Recessions can make any business — large or small — uneasy about potential drops in sales from the decline in economic activity. With inflation and ongoing supply chain issues, experts predict a 70% likelihood of a U.S. recession in 2023, with at least 41% of consumers saying they will cut back on spending at restaurants, bars and food delivery services, according to one survey.
Historically, discretionary purchases like restaurant meals are one of the first things consumers cut back on during an economic downturn. So what can restaurants and other businesses do to make it through a recession? Since loyalty programs are responsible for an 18-30% increase in spend and visit frequency, according to Paytronix, it makes sense for a brand to strengthen its loyalty strategy in the face of an economic downturn. Fine-tuning your loyalty strategy to meet customer needs during tight financial times ensures the most loyal customers remain engaged with your brand during the downturn and are primed to return to pre-recession spending levels once the economy rebounds.
Nurture emotional connections
One way to engage loyal customers is to nurture the emotional connection with them. Acknowledging the difficult times customers face or showing small gestures of appreciation go a long way in strengthening a connection, especially when finances may be tight. This could look like anything from extending the expiration date on earned rewards to surprising loyalty members with unexpected perks such as bonus points.
A darling of the quick-service restaurant industry, Chick-fil-A knows how to engage its customers and keep them coming back time and time again. Chick-fil-A One, the restaurant’s loyalty program, connects with members at a local level through email content including surprise and delight offers and in-store events. Personalized email communications come from the local store manager and include the manager’s picture, so customers can easily recognize them the next time they visit. The program offers excellent customer service, providing members access to an FAQ, a robust online help form, a phone number, a mailing address and customer service via Twitter.
Likewise, employee engagement can also boost customer loyalty. A solid company culture allows employees to flourish. Employees who are enthusiastic about their restaurant can be in-person brand ambassadors at every interaction. In the case of Chick-fil-A, every interaction with a customer is personalized, whether through its tiered loyalty program or at a restaurant when a manager puts a thank-you note in a pickup order. All small connections lead to satisfied and repeat customers.
Gain loyalty insight from data
How well a brand knows its customers can make all the difference in how well its loyalty strategy performs. One study showed that 73% of global consumers report it’s critical for a brand to know who they are and understand their preferences. By developing predictive models based on customer data, restaurants can identify high-value look-alike consumers and fast-track them to becoming a loyal customer.
Beyond the demographic data, brands need to consider how a person’s interests, values and opinions impact them during a recession. With this data in mind, it might be necessary to make minor tweaks or major changes to the value proposition in a loyalty strategy in order to improve customer engagement and satisfaction during a recession. Customer data is the fuel for ongoing, meaningful interactions with your brand.
Multiply program value with partnerships
Partnerships can multiply a brand’s benefits, lifting the member experience in tougher times and elevating consumers’ perception of the brand. When evaluating a potential partnership, consider if the values of both brands align, if the products and services add value to each of the customer bases, if the customer segments are complementary, if it is easy for members to engage with both brands’ program benefits and if the partnership would enable recognition of elite tier members by both brands.
One example of a strong partnership is Delta Air Lines and Starbucks. Their partnership began with Starbucks coffee being served on Delta flights. It has now blossomed into inviting members to link their Starbucks Rewards accounts to Delta SkyMiles to earn one mile for every dollar spent at Starbucks, and double miles on the day of travel on Delta. This partnership, and the value it offers, drives member retention and provides an additional revenue stream for both brands.
Shift brand marketing and loyalty budgets
Economic shifts not only impact customers, they may affect a brand’s marketing and loyalty budgets as well. If that is the case, look for ways to focus content and prioritize spending on high-value members — the 10% of members who statistically account for 50% of a loyalty program’s revenue. Look at economic models and budgets per tier of loyalty member to identify opportunities to shift dollars to top tier customers. Recession cutbacks aren’t necessary to get started. Start elevating interactions with high-value members now. Recognize and reward the importance of their relationship with the brand before economic conditions shift and this will encourage high-value members to quickly return to purchasing when circumstances allow.
Recessions are stressful for consumers and restaurants alike; however, a loyalty strategy can be the key to continued connection with your most loyal customers — resulting in retention and even growth despite market challenges.
AUTHOR BIO
Mary English is senior director, strategic services at The Lacek Group, a Minneapolis-based data-driven loyalty, experience and customer engagement agency that has been delivering personalization at scale for its world-class clients for more than 25 years. English is an accomplished global leader in CRM-driven loyalty marketing and customer experience with a proven track record of designing strategies that convert into meaningful, measurable results. She has worked with clients in several industries, including travel and hospitality, retail and luxe beauty.
