Eating out can be expensive. In an attempt to attract and maintain customers, many restaurants and companies offer customer loyalty programs. And it’s not just huge chains that offer these programs for their loyal customers. Many smaller restaurant operators also provide loyalty programs for their clientele.
It’s not just handing over a punchcard to get a free sandwich. Even smaller businesses are using new mobile apps and programs to offer rewards for repeat customers. As a small business owner, you might wonder how you can use these programs effectively in your own business. Read below to learn more about using a restaurant reward program in your own business.
What is a Customer Loyalty Program?
A loyalty program is an incentive-based program that customers can sign up for with a restaurant or other business. When customers spend money, they earn points towards benefits. The benefits can range from a future discount to a free item. Many loyalty programs offer additional benefits, such as a free item on your client’s birthday and other discounts only available through the program. These loyalty systems are a great way to ensure returning business and a loyal customer base.
Remember the old days of punchcards? Buy ten sandwiches and get the 11th for free. Restaurant loyalty programs are the same idea but work in a much more modern way. Some apps and systems are integrated with your existing POS register system. Or you can always keep it simple with the old-school punchcard.
Loyalty programs are now typically associated with mobile apps. For loyalty program members, they’re simple to sign up for and easy to redeem. Restaurants either enter in a number or scan a barcode. An integrated system is a great way to ensure that your customers will never lose their program cards. It’s simple for your customers.
What Restaurants Have Loyalty Programs?
From huge, international chains to small mom-and-pop shops, many restaurants are now participating in these customer loyalty programs. A lot of businesses are taking advantage of how simple these programs can be to start up. Customers typically have a reward card at every place they visit. Here is a list of some of the most popular loyalty programs:
Starbucks has a popular loyalty program that was initially associated with its Gold Card. The program is a mobile app that customers download. Customers earn points by buying products. Customers can redeem their points for drinks and food. The great benefit of this program is that it is tied to the gift cards. Customers use their Starbucks gift cards to earn points and pay for their items.
This famous burger place offers a customer loyalty program. Customers sign up with their phone numbers, and all points are associated with the number. Customers receive free items, as well as cash off after a certain number of visits. There are no cards or apps related to this program. Customers can log on to the Red Robin website to check in on their available rewards.
Chipotle recently launched its customer loyalty program via an app. Customers earn 10 points for every $1 spent. Chipotle also offers additional bonus points for trying something new and other challenges. After reaching 1,250 points, you’ll earn a free entree. Customers scan their app when they are in-store and can also use the reward program when ordering online. Scanning a phone instead of holding onto a piece of paper is incredibly convenient.
Landry’s Club is a giant corporation that owns many different restaurants. Its loyalty reward program covers all of these restaurants, so customers can earn no matter where they choose to eat. Landry’s Club has a loyalty program that offers points for dining at over sixty different restaurants. Landry’s owns restaurants such as McCormick & Schmick’s and Morton’s Steakhouse.
Pizza Hut offers a program called Hut Rewards. Customers earn two points for every $1 spent. They are then able to redeem their points for different menu items, such as breadsticks and pizza. Pizza Hut offers exclusive benefits to its loyal users, as well. Pizza Hut’s program is a downloadable app, but customers can also log in to the website to check current rewards.
Types of Loyalty Programs
There are many different types of loyalty programs that you can implement in your restaurant. You don’t have to have a fancy app to attract customers. You can keep it simple with just the old-school card or kick it up a notch by adding it to your existing POS system. Here are the three main types of loyalty programs available for you as a restaurant or shop owner.
Traditional Stamp Cards
A traditional stamp card would be a card that your customers bring in for every visit. You either stamp or punch out the card on the spot during each visit. Once the customers hit the goal, they then give you the card and get whatever item or discount they were working towards earning. It does not necessarily have to be a free item. You can offer customers a discount such as half off. These require a big reward, or customers will be unlikely to use these cards.
Digital Stamp Cards
You can also have a mobile app that serves as a stamp card. Digital stamp cards offer the same simplicity of the traditional stamp card with the accessibility of a mobile app. Customers love this option because they aren’t worried about losing your stamp card. Customers’ stamp cards are always available. Otherwise, the system is the same as the traditional stamp card.
Integrated POS System
You can also pay a premium to have your loyalty program synced with your POS system. Integrated POS systems can be a more costly option, but can also be the easiest for your customers. You can enter a phone number or email address to pull up the customer’s information. You can have an app or not.
Cost of Starting a Loyalty Program
You might think that starting up a loyalty program can be incredibly expensive. You’re giving away free stuff to customers, paying for the app, and paying for the upkeep of this program. It can seem overwhelming.
Start-up costs can be as low as $50. The more complex the system, the higher the price. Some integrated systems can require an initial fee of over $1,000.
Monthly costs to maintain a mobile app can start at around $20 per month and can be as costly as $500 per month. With low prices at $20, loyalty reward programs can be accessible for any business owner.
You don’t necessarily have to spend a lot to get a good system. If you are concerned about the upfront cost of implementing a customer loyalty program, here are six steps to getting a small business loan to help you get started.
Benefits of a Customer Loyalty Program
There are many different benefits you can earn as a business owner from providing a customer loyalty program. There are more benefits of starting up a rewards program other than just financially. Here are some of the top benefits of having a customer loyalty program for your business:
With a customer loyalty program, you can keep track of different spending trends. You’ll have access to a lot of customer information and spending habits. This information will be vital in making new marketing decisions. You’ll also be able to pinpoint what customers enjoy what items.
You can use this information to attract customers with different promotions specially designed for them.
With a loyalty app, you will have a direct line of communication with your customers. They can reach out to you directly regarding any issues. This increase in contact can be incredibly beneficial, especially if you have a newer business. You’ll want to retain happy customers to build up your store.
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More Customer Retention
Customers are more likely to stick around when they earn rewards for frequenting your business. When people are rewarded for buying things, they’re more likely to buy. As long as your rewards are worth it, customers will be more likely to stick around. You’ll gain a lot of repeat customers.
Since so many restaurants have these customer loyalty programs, a lot of customers almost expect a restaurant to have one. If you’re a smaller restaurant, you’ll be ahead of the game with a program to reward your customers.
Customers will be more likely to spend more when there is a loyalty program in place. When people know there is a discount, they are more likely to spend more. It’s human nature. You’re going to increase the total ticket for your customers that sign up for your program. This increase can often pay for the program itself.
Why Do Loyalty Programs Fail?
You might have seen other small business owners start a customer loyalty program only to fail quickly. They lose money and customers. Here are some of the reasons why these programs can fail and what you can do to avoid failure.
If the rewards are not appealing to your customers, they’re likely to leave the program or not even sign up in the first place. Some restaurants force clients to spend hundreds of dollars and only reward customers with a small discount on a future meal.
Free entrees make excellent rewards for restaurant loyalty programs. Don’t offer small discounts. Customers will be less likely to join if you promote unappealing rewards for your loyalty program.
Too Many Changes
Customers will be tempted to leave if you make too many changes to your program. If the program is too confusing, they’re not going to want to stick around. A notable instance of a royalty program changing was Starbucks making changes to its loyalty program in early 2019. Starbucks was worried that customers might jump ship.
Find a good reward structure, and be sure to stick with it, at least for a long time.
Difficult to Sign Up
Some loyalty programs can make it challenging to sign up. If you require clients to provide too much information or jump through multiple screens to sign up for your program, you might face some issues.
Be sure to have a simple sign-up process that only requires necessary information. Don’t ask for too much information from your customers at first, because that might scare them away from signing up.
If your program is too complicated, your customers will be less likely to want to join. You’ll want to keep things simple. If there is too much math or too many options, your customers will not want to use the program. You’ll need to keep the earning mechanism consistent.
How Can Customers Earn with a Loyalty Program?
How your customers earn with the loyalty program can play a huge factor in the success of your customer loyalty program. A confusing reward structure can dissuade future customers from signing up or result in the loss of customers. Be sure to keep your earning system consistent for the best results.
Customers can earn by item. If you run a sandwich shop, customers can earn points based on every sandwich they purchase. Earning by item works better for specialty shops such as coffee stores or ice cream parlors. Earning by item is not a great option if you run a traditional restaurant.
Customers can also earn from how much is spent. For every $10, your customers could make one point. Earning for total price is a good option if you have a lot of different items available to be purchased. Earning for the total amount spent also works well for other kinds of shops, as it is a straightforward conversion for your clients.
How Do Businesses Earn with a Loyalty Program?
It may seem counterintuitive to have to offer rewards to earn more, but as a small business owner, you can make a lot by implementing a loyalty program.
Customer incentive programs are known to increase the cart total. Since customers see a discount in the future, they are more likely to load up on the total bill after signing up for a loyalty program. If your program earns by total cost, customers believe that they are getting more of a discount when they purchase more. This is good news for you as a business owner. You’re increasing your average customer total without the hassle of up-selling at the register or table.
Loyalty programs also encourage repeat customers. If customers see that they can earn points and ultimately free items from your business, they are more likely to return more often. A coffee shop with a reward program can expect customers to come in more times a week than a coffee shop without such a program.
Businesses with customer loyalty programs can also expect additional customers from recommendations. Current customers who believe they are benefiting from your reward program will be more likely to recommend your restaurant to friends and family. This increase in recommendations can also boost your sales.
Be sure to have a sound reward system set up to encourage your customers to use your program, and you will see the financial benefits of implementing your loyalty program.
If you’re starting out as a business, customer loyalty programs can help your sales. If you’re still struggling or looking to expand, check out our other article on understanding small business loans.
How Can You Create a Customer Loyalty Program?
Now that you have a better idea of the benefits of a customer loyalty program as well as the types, you might be ready to start up your own. Here are the steps to creating your very own loyalty rewards program:
1. Figure out your rewards.
The first step in creating your customer loyalty program is to determine what rewards you are offering your customers. The awards will help you answer other questions later on. Do you want to provide a free item? Do you want to have different tiers? Write out the rewards you plan on delivering to your customer base.
2. Determine the structure.
After confirming what rewards you plan on providing, you’ll need to figure out how your customers will get there. Will it be based on a certain amount spent? Will customers earn after so many sandwiches purchased? Figure out how much a customer needs to pay to earn.
3. Know your type.
Now that you know your rewards and how your customers will earn, you should be able to figure out if you need to use a traditional stamp card, a mobile app, or a POS integrated system.
4. Price and purchase.
Get multiple different quotes from different companies before choosing the company for your customer loyalty program. A good way to is to get three different quotes before deciding what route you will take. Be sure to have all your information ready to get the most accurate quotes.
5. Start marketing.
After purchasing a loyalty reward program, you will need to begin marketing to let your customers get excited about this future way to earn different rewards. Start letting your customers know through emails or signs in your store. You’ll need to begin this before the launch date to get interest buzzing.
You can finally launch your reward program. A great way to get a lot of customers to sign up is by offering a small reward for signing up. A small discount or a small free item is a great incentive to get customers to sign up for the program initially.
Starting up a customer reward program is a great way to increase your current business and also gain more business. It can be intimidating if you don’t know where to start. Now that you know more about creating a customer reward program, you’re all set to bolster your business.
What is your favorite current loyalty reward program? Let us know in the comments below!