There was a time when joining a restaurant loyalty program meant carrying around a piece of cardboard that got punched after every purchase.
Now loyalty programs have moved into the digital world, and have become an increasingly important element of marketing, especially in the competitive limited-service space, where high-frequency customers are looking for value and a reason to choose your brand over the other guy.
A growing number of restaurant chains are launching or changing their loyalty programs to both evolve with technology and attempt to stand out from the crowd.
Two trends have driven increased interest in loyalty programs, said Zach Goldstein, CEO of the Thanx loyalty and customer retention marketing firm.
“The ubiquity of mobile is making the idea of building a relationship with customers through a new channel more approachable,” he said.
Additionally, chains are getting smarter about their use of data, which can give a better sense of return on investment, Goldstein said.
For restaurant chains, there are clear benefits of building loyalty, not only for the data stream such members provide, but to allow for more targeted marketing.
Good loyalty programs help restaurants identify the 20 percent of customers that drive 65 percent of business, and get a larger share of that wallet, Goldstein said.
Loyalty customers tend to visit more often and spend more. Starbucks, for example, boasts more than 20 million My Starbucks Rewards members globally. Those program members spend an average of about three times more than non-loyalty customers, the company said.
Still, with a growing number of chains pitching the benefits of loyalty to their brands, how loyal can customers really be?
A recent survey by AlixPartners found that only about 14 percent of consumers said loyalty programs are “very” or “extremely” influential in their choice of restaurant.
“While everyone wants to come out with the next best loyalty program, or at least is considering it, the average consumer doesn’t walk around with six or seven different loyalty cards in their pocket. Basically, you have one or two or none,” said Eric Dzwonczyk, managing director of AlixPartners and co-head of the firm’s restaurant, foodservice and hospitality practice.
As a result, Goldstein predicts that loyalty programs will evolve to become even more seamless, without requiring consumers to jump through hoops like scanning QR codes or checking in.
“When you have a line and someone is fumbling for a loyalty card or their phones, that’s money walking out the door,” he said. “Loyalty programs need to become more consumer friendly. We’ll see a whittling down of that same experience.”
Here’s a look at how restaurant chains are thinking about loyalty programs this year:
Fast-casual chain Blaze Pizza this week launched a new mobile app and loyalty program that allows users to order and pay ahead and earn “flames” toward a free pizza.
Users must scan the app when they pick up their pizza to earn their flames. Ten flames gets them a free pie.
The program was launched in part at the request of brand fanatics, who have demonstrated a certain level of devotion on social media, said Jim Mizes, president and chief operating officer of Pasadena, Calif.-based Blaze, which has 116 locations across the country.
“We’re a young company, but already we have hundreds of thousands of fans on social media, and had over a hundred thousand online orders last year alone, so we certainly recognize the importance of technology in our business,” he said. “Guests today want to be a part of the conversation, and be able to order, pay and earn loyalty from their phones. Now we have the tool in place to make this easy.”
McDonald’s is developing a loyalty program in the U.S. that could be in place later this year or in early 2017.
“We’re working on a customer-designed loyalty program that we think will be as good as there is out there in the marketplace,” said Mike Andres, McDonald’s USA president, earlier this month.
The Oak Brook, Ill.-based quick-service chain in some markets has offered an app where guests can earn a free McCafé drink after the purchase of five beverages. That app has been downloaded 7.5 million times — more than company officials had expected.
For the national program, rewards would likely be linked to customer purchases, but perhaps based on visits.
The move will also help McDonald’s compete during the morning daypart with coffee specialists Starbucks and Dunkin’ Donuts, which have active loyalty programs.
How Starbucks, Taco Bell, Domino's approach loyalty
In April, Starbucks will roll out a revamp of its loyalty program that will allow My Starbucks Rewards members to earn stars based on spending, rather than transactions.
Company executives said the change would address a problem with “transaction splitting,” or customers who broke up their purchases into more than one transaction to earn more points, a practice that slowed the line.
The new loyalty program will also have monthly Double-Star Days for Gold loyalty club members, when customers can earn stars at a faster rate.
After the Seattle-based coffeehouse chain announced the planned changes earlier this month, some customers took to social media to vent their disapproval.
Later this year, however, Starbucks plans to roll out more personalized marketing messages that executives expect to drive traffic.
If a loyalty member orders an iced tea via mobile app, a photo of a panini may pop up as a suggested addition, or something based on that person’s order history.
For the first quarter, Starbucks had 11.1 million loyalty members in the U.S., a 23-percent increase over the first quarter last year.
Taco Bell unveiled its long-awaited loyalty program in December, rewarding customers for simply “Living Más” on social media.
Dubbed Taco Bell Explore, the program has a gaming component that allows users to earn puzzle pieces towards a reward.
Users can earn rewards two ways: by ordering through the mobile app or by linking their social media networks to the loyalty program.
As they go about their lives posting on social media, certain words or phrases will earn Taco Bell rewards.
Tressie Lieberman, Taco Bell vice president of digital innovation and on demand, said the goal was engagement for mobile app users, who tend to spend about 30 percent more than non-mobile customers.
“The whole game is about surprise and delight,” Lieberman said. “We’re not telling you what to do. You’re just going about your daily life and unlocking puzzle pieces.”
And, because Taco Bell’s target audience is young and easily distracted by the latest shiny object, the Irvine, Calif.-based chain has built innovation into program. This version is called “Season One.”
“Who knows what Season Two will bring,” Lieberman said.
Domino’s introduced its first digital customer loyalty program in September, called Piece of the Pie Rewards.
Although company officials declined to give membership counts during the fourth-quarter earnings report, Domino’s CEO Patrick Doyle said the program is “off to a great start.”
Members earn 10 points per day for online orders of $10 or more at Dominos.com or via mobile app. Once they reach 60 points, they can redeem their points for a free medium two-topping pizza.
Other member perks include discounts and bonus offers.
New to the loyalty game is the corporate dining marketplace Dinova LLC, a network that includes more than 13,000 restaurants, from quick service to fine dining, that serve business diners using corporate credit cards.
Dinova this week launched the myDinova program, through which business diners can earn personal rewards to dine out at any restaurant within the network.
“Whether it’s colleagues talking about a project over lunch at a restaurant near the office, the road warrior eating three meals a day while traveling, or a sales executive taking a client out for a nice dinner, any reimbursable business meal scenario is an opportunity for employees to earn personal rewards,” said Vic Macchio, Dinova founder and CEO.
For every $1 spent at a Dinova restaurant, the member earns 1 point. The more they dine in network, the more opportunities there are to earn points under the plan.
Membership also brings special offers and promotions. Rewards points can be accumulated to earn gift cards for network restaurants.