5 Tips for Successful Restaurant Loyalty Programs That Target Millennials

on October 30, 2015

Many restaurateurs—perhaps yourself included—simply don’t have time to think critically and strategically about what type of loyalty program is right for their business.

The lack of support for loyalty programs is no surprise, considering that 56 percent of single-location restaurants don’t have a POS system in place.

restaurants with POS system graph

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 (especially mPOS systems that enable customers to input contact info right at their table).

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.

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.

For example, you could tie your food delivery business into your loyalty program so customers are rewarded for every interaction with 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

millennials loyalty reward preferences graph

Loyalty programs that award points per the amount of dollars spent are most preferred by millennials, at 35 percent. This is followed by programs in which customers opt-in and receive discounts.

A loyalty program that combines these two—where points can be spent on a variety of items, while sporadic discounts are offered—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

Third-party loyalty programs Rewards network
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—suggests exclusive perks in place of monetary rewards to encourage loyalty. These can include:

  • Guaranteed reservations for exclusive events
  • Members-only special dinners
  • Members-only apparel items

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, 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
why millennials quit restaurant loyalty programs

Our data shows that the top reasons millennials abandon loyalty programs are because rewards take too long to accrue and they’re not deemed valuable enough for the effort required to earn them. 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 of a loyalty program is the ability it enables to sustain engagement with valuable customers. 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

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 (43 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.

Customer’s loyalty rewards points balance via Revel

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 specia

lized apps on their smartphones or tablets to earn, track and redeem loyalty rewards (38 percent).

Preferred Method for Tracking/Redeeming Loyalty Rewards

preference of millennials for restaurant loyalty programs

Fortunately, most third-party loyalty programs offer consumer-facing mobile apps for doing just that. Some POS systems, including 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

what millennials would do with loyalty program app

Our research finds that millennials would most want to use a loyalty app to receive and redeem their points in exchange for rewards (35 percent). Another one-third of millennials (33 percent) would most want to view their rewards balances (33 percent). This gamification is precisely the chord you want to strike with a loyalty app-enable rewards program.

One thing to consider is the complexity of the app. You’ll want to make sure your 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.

Final Takeaways

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 “Compare Software” 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 justinguinn@softwareadvice.com.

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