It’s not just your restaurant financials that will benefit from rewarding customers with loyalty programs, you’ll see some excellent business benefits that can even give you a competitive advantage.
But where do you get started on a programme for rewarding customers. One thing you should know is that there’s a wide gap between the distinction of loyal customer and frequent customer. Some guests will use a restaurant purely because there is no other alternative available to them. If an alternative appears, then it’s critical that your guests are coming to you because they are loyal.
In order to get the best from a loyalty programme, it’s important to instil a goal of loyal and potentially loyal guests benefiting from it. This leaves the challenge of how to go about this.
One of the most effective approaches is to sort the guests into groups with a program set for each. Ideally the most desirable program will appeal to the most desirable group.
Using the basic rule that 45% of new guests don’t return to make another purchase, use the following approach:
- Guests that are mostly likely to make another purchase are your primary goal, although this may involve initial expense.
- Identify guests who are most unlikely to make another purchase and keep marketing spend limited for this particular group.
- Put resources into marketing to the group that are most likely to repurchase as they fit the profile of your existing re-purchasers.
Once your loyalty programme has been initiated you can expect the following business benefits:
1. Retention of existing guests
The implementation of a loyalty program that delivers customer retention should include a practical reason to re-buy. This may work best on a point accumulation system for a reward or service level increase. In addition, it will provide information so that guests can enjoy greater meeting of needs, which feed into the customer retention cycle.
2. Acquisition of new guests
The effective loyalty program will also attract new customers/guests. The rewards will determine how well this will work. Are they valuable or exciting enough? However, a focus on new clients should not be greater than the retention of existing ones and upselling to them.
3. Unprofitable customers
Bad customers who only cherry pick your discounts and low spending customers cost you money by costing more money to service than they generate. A loyalty program that rewards good customers without any reward for bad customers helps them not to stay.
4. Build relationships
Improved loyalty can be gained from building relationships with customers, and that can increase bottom-line profits. However, not all customers will fit your preferred customer profile, so a general approach to build relationships with all and sundry won’t yield best results.
5. Create advocates of your brand
Advocates will do your marketing for you, and far more convincingly than you can. They are so pleased with your product or offering that they will tell their family, friends and contacts. Overall a loyalty program that is designed to reward customers who are your most loyal and best spending clients can deliver the best results. Doing your homework on who these people are and building a profile is going to reward you and the bank manager.