Restaurant Loyalty Programs: What Works, What Doesn’t, and How to Make Them Successful
It’s no secret that restaurant loyalty programs are on the rise. Reward programs are nothing new, but their popularity has exploded in recent years. With the rise of mobile-first technologies, it's become easier than ever for restaurant chains to track customer behavior. And do so while sitting neatly in the customers' pockets. By offering more than a tasty meal and excellent service, restaurant chains can create a loyal customer base, excited to come back again and again.
Burger King’s Royal Perks, Chipotle Rewards and MyMcDonald’s Rewards are only a few examples of multi-million QSR brands capitalizing on the new loyalty trends that I will break down for you today. I will also take a look at what works – and what doesn’t – when it comes to restaurant reward programs.
Quick side note: This post focuses on digital loyalty programs for restaurants. To be successful in the modern restaurant and QSR market, you need to stay away from physical-only programs and punch cards that will only take up space and collect dust in customers’ wallets.
- Why are restaurants moving to loyalty programs?
- How to structure a loyalty program for a restaurant business?
- 5 mistakes to avoid for building loyalty in the restaurant industry.
- 4 examples of the best restaurant reward programs.
- Why choose Voucherify for your restaurant loyalty program?
Why are restaurants doubling down on loyalty?
The competition in the restaurant market is fierce, especially after the COVID-19 pandemic, where those brands who weathered the storm are now looking for any edge they can get. One way to boost their business is through loyalty programs. And it seems to be working. Reward programs are effective in both acquiring new customers and boosting spending among existing ones. For example, 38% of consumers are more likely to visit a restaurant if it has a loyalty program and 78% of diners would spend more at a restaurant if it offered rewards.
It's no wonder that more and more restaurants are jumping on the loyalty bandwagon. And investment in loyalty technology pays off – the total consumer spending in the QSR sector in the US alone was over 300 billion in 2021. If you fail to capture customer loyalty, that’s a big chunk of revenue you are missing out on.
How to structure a loyalty program for a restaurant business?
To create a loyalty program that will work for your restaurant business, you'll need to consider a few things. First, what are your goals for the program? Are you looking to drive more repeat business? Attract new customers? Once you know your goals, you can start to put together a loyalty program that will help you achieve them. Here are the most effective loyalty program models for restaurants and QSR chains:
1. Point-based programs (earn and burn model)
In the restaurant industry, loyalty programs typically operate on top of a point-based system. Customers earn points for making orders and exchange these points for free menu items and discounts. It is the best model when you are getting started or if you are a QSR brand where concepts of customer experience or privilege lose with instant savings. However, this type of program carries some risks.
First of all, by competing with other brands on price only, it’s more than likely that customers will quickly switch to your competitor as soon as their price drops a cent lower than yours. Also, make sure that the reward value doesn’t cut into your profits when the demand goes up. You can make your point-based program more interesting by offering proportional points for making orders above the specific order total or purchasing specific menu items, e.g., double points for each burger in the order. Here is how you can set it up in Voucherify:
2. Digital punch cards
Even though punch cards fell out of fashion a while back, the concept of rewarding customers with free menu items for making consecutive orders is still live and kicking. It's a simple concept – customers are rewarded for purchasing an item a certain number of times. For example, if they buy nine cups of coffee, they get the 10th free. This encourages repeat business and loyalty among customers. And it's a great way to show appreciation for their business. Item-based reward systems are also easy to set up and manage. So if you're looking for a way to show your customers that you value their business, an item-based rewards system is a great option to start.
3. Tiered loyalty rewards
A tiered loyalty system is a great way to encourage customers to spend more at your restaurant. The way they work is quite simple – the more a diner spends with you, the higher level of membership they earn. Tiered loyalty programs work for one reason – exclusivity. Customers love feeling like they are part of a deluxe group, and by offering tiered benefits, you can tap into that desire.
Tiered benefits tend to work better in physical venues that focus on delivering excellent service and VIP-like experiences. By implementing a tiered loyalty system, you can identify the best customers and offer them a unique dining experience. If you are big on pampering top diners, you can provide them with free items and other perks each time they visit, without any need for collecting and redeeming points.
4. Gamified loyalty programs
Similarly to tiered reward programs, gamified loyalty models tap into exclusivity, achievements and challenges as the primary sources of loyalty engagement. The formula of a gamified loyalty program can take many shapes and forms. Depending on your unique selling proposition and target audience, you can run fun challenges on social media, organize giveaways and contests, or offer double points days to stimulate demand in slower periods. Personalized experiences have high ROI and recall value so if your loyalty technology allows it, use personal occasions such as birthdays and anniversaries to send relevant notifications and encourage diners to drop by or order online to claim surprise gifts.
Whatever approach you take, your loyalty program has to be easy to understand and use. The last thing you want is for customers to sign up but then be confused about how it works. Keep it simple and make sure the benefits are clear, and you'll be on your way to creating a successful loyalty program. Always remember to put the customer first, and the rest should be a piece of cake.
5 mistakes to avoid when building a restaurant loyalty program
When it comes to the nitty-gritty of running a loyalty program for a restaurant business, there are a few common mistakes to avoid.
1. Don’t follow the trends blindly
Make sure that the program is tailored to your customer's expectations. There is no one-size-fits-all approach – what works for one restaurant might not work for another. Current trends in food and hospitality tend to focus on customer experience rather than plain savings. However, in times of raging inflation and economic uncertainty, you might be better off with a program focused on instant savings and gratification rather than experiences or bonus perks accrued gradually.
2. Make program promotion your priority
You can't create a loyalty program and expect your customers to sign up – you need to promote it through all your channels, especially social media. As found by one study, 42% of diners have interacted with restaurants on at least one social media platform. Of that group, 66% are more likely to order food from the restaurant they follow.
Social media is all about FOMO (fear of missing out). If you can tap into your customers' FOMO and show them what they're missing out on by not being a member of your loyalty program, you're more likely to get them to sign up. Another idea is to combine a referral program with your loyalty scheme and reward brand advocates with loyalty points for spreading the word about your venue.
3. Keep the program rules simple
One of the most common mistakes I see restaurants make is overdoing it. Finding the most effective program structure, reward actions and rewards is always going to take time. It’s better to start with the basics and iterate from there.
Customers are getting bombarded daily with various marketing communications. Forcing them to devote a big chunk of their personal time to grasp the mechanisms of your loyalty program is a grave mistake. Also, your communication should focus on “redeem points” rather than “earn points”. Only when customers redeem points for rewards will they return to your restaurant and you will see higher participation rates.
Learn more: Loyalty reward ideas for B2B and B2C
4. Offer a loyalty mobile app
Mobile loyalty programs help brands build high-quality relationships with customers. In the fast-paced world, it can be difficult for businesses to keep track of customer preferences and behavior. Mobile loyalty programs make it easy for businesses to track this information and provide personalized recommendations and deals at the right time and place.
The food industry is a crowded space, and if you find yourself constantly fighting for market share, mobile channels can be the direct link to customers that you have been missing. By having an easy way to not only run the program but also place orders, you can cut on high delivery app fees.
4 examples of the most successful restaurant reward programs in 2022
1. MyMcDonald’s Rewards
It’s no surprise that the undisputed king of fast food runs a wide-scale loyalty program.
“Loyalty is the single biggest driver of digital adoption and MyMcDonald’s Rewards has exceeded expectations in terms of enrolment and participation. After just six months in the US there are over 30 million loyalty members enrolled and 21 million active members earning rewards.” – McDonald’s CEO, Chris Kempczinski.
MyMcDonald’s Rewards is an app-based rewards scheme that follows the earn-and-burn model with some gamification elements in the form of tiers that unlock more menu items that members can claim as rewards. The McDonald's mobile app was the top-installed QSR app in 2021 (24 million downloads) – part of this success goes to the quick order options built within the app.
How does the program work?
- For each $1 spent, customers earn 100 points.
- The tiering system is based on the number of collected points – 1500, 3000, 4500 and 6000 – each level unlocks new menu item rewards (16 in total).
- Redemption limits: a single reward can be redeemed per order. Redemptions start from 1500 collected points (members earn 1500 points on their first payment using the linked card).
- Points expire after 6 months from the day they were earned.
- Points are not transferable to other accounts.
- Members earn and redeem points only through the app – all it takes is showing the staff the 4-digit loyalty code. Scan the code – get the reward kind of simple.
The MyMcDonald’s Rewards program is simple and easy to use, which is undoubtedly one of the key building blocks of its success.
2. Chipotle Rewards
Chipotle launched its US reward program in 2019, and in only three years, 28 million members have joined, making it one of the food industry's fastest-growing loyalty programs.
"Chipotle Rewards is another access point for guests to engage with our promise of real ingredients prepared fresh daily, and a way for us to say thank you for joining our mission of Cultivating a Better World.” – Anat Davidzon, Managing Director at Chipotle Canada.
To boost accessibility, Chipotle runs the program through a dedicated app and a web app. The program follows an earn-and-burn model with no dedicated tiering system in place. Program gamification relies on bonus points days, birthday surprises and other in-venue events, such as Halloween specials where each member dressed in a spooky consumer gets a $6 entrée for free.
How does the program work?
- 10 points for every $1 spent in the restaurant, in the app, or online.
- Exclusivity features: early access to new menu items and other insider info.
- Rewards Exchange: a real game changer in the space of QSR loyalty programs was Chipotle’s Rewards Exchange, where members can exchange points for free menu items, sustainable swag and items, or charity donations.
- Extras: bonus gamified challenges that allow members to celebrate their achievements with special badges. Chipotle takes gamification to heart and releases a fun web-based game where users could complete races to collect points.
- Points expire after six months of account inactivity.
3. Burger King Royal Perks
Burger King was a tad late to the loyalty party, but they definitely made their entrance note-worthy. Burger Kings Royal Perks program also follows a point-based model but with a twist – they offer a custom currency (Crowns) and a unique reward (free order upsized once per day).
“Since announcing the rollout of our loyalty program last September, Royal Perks is now available in nearly every Burger King restaurant nationwide. Enhancing the digital guest experience continues to be a major focus for our brand.” – Tom Curtis, President of Burger King North America.
Similarly to Chipotle, the program is available both via an app and a web customer portal.
How does the program work?
- Members earn 10 crowns for every $1 spent.
- Open access to all menu items (unlike MyMcDonals’d Rewards), and free menu upsizes once per day as a membership perk.
- Personalization: double points throughout the entire birthday month.
- Early product access and limited-time member-only specials, as well as opportunities to earn even more points through Royal Perks challenges and promotions.
- Crowns expire after 180 days after the last eligible transaction.
- Limits: since November 2022, members can earn crowns on a maximum of 3 orders per day.
4. Chick-fil-A One
Chick-fil-A is a loyalty pioneer as the brand released the first version of the reward program way back in 2016. Today, the brand offers its program through an app and the web. The program is structured around tiers – the higher the tier, the better the points multiplication with the highest level earning 13 points per $1 spent. All in all, there are four membership levels with various perks and privileges based on the annual spend. Here is the breakdown of what comes with each level:
Level 1: Member:
- 10 points per 1$ spent.
- Surprise and birthday rewards from their local Chick-fil-A venue.
- Insider content.
- Bonus points challenges.
Level 2: Silver Member:
Everything in Member plus:
- 11 points per 1$ spent.
- Ability to give rewards to friends and family.
Level 3: Red Member:
Everything in Silver Member plus:
- 12 points per 1$ spent
- Exclusive rewards.
- Backstage tours at Chick-fil-A offices.
Level 4: Signature Member:
Everything in Red Member plus:
- 13 points per 1$ spent.
- Exclusive rewards and experiences.
There are plenty of paths you can take your loyalty program down. Both earn-and-burn and tiered loyalty models have proven to be effective in the fight for customer stomach share.
For starters, you might be more interested in the streamlined point-based model with hassle-free rules and experience. For more mature brands, I recommend choosing incremental loyalty, where perks and rewards depend on the customers’ standing with your brand. No matter which road you take, all of the most successful restaurant loyalty programs have one thing in common – they are powered by robust loyalty program software.
Why choose Voucherify for your restaurant loyalty program?
At Voucherify, we believe that rigid technology prevents businesses from reaching their full potential. This is why we built an API-first loyalty solution that adjusts to your needs, not the other way around. By following the best practices of composable commerce, Voucherify is successfully implemented by global brands to run fully custom loyalty programs and other consumer promotions on top of the data you feed our Rules Engine with. A rich collection of loyalty building blocks, including points expiration policies, tier expirations, pay-with-points features and proportional points assignment and multiplication, make Voucherify a fantastic tool for large-scale QSR and restaurant reward programs.
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