Why Loyalty Matters: How Restaurants Can Leverage Loyalty Programs To Drive Direct Sales

Restaurant owners should use loyalty programs as a tool to ensure that they are continuing to offer promotions and products that attract, and resonate with, their target customer base and keep them coming back.
By Mo Chaar, Chief Commercial Officer, Givex - 5.11.2021

The COVID-19 pandemic taught restaurants two important lessons: online ordering is a huge key to success and increased off-premise sales are here to stay. Online ordering across restaurant brands shot up by 44% in 2020 but, unfortunately for restaurants, a massive portion of those sales were claimed by third party delivery providers, many of which can charge up to 30% in fees per sale.

While this is a frustrating realization for many restaurant owners, one of the solutions to avoid third party fees is quite simple: loyalty programs. An engaging loyalty program can help to increase overall customer spend, keep orders direct and provide a valuable avenue to help restaurant owners track customer data.

In today’s competitive landscape, customer retention means everything. An extra 5% of customer retention can increase profits by 25% to 95%, and it costs five times less to keep a current customer than to land a new one. So how can restaurant owners keep customer retention high while lowering third party fees? By creating simple and engaging loyalty programs to encourage repeat business and drive direct sales.

How a POS Can Help to Craft Loyalty Programs

A single restaurant can never hope to offer the variety found on third party delivery providers like Uber Eats or Postmates, but restaurants can beat the big tech giants on value every time. 87% of Americans are willing to give up some personal data in order to get more personalized rewards and brand experiences. Thankfully, a strong POS system is constantly capturing valuable customer data that can be used to create an effective loyalty program. Restaurant owners can then analyze the data gathered from their POS system, including buying trends and customer demographics, to build a loyalty program that will resonate with customers.

Loyalty isn’t one-size-fits all; therefore, restaurant owners may need to tweak their programs until they find the system that works best. For example, while a points-based program may work for some brands, others may find that customers respond best to discounts on top-selling menu favorites or free add-ons during certain hours. While it may take a few attempts to find the program that works best, restaurant owners should keep a close eye on their top customers and ensure that they are crafting enticing promotions to keep them coming back. Recent polling shows that 75% of consumers favor companies that offer rewards, and 56% of customers stay loyal to brands that offer them, so it’s in a restaurant’s best interest to capitalize on this trend.

No Customer Loyalty Without Direct Orders

Without direct ordering, there can be no customer loyalty. By relying exclusively on third party delivery providers, restaurants lose the opportunity not only to build relationships with their customers but also to craft targeted programs that ensure repeat business. Plus, restaurants lose a large portion of their profit from every sale due to third party fees.

Instead, by encouraging customers to order directly, restaurants can begin to increase their sales over time while lowering the margin for error that often occurs through the use of third party providers. Direct online orders flow straight to a restaurant’s POS system rather than filtering through other websites, allowing restaurants to increase their overall accuracy and decrease potentially costly errors. An effective loyalty program should lead customers directly to the restaurant’s online ordering page, reducing the chances for customers to get lost in the shuffle while attempting to navigate to the site.

That being said, some restaurants may still need to work with third party delivery providers in order to increase visibility. In that case, while it may be enticing to offer deals and promotions on these sites to help encourage orders, restaurants should save the best deals for valued customers who order directly. This will help to reinforce direct orders and drive repeat business. When using third party delivery services, restaurants should include promotional codes and details about its loyalty program on all to-go packaging, highlighting the money that can be saved on future orders when customers sign up for rewards and order directly for their next purchase.

The Key To Good Customer Loyalty Programs

The key to a good loyalty program is simplicity. Customers that find a program complicated are more likely not to follow through and will drop off before ever making a purchase. A streamlined and straightforward loyalty program makes it easy for customers to order, track their rewards and plan future purchases.

While loyalty programs offer a direct path to increased sales and higher customer retention, they also offer an opportunity for restaurants to test their understanding of their customer. Restaurant owners should use loyalty programs as a tool to ensure that they are continuing to offer promotions and products that attract, and resonate with, their target customer base and keep them coming back. If owners notice a drop-off in sales, it’s time to tweak the program and offer new incentives to bring back customers who may have begun to falter.

Monthly newsletters and e-blasts also provide a simple and effective way for restaurants to share their newest offerings with customers and ensure that top customers are always the first to hear about exciting new promotions or limited time offers. An effective loyalty program allows for a conversation between a restaurant and its customers to not only share news of exciting menu additions but also to receive feedback from customers.

When done correctly, a loyalty program is one of the most effective tools a restaurant can use to drive direct orders and increase overall sales while allowing customers to build a stronger sense of connection with the brand.

Since joining Givex in 2007, Mo Chaar has helped the company expand its North American footprint. He began his tenure as a Business Development Manager before becoming Vice President of Sales for North America, and then moved to his current role of Chief Commercial Officer. In this role, Chaar oversees commercial strategy and development worldwide in addition to managing the sales teams within North America. His experience in gift card, loyalty and POS has played a pivotal role in the success of some of Givex’s largest partners. Chaar received a Business Administration Diploma from Sheridan College and prior to joining Givex, served as a Location Manager for Jiffy Lube International. Givex is a global cloud-based operations management solution designed to streamline business efficiencies and generate valuable and actionable customer data. Since its founding in 1999, Givex has provided operational intelligence across a wide variety of industries, from restaurant and retail to hospitality and the service sector, offering a fully integrated suite of customizable products, including gift cards, loyalty, point-of-sale (POS) and analytics.

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