Restaurant chains find that loyalty marketing pays dividends

Enterprises see loyalty programs increasing revenue, competitiveness in digital arena

Marketers have long embraced reward programs to engage customers and encourage increased order spend and frequency. Restaurant chains are seeing the value of loyalty first-hand in the context of the digital ordering explosion. A number of brands have recently launched or revamped loyalty programs in recent months, including Burger King (improved), Velvet Taco (launched), and IHOP, which rolled out its International Bank of Rewards.

Paytronix, a Newton, Mass.-based marketing-services company providing SaaS-based customer experience management solutions, reveals that there is a delicate balance between diner spend and the value of rewards. A restaurant can spend more on rewards to increase customer spend; however, at some point, the value of rewards can be so high that it becomes counterproductive. At that tipping point, customer spend can actually decrease. In other words, there’s a science to managing these programs.

Data from the 2021 Paytronix annual loyalty reports suggest that in 2020, loyalty members’ checks were 6% larger on average than those of non-loyalty members. For eight months of that year, the top 10% of loyalty members accounted for more than half of all loyalty spend at their favorite brands.

Per its 2022 report, Paytronix found in-store orders in 2021 were down 42% versus the pre-pandemic year of 2019; meanwhile, unsurprisingly, digital orders were up 113%. Digital orders now account for a third of all orders, while they only made up 12% of orders pre-pandemic.

Thanx, a guest engagement platform that offers loyalty programs, has been working with fast-rising restaurant chains, including Pincho and Dig. Its tiered-loyalty program with fast-casual Dig has attracted attention. Dig’s custom app now connects to the Thanx loyalty program via APIs and a cloud platform.

For restaurant companies that may not have a mobile application, Thanx steps in with a mobile solution. This engagement program can provide a white-labeled experience and digital ordering solutions, in addition to loyalty. Dig maintains control of their app experience while up-leveling for better data capture, as well as automated enrollment, easy-to-use marketing tools, and integration with online ordering provider, Open Tender (previously Brandibble).

The Dig app is now integrated with the Thanx loyalty program Image by Thanx.

According to Thanx, loyalty programs offer great data capture opportunities. “When a customer enrolls in a loyalty program and identifies themself for subsequent transactions, all of their transactions are captured, enabling restaurants to paint a complete picture of who their guests are, their preferences, and what motivates them,” said Zach Goldstein, chief executive and founder of Thanx.

In addition, loyalty programs create personalization that generates worthwhile return on investment. Restaurants can better channel their marketing and send targeted offers. This lowers the cost of promotions, notes Goldstein, while increasing the incremental revenue per customer. A restaurant can send a customer offers based on personal preferences and purchasing habits.

Non-discount offers are another good way in which reward programs can be used. In the past, loyalty programs have gotten a bad rap for discount promotions such as generic coupons. For example, a restaurant can persuade customers to save money and accrue loyalty points by ordering direct versus through third-party providers, where fees can be higher.

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With the program deployed at Dig, customers receive $5 when they sign up through an easy-enrollment process. No passwords are required and the program works with guests’ credit cards. Dig customers earn $5 for every $50 spent. The multi-tiered program entices customers to increase their reward level as they move through “kitchen ranks.” With Sous Chef status, for example, perks include birthday and referral rewards. At the top rank, Executive Chef, they can take advantage of free monthly featured menu items and bowls.

Dig executives tracked a 24% increase in average check as a result of the program, installed early last year and announced in 2022. Tracy Kim, chief operating officer at Dig, notes that the loyalty program offers a great way to provide a best-in-class experience. She says, “As we do when guests are in the restaurant, we want to make our digital guests feel special and like part of the team as well. Loyalty has been a great tool in creating that brand connection. Being able to offer perks and freebies to brighten up somebody’s day is the cherry on top.”

Velvet Taco and Curry Up Now are additional Thanx customers, launching creative loyalty programs for their guests. In February, Velvet Taco created The Velvet Room, a tiered program to increase guest spend without leaning on discounts.

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According to Thanx’s Goldstein, the need for restaurants to communicate with guests was accentuated during the pandemic, and has accelerated the launch of loyalty programs among chains, including McDonald’s, which has been widely-viewed as successful. He says, “The value of knowing who your customers are, especially in light of competition from third-party delivery companies, is more acutely understood now. What’s more, to differentiate from third-party channels, restaurants are leaning into loyalty programs to promote ordering directly and to drive digital engagement.”

With digital orders on the rise, restaurant companies can effectively use mobile apps combined with loyalty to keep customers engaged and ordering on their channels. Marketplaces and third-party providers have not historically shared customer data and can compete for guest loyalty. Reward programs clearly position restaurants more competitively in a digital world.

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