Restaurants reap rewards of loyalty initiatives

Restaurants reap rewards of loyalty initiatives

Operators looking for evidence that customer loyalty is more important than ever need look no further than Pam Felix, co-founder of California Tortilla. When she eats somewhere other than the 39-unit fast-casual chain she started, she’s looking for rewards.

“Even I own a loyalty card to somewhere else that will remain nameless,” Felix says, “so it definitely drives my thinking and other people’s.”

At a time when recession-weary customers are eating out less frequently, many restaurateurs are placing increased importance on their loyalty marketing programs as a way to drive repeat traffic. Loyalty programs are growing beyond paper punch cards promising a free entrée with the purchase of 10 to increasingly sophisticated offerings allowing faithful patrons to stockpile more points, win more food items, receive preferred seating and partner with other merchants’ loyalty clubs. For operators, such programs increase the opportunity to gather data on guests, establish ongoing communications and better target future marketing efforts.

Among the benefits for members of California Tortilla’s Burrito Elito club are free burritos on members’ birthdays, occasional freebies like chips and salsa, and points for every dollar spent that can be accrued and redeemed for “Burrito Bucks” coupons. At every grand opening of a “Cal Tort” unit, the first 10 people in line get one free burrito a week for a year, and every patron that day gets a Burrito Elito card with a credit for a free taco loaded on it.

Once customers register their cards online, Rockville. Md.-based California Tortilla gathers their e-mail addresses and sends them Felix’s “Taco Talk” newsletter.

“It’s all about creating good will,” Felix says. “Burrito Elito has made it possible to create a consistent voice. Even before people walk into the restaurant, they have a positive feeling about us.”

Burrito Elito members spend about 20 percent more per visit than nonmembers, Felix says. She even tracked down the cardholder who visited California Tortilla the most often last year—Barb Leihy, who came in 258 times—and called her to say thank you.

Passport to pay dirt

Michael Mindel, senior vice president of marketing for 20-unit Il Fornaio, says the Corte Madera, Calif.-based Italian-dinner-house chain’s Festa Regionale loyalty program has been crucial to the brand’s authenticity, positioning and employee education. While the monthly program, which began in 1995, was started to settle a bet among Il Fornaio’s Italian chefs as to whose native region had the best food, Mindel says, it also was meant to encourage incremental traffic from regular guests.

“We realized our typical restaurant guest was coming in eight to nine times a year,” Mindel says. “I thought, ‘How can we get people to come in more often, maybe 12 times a year, or once a month?’”

For Festa Regionale, Il Fornaio makes a special menu highlighting the food from a certain region of Italy and serves it the first two weeks of each month. For instance, the region featured for June was Lombardia. Guests on the restaurant’s mailing list receive a “Passaporto” in the mail every six months and are invited to get the paper passports stamped for each region they sample.

“We wanted to have more of those people and make this part of their habits,” Mindel says. “At the end of the six months, once the passport is complete, they fill out their mailing list info and become eligible for a trip for two to Italy. That encourages them to stick with it and come back.”

There are now 10,000 passport holders, Mindel says. Each new monthly menu is promoted with direct-mail postcards, and the chain will start promoting the menus via social-networking sites soon. Notices of new menus reach about 250,000 people, he says.

Another aspect of the program is Il Fornaio’s “Passaporto Parties,” held at each unit every six months, where all the passport holders are invited to a private event and the winner of the trip to Italy is announced. Members also receive a hand-painted commemorative plate every six months upon completion of a passport.

The chain also hosts Tuesday Night Tastings, where guests are invited to learn about Festa Regionale’s special menus. The event began several years ago in response to guests showing up to server training sessions.

“There were people at these meetings not in uniform,” Mindel says, “and the manager told me: ‘Oh, those are our guests. You know, it’s Willy. He comes here all the time.’ So we thought we’d do one of these educational meetings for our guests so they don’t have to sneak in. The first Tuesday of every region we invite select guests, at the manager’s discretion, and walk them through the menu. It takes about 20 minutes, and more often than not, they wind up staying for dinner on Tuesday, which is usually slower.”

Getting the word out

Wheat Ridge, Colo.-based Qdoba Mexican Grill [3] also relies upon educating staff as much as guests for the success of its Qdoba Card.

“We promote the program as aggressively as we can in the restaurant,” says marketing director David Craven, “which means having POP materials and relying heavily on our team members. We talk a lot in our training that the Qdoba Card is a huge piece of the brand experience. Not everybody who comes into the store and sees a POP is going to understand what the card’s about and get one.”

Craven hasn’t seen much difference in use of the Qdoba Card between dayparts or among the 470-plus-unit fast-casual chain’s different markets.

“It’s more of a marketing issue than a trade area issue,” Craven says. “If we make people aware that we offer the Qdoba Card, we see great participation regardless of the trade area.”

He adds that Qdoba wants to leverage the demographic information and buying patterns captured on the electronic cards to market to guests more efficiently.

“We’re looking to do a better job of mining that data and then do a better job of one-to-one marketing, instead of a broad-based program,” he says. “Rather than send one message or offer to the whole card member base, we could gear specific offers to smaller groups of guests more personally.”

Soft power

Marketing expert Linda Duke, the chief executive of Duke Marketing in San Rafael, Calif., says that kind of follow-up with targeted messaging matters with loyalty offers.

“Communications is really the most important part of loyalty programs,” Duke says. “You have to have a way to talk to these guests and invite them in. There’s a lot to be said about direct mail, and e-mail databases are so smart now that you can really target your offers.”

Loyalty offers need not only involve discounts or giveaways of food, she adds. “Soft offers” like preferred seating or valet service for regulars offer a personal touch and can be cost-effective.

“Some of the soft offers really don’t cost anything,” Duke says. “Giving a loyalty club member a better table won’t cost anything but paying attention.… Over the long term you need to invest time and energy, and it takes time to see them coming in on a regular basis. You can’t expect loyalty immediately.”

Many of the benefits associated with Starbucks’ [4] loyalty program, Starbucks Card Rewards, are soft offers, such as two hours of free Wi-Fi a day, refills on drip coffee, and the ability to customize drinks for free with flavored syrups or soymilk.

Alisa Martinez, spokeswoman for the 16,000-unit coffeehouse chain, said many of those perks came from customers via the My Starbucks Idea blog, where guests often register comments or complaints.

“If we know that modifying drinks with syrups is popular, and the majority of our members take advantage of that, then we know we nailed it,” Martinez says. “About 15 percent of card members take advantage of the refills. We hear feedback all the time that it’s a great benefit for them to have, as is the free Wi-Fi.”

Since Starbucks Card Rewards was launched in April 2008, Martinez says, there has been a 70-percent increase in registration for the program year over year. Seattle-based Starbucks counts about 25 million transactions in which a cardholder has redeemed some kind of reward since the launch of the club.

Leveraging other loyalties

It helps that Starbucks is one of the world’s largest restaurant companies, says marketing consultant Ray Coen. He often advises independent clients not to take on the significant expense of starting and sustaining a loyalty program.

“You need the resources of a chain,” Coen says. “One way or another, you’re going to pay for the administration. It has to involve some sort of return to the consumer, which in one way or another is a discount, and so [you must ask] is [a loyalty program] more attractive than a straight discount.”

Once a restaurant starts such a program, Coen adds, it’s incredibly difficult to end if the offer proves ineffective. Further, he says, the most important aspect of loyalty marketing is customizing the offers to a brand’s personality, which requires large investments in time, technology and training.

But some vendors can take much of the labor out of running loyalty programs, as Hard Rock [5] Café has found with merchant network provider Vesdia Corp. The chain of 50-plus casual-dining restaurants and entertainment venues makes about 40 million marketing impressions per year by partnering with Atlanta-based Vesdia, says Laura Kreutzer, regional sales and marketing manager for Orlando, Fla.-based Hard Rock.

Vesdia markets Hard Rock’s offers to members of other retailers’ loyalty programs, such as credit card holders with Citi and Sun-Trust banks or Hawaiian Airlines. Hard Rock could offer double loyalty points to SunTrust’s program, for instance, if the cardholders visit one of the brand’s restaurants in SunTrust’s trade areas.

“We have a marketing manager we work with who directs opportunities our way,” Kreutzer says. “We can say ‘yea’ or ‘nay’ on any program, and can opt in on any new ones they launch. With SunTrust, we have 14 cafes in their territory, so it obviously made sense for us to hit SunTrust cardholders. Hawaiian Airlines is another. The airline is strong out of Los Angeles and San Francisco [where we have restaurants], and we have two cafes in Hawaii.”

Customers funneled through Vesdia spend more on average than regular Hard Rock customers, Kreutzer says. She adds that Vesdia’s program, which drives trial and expands the customer base, complement’s Hard Rock’s existing loyalty program, All Access.

“The benefit of All Access is to drive locals in, and the program includes local music events and other special opportunities throughout the year,” she says. “Also, there are people who use Hard Rock as a destination venue, and when they go on vacation, they’re going to visit the Hard Rock in that city. All Access ensures that they’ve got their VIP passes when they go to that Hard Rock.”

Kreutzer also praises Vesdia’s program for showing a noticeable return on investment, as the provider’s invoices clearly detail which rewards get redeemed where—and what kind of transaction they produce—and Hard Rock only pays Vesdia a fee per redemption.

“Pay for performance is a necessity with this type of program,” she says.— [email protected] [6]