks about loyalty,” First Watch CEO Chris Tomasso told analysts in March. “But we want to have relationships with our customers.”
Olga Lopategui, founder of consultancy Restaurant Loyalty Specialists, has been advocating for a more bare-bones loyalty strategy since she first got into the business. “In most cases, the base loyalty program doesn’t really do that much,” Lopategui said. “It’s an incentive for customers to provide their data.”
The key to the examples above is that they’re all designed to lower the barrier of entry into loyalty programs. Requiring someone to download a mobile app is a much bigger ask than asking them for their phone number. Expecting them to then stay engaged with an earn-and-burn-type program is also a fairly big request.
They also allow the restaurants to offer more personalized rewards that are targeted at specific customers or segments, which could potentially be more effective at getting those customers to visit compared to a one-size-fits-all structure.
However, an app-less program lacks some of the incentives promised by a more traditional program, like a clear path to rewards, the ability to track progress and an idea of what a customer can get in exchange for their loyalty. Plus, mobile apps have other features that can add value for customers, like online ordering and delivery.
And if restaurants without loyalty apps even want to do anything with the data they collect, they will still need to get customers to opt in to receive emails and other marketing messages.
Indeed, 60% of adults say they prefer to participate in loyalty programs via a smartphone app as opposed to a physical card, according to the National Restaurant Association—although it doesn't appear that they were asked about other formats.
“The challenge is, are you going to get the same number of people into this program if you don’t give them a carrot?” Lopategui said. She suggested that restaurants going the non-app route may still need to offer customers something for signing up.
Ideally, though, a loyalty program that asks less of its users should allow restaurants to reach more of them, including both superfans and the occasional customers who make up the bulk of a restaurant’s audience. They’re important because they present the biggest opportunity for incremental sales. And they are probably less likely to join a more traditional program.
Portillo’s, for its part, expects to have 1.5 million to 1.7 million Perks members by mid-summer, which equates to about 17,000 at each of its 94 locations—“an extraordinary number,” said CEO Michael Osanloo—and all without an app.
Lopategui predicted that we'll see more of this kind of thing. But, “I think we’ll also discover in a year or two that we can’t get enough opt-ins. So you still have to dangle some kind of carrot in front of people.”