Many restauranteurs—perhaps yourself included—simply don’t have time to think critically and strategically about what type of loyalty program is right for their business. This isn’t surprising, considering 63 percent of restaurants don’t have a POS system in place.
Adopting a point-of-sale (POS) system is a fundamental first step on the road to implementing your restaurant loyalty program. Successful loyalty programs are built on customer data, and POS systems are essential in collecting and analyzing that data.
What’s more, using a POS system will give you more free time to help customers and build meaningful relationships that ensure positive experiences. (If you need advice selecting a POS system for your restaurant, click the button to the right and we can provide you with free pricing information.)
So, once your POS system is in place, what are the next steps for creating an effective loyalty program?
To help answer this question, we conducted research on millennial customer loyalty preferences and spoke with experts in this space, coming up with five tips for success.
Why are we focusing on millennials? They are the most valuable segment for your restaurant to target with loyalty programs. According to a U.S. Chamber of Commerce report, millennials (16- to 35-year-olds) now outnumber baby boomers (51- to 69-year-olds) as the largest generation group in America. Another study shows 49 percent of millennials eat out at least once a week, and 36 percent get take-out or delivery once a week.
The following tips can help you select the loyalty program that’s right for your business. They will also help you ensure that, regardless of which loyalty program or platform you choose, it meets the needs of your targeted customers.
1. Know Your Options
There are many loyalty program options available, but we advise choosing a program supported by your POS system. The advantage such programs offer over others is that they run on the same system you use to manage the rest of your restaurant. This allows you to review valuable customer data and update loyalty offerings without having to move into a different software system.
POS-enabled loyalty programs typically offer several options for operating the program and rewarding customers. This is helpful, given that our research finds millennials are somewhat split in their preferences:
Millennials’ Preferred Loyalty Program Rewards
Loyalty programs that award discounts are most preferred by millennials, at 37 percent, followed by earning points based on dollars spent (30 percent). A loyalty program that combines these two—where points are accrued for dollars spent, which can be redeemed for discounts on future purchases—is most likely to be popular among millennial customers.
For those who decide to operate their loyalty program independently of a POS system, there are other great options to choose from, as well. Here are some of the details of these programs:
Additional Loyalty Program Options
|Typically operates on a frequency model (points earned for each visit)||Registers your restaurant within a network of other restaurants|
|Customers check in with a card or mobile app at your restaurant to earn points||Customers opted into the program dine anywhere in the network to earn points|
|You choose your program’s rewards and point totals||Points are awarded to customer’s linked rewards program (airline miles, fuel rewards etc.)|
|Provides you with access to customer purchase histories, contact information and other data||Third-party provider does most of the legwork to get customers into your restaurant|
|Managed by a third-party loyalty company; may or may not integrate with your POS system||Customers may become loyal to the program, but not necessarily to your restaurant|
Regardless of which loyalty program you choose, it should have a positive impact on your bottom line. These programs need to bolster your revenue, never drain it.
2. Look Beyond Monetary Rewards
It’s important to be forward-thinking when implementing your loyalty program—regarding both the impact the program will have on your revenue as well as the shared values of your customers.
“What we see is [that millennials], especially on the restaurant side, do have a great deal of loyalty,” says Mark Johnson, CEO and CMO at Loyalty360, a professional loyalty marketing association. “They want to have a very unique relationship [with,] and more emotional attachments to, brands.”
You may consider aligning your brand with causes many millennials support to encourage them to join your loyalty program. This can be anything from serving locally sourced ingredients to taking a stand on a social issue. Building loyalty in these ways can help reduce the amount of discounts and other monetary rewards you offer.
Minimizing monetary rewards is advisable, according to Cheryl Parsons, vice president of marketing at Rewards Network (a financial and marketing firm that consults restaurants about loyalty programs). The typical restaurant’s profit margins of 3 to 5 percent are small enough, she notes, without awarding free giveaways to loyalty members on top of that.
Duane Owens, business development manager at Restaurant Manager POS—a restaurant point-of-sale software vendor—agrees that monetary rewards aren’t necessarily the best way to encourage loyalty. He suggests using exclusive rewards, such as guaranteed reservations for exclusive events or members-only special dinners. Not only do these help your bottom line, they are also great ways to cultivate the unique brand relationship millennials seek.
But how do you determine which rewards, monetary or otherwise, will have the greatest impact on your customers? The answer is actually quite simple.
3. Actively Listen and Seek Feedback
Successful loyalty programs require active participation from both parties: Not only do customers have to participate, you and your staff must also be active in listening to their needs and desires.
“Just ask customers what kind of rewards they’d like to get,” says Jenny Beightol, director of brand communications with Belly, a loyalty platform that integrates with POS systems. “Millennials have no problem providing feedback.”
Millennials, as a group, also tend to be active on social media—so invite your customers to leave comments and recommendations about your loyalty program via a Facebook page or Twitter account. Some POS systems even offer marketing modules that integrate with these social media channels, which can be an effective way to manage various accounts in one place.
The chart below perfectly illustrates the importance of actively listening to your millennial customers:
Top Reasons Millennials Quit Restaurant Loyalty Programs
Our data shows that the top two reasons millennials abandon loyalty programs are because the rewards and/or discounts offered aren’t valuable enough. These insights are great examples of what you can learn about your loyalty program by simply asking its members.
A survey or poll is an effective way to gather this information. Many POS systems offer marketing modules that allow you to send targeted email campaigns—which can include surveys—to loyalty members. Alternatively, you can utilize your loyalty member contact information and a survey creator (e.g., SurveyMonkey) to gather feedback. With either option, you can even incentivize them to complete the survey by offering extra points or some other (preferably non-monetary) reward.
You can see the importance in gathering these insights: They can be used to optimize your loyalty program so that you can keep members coming back.
4. Sustain Engagement With Loyalty Members
Though it’s no small feat, gaining members is not the crowning achievement of successful restaurant loyalty programs: The real value is in the ability to sustain that engagement. To explore this further, we asked millennials about the factors that most encourage them to participate in loyalty programs.
Top Incentives for Millennial Participation in Loyalty Programs
Our data shows that the speed with which points and awards can be gained has the greatest impact on millennials’ likelihood to participate in a restaurant’s loyalty program (51 percent). Thus, a best practice might be to offer an initial reward for enrolling in the program and/or for the first visit as a loyalty member. Indeed, Beightol says this type of engagement tactic works at Belly to get members engaged early on.
“Belly uses the theory of ‘Goal Gradient’ to keep customers engaged,” Beightol says. “After a customer’s first visit, they’ll receive a ‘First Visit Boost’ and earn triple Belly Points—15 points—instead of the standard five points for their visit. This will put them even closer to a reward, which has been scientifically proven to prompt the customer to return even sooner.”
And while the gradient method works well for initial visits, what about long-term engagement? David Grant, director of developer marketplace at Revel Systems, recommends employing loyalty tiers to give members something to work toward.
With this system, Grant explains, “if you earn a certain amount of points at a restaurant [by coming in a certain number of times], then you get placed into a higher tier. And perhaps by being in this tier, you get double points … to incentivize you to keep coming back.”
A program such as this lets members accrue points quickly, which can be great for driving engagement. There’s even an element of gamification involved with “leveling up” to the next tier. To encourage participation, it’s a good idea to offer loyalty members a way to check their points and see how many they need to upgrade. But what’s the best way to do this?
5. Offer Mobile Accessibility for Loyalty Programs
As you may have expected, mobile apps are king. Our research shows that most millennials prefer to use specialized apps on their smartphones or tablets to earn, track and redeem loyalty rewards (40 percent).
Preferred Method for Tracking/Redeeming Loyalty Rewards
Fortunately, most third-party loyalty programs offer consumer-facing mobile apps for doing just that. Some POS systems, such as Revel, also offer open APIs so that you can create your own loyalty app.
We also asked millennials what activities they’d do most often on a loyalty app. Use the following information to determine what functionality your app absolutely needs to have.
Activities Millennials Would Do Most Often With Loyalty Program App
Our research finds that millennials would most often want to view their rewards balance (36 percent), followed by viewing menus and prices (29 percent). Be sure whatever app you choose allows users to perform these functions. It’s also a good idea to enable loyalty enrollment via the app: This will streamline the program sign-up process and take it off the hands of your staff. However, it would be wise to ensure staff members are well-versed in the workings of the app, as they’ll be the ones your customers ask if they have any questions.
To reiterate, be sure to do your research and decide which loyalty program is best for you. Stay fluid and creative with your rewards to avoid lessening your margins. Ensure your loyalty platform or POS system has the ability to manage social media channels, so you can listen to and engage with customers. Consider how best to maintain consistent engagement with your loyalty members. And if you go with a mobile app, be sure it supports the activities customers most want to use it for.
And again, before implementing a loyalty program, you should have a fully functional restaurant POS system in place. Not only are these systems essential for managing and analyzing customer data, they also enable you and your staff to deliver greater customer experiences by saving time and streamlining daily operations. Strong customer experiences are the foundation of any successful restaurant, not to mention its loyalty program.
If you’re interested in learning more about POS systems or need help choosing the best system for your restaurant, we’re here to help. Click the “Get Pricing” box to your right or just give us a call at 888-918-2746 and one of our POS experts will help you determine the best solutions for you business.
If you have comments or would like to obtain access to any of the charts above, please contact firstname.lastname@example.org.
To collect the data in this report, we conducted a one-day online survey of 14 questions, and gathered 346 responses from random millennial consumers within the U.S. We screened our sample to only include respondents who are or have been enrolled in restaurant loyalty programs. For more information on our methodology, click here.