Red Robin on strategy behind loyalty program

CMO: Program will help chain collect customer data to provide targeted offers

Red Robin Gourmet Burgers’ new loyalty program is about more than just building frequency, said chief marketing officer Susan Lintonsmith.

The Red Royalty program, which the 450-unit chain rolled out in January, will help the chain track registered users’ preferences and purchases in order to understand guests better and determine which incentives can drive repeat business efficiently, she said.

“We’re hoping to drive sales primarily through traffic gains,” Lintonsmith said, “and national TV and Red Royalty are our two biggest and strongest ways to drive that through retention and frequency. Then we’ll have product news from appetizers, desserts and beverages to drive the incremental guest check, but first and foremost, it’s about traffic.”

The loyalty program is part of parent company Red Robin Gourmet Burgers Inc.’s Project RED plan, which is aimed at driving traffic, improving sales, reducing expenses and improving margins. Red Robin executives discussed the initiative during the company’s earnings conference call on Feb. 18. (EARLIER: Red Robin details its turnaround plan [3])

Lintonsmith spoke with Nation’s Restaurant News on Monday about how the program was developed and how customers are responding so far.

Red Robin reported a 2-percent increase in guest traffic at stores that tested the loyalty program. Could you elaborate on those results?

That 2-percent lift was in 45 test restaurants, and currently we’re seeing even stronger guest acceptance in the first month: one in three guest checks is getting captured in the Red Royalty system, while only one in 10 were during the pilot program. In the first month, we’ve activated more than 600,000 cards. Based on what we saw in the pilot and in these early weeks, the lift in traffic systemwide could be comparable or greater.

We launched Red Royalty before the nationwide TV campaign for the Prime Chophouse Burger began to enroll new guests or customers coming back for that promotion. The question becomes how you incentivize those guests to register their cards, because that’s how we collect their preferences and get attitudinal info. We offer a free appetizer for registering, and that’s a piece we added after the pilot test.

What led Red Robin to construct a loyalty card program? It’s not too widespread across casual dining.

A couple things led us to develop it, starting in early 2008. We had our first national TV campaign in 2007, and we know that brought a lot of new traffic into the restaurants, but we didn’t know who those guests were. We have a great database, with 2 million guests in our e-club. I have all their e-mail addresses, but we don’t know much about them from an attitudinal or behavioral perspective. We wanted to know what they bought and what they thought about the brand so that we could communicate in a more relevant and targeted way.

Red Robin’s chief executive Steve Carley said during the company’s last earnings call that Red Royalty would be more about loyalty than frequency. What does that mean?

He meant Red Royalty is more than just a punch-card program. It’s not just about getting [guests] to come back more often, but also understanding their preferences so we can send them relevant messages. Once we can segment this database, we can communicate with customers based on their past behavior.

The messaging sometimes has nothing to do with an incentive. The free birthday burger is a big reason why people join our e-club and activate this program, but another big part are our surprise-and-delight offers. We may decide, “Hey, it’s Guacamole Day,” and offer a free or discounted guacamole appetizer or burger with guacamole. That part is about having fun and celebrating some other tidbits of our brand.

If a person comes in four times a year, we can provide her incentives to come back more often with something that is lower-risk, like a free meal if she visits three times in the next 30 days. But if we have a guest who comes in more often but only for a chicken sandwich, we can message that person any time we have news about chicken. And we can get that person to add incremental sales with offers for an appetizer or a signature beverage.

What best practices did you see from other loyalty programs?

We looked at a number of programs outside the restaurant industry, and we were impressed most by grocery [stores] and bookstores. With grocery store programs, it’s very easy to punch in a registered phone number if you don’t have your card, and you get your credits and discounts right then and there for things you’re already buying. When they message customers with direct mail, it’s based on what they typically buy. Bookstores track behavior, so if I buy one kind of book or like one author, they’ll message me and ask if I’ve considered these similar books. It’s very relevant, and I would come back more often because I felt they understand me and are targeting me.

Contact Mark Brandau at [email protected]