Tech Check is a regular column on restaurant technology by Senior Editor Joe Guszkowski. It's also a newsletter.
Whenever a restaurant starts talking about its loyalty program, they invariably bring up some version of the following statistic: “Loyalty members make up just 20% of our customers but account for 80% of our sales.”
It always seems designed to elicit oos and ahs about the power of loyalty programs. But turn it around, and it’s actually more of an indictment. It means that the vast majority of people who visit the restaurant aren’t signing up for its loyalty program, and they aren’t returning, either.
That suggests that restaurant loyalty programs as currently constructed aren’t appealing to most guests. And a lot of restaurants seem to agree. In a survey published Wednesday by POS provider Qu, 80% of limited-service operators reported that their loyalty programs need a reboot.
That’s a head-turning statistic given the tenor of loyalty discourse over the past year. In this publication, we’ve written about subscriptions at Panera, tiers at Subway, badges at Chipotle and PanCoins at IHOP. I did a feature titled “Restaurant loyalty outgrows the points system.” It felt like the days of the old-fashioned punch card were behind us.
Qu’s research is a reminder than many restaurants are still using rudimentary loyalty systems for want of any tried-and-true alternative. And though there are certainly more advanced options on the market, making a change is risky, because it could disturb the existing loyal customers who make up a big portion of sales. (Remember what happened when Dunkin' changed its loyalty program a couple years ago?)
“I think they’re stuck,” said Jen Kern, Qu’s chief marketing officer. “It’s kind of like what happened in POS. To make a change to your POS, it’s so hard to think through it.”
It's not for lack of trying: 46% of restaurants told Qu they plan to invest in loyalty this year, making it their top tech priority for the second year in a row.
But where those investments are going is unclear. When asked what loyalty upgrades they planned to make, 45% of restaurants chose something called “experience engagement.” It was the most popular answer, even though it could mean almost anything.
“It’s really just the thing that you do as a brand that tells your guest, ‘Wow, they actually know me, they’re actually thinking about me,’” Kern explained. “‘I’m not just a punch in a card.’”
Personalization would seem to be the next logical evolution for restaurant loyalty, which has long gone with a one-size-fits-all, earn-and-burn approach. But targeting individual guests calls for a data-driven strategy that may stretch the expertise of smaller brands. And how does an operator even get that data if most people aren’t signing up for rewards in the first place?
The Qu report offers some concrete ideas there. Thirty-nine percent of respondents, for instance, said they planned to explore “frictionless sign-up,” while 16% expressed interest in “app-less loyalty.” Both are geared toward making it easier for customers to get into the program, which is a good first step.
The next step—getting those guests to keep coming back—is more complicated. What types of rewards actually lead to incremental spending or visits, short of just handing out free stuff? This warrants close monitoring over the next year or so.
I personally have my eye on new programs at The Cheesecake Factory and Sweetgreen.
Cheesecake is one of the few full-service chains to make the leap into loyalty, and is doing so in typical deliberate fashion. Cheesecake Rewards offers customers not points but the ability to get occasional “surprise and delight” offers that are tailored to their tastes. Early results have apparently been promising, if marginal: The chain doesn’t expect to see an impact on sales for at least the first year.
Sweetgreen, meanwhile, made a splash last year with Sweetpass, a two-tiered program that offers both free and paid memberships and a range of perks, challenges and exclusive “drops.” Participation increased by 25% in the second half of 2023, but the bells and whistles have yet to translate to sales, executives said last week. The chain is now working on “optimizations and simplifications” designed to drive more transactions.
A brand as big and tech-savvy as Sweetgreen can afford to work out the kinks. But smaller operators with fewer resources may only have one shot at getting it right. Until some of these new strategies begin to bear fruit, it may be best to stay stuck.