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Restaurants are committed to loyalty programs to maintain digital profits

Employees carry customer orders at the Domino’s Pizza restaurant in Detroit.

Sean Proctor | Bloomberg | Getty Images

Forget the battle for supremacy of chicken sandwiches. Loyalty Program War is coming.

According to market research firm The NPD Group, digital restaurant orders surged 124% in the year ended in March. And the surge in popularity of online orders during pandemics has motivated large fast food chains to use reward programs to retain customers for new mobile apps. Most restaurant chains now automatically enroll their customers in the loyalty program when they order meals via the mobile app.

Starbucks, Panera Bread and Domino’s Pizza paved the way, and Chipotle Mexican Grill launched its own version in 2019. But last year, more players joined the arena. Wendy’s, Yum! Brands Taco Bell, and Restaurant Brands International’s Burger King are among the new entrants, and McDonald’s and Jack in the Box are preparing to launch a loyalty program later this year.

“With Covid-19 and changes in consumer behavior, I think we’re launching a program for consumers to come back and maintain it. Loyalty,” he said. Elle Kross, director of travel, hospitality and food service client strategy at digital marketing firm Movable Ink, said.

According to Aaron Allen, founder of restaurant consulting firm Aaron Allen & Associates, loyalty programs help facilitate more frequent visits and higher average checks.

For example, Chipotle CEO Brian Niccol told analysts in April that the company’s loyalty program is driving additional transactions across the “light, medium and heavy consumer segment.” Prior to the pandemic, the chain program had 8.5 million members. Currently, it has more than 21 million members.

For the first time in the first three months of this year, digital orders accounted for the majority of the company’s quarterly sales. The company continues to drive consumers towards loyalty programs by offering early releases of new menu items and making some items, such as quesadillas, available only for digital orders.

However, these are not the only factors driving the loyalty program boom between restaurants. Companies also want to know more about their customers by collecting and analyzing data based on their order preferences and personal information. This consumer data can be used to better target customers, both in marketing offers and in future opportunities such as new menu items.

“We’ve come a long way from subway punched cards,” Allen said.

For now, customers rarely care about providing this data about themselves, occasionally in exchange for free drinks and discounts. Goldman Sachs surveyed 2,000 consumers about their views on technology features in the restaurant industry. Studies show that loyalty programs are becoming more important to these consumers.

Restaurant loyalty programs differ in design and rewards, but unlike airplane reward programs, most programs do not use individual tiers based on the number of points earned by members. For example, Starbucks dropped the tier in 2019 to allow new members to be more involved in the loyalty program.

In the three quarters after Starbucks made that change, 3.1 million loyalty members were added, up 15% from the same period in 2019. Throughout that period, same-store sales in the United States increased significantly quarterly, except during the period when the pandemic began to occur. Business sacrifice.

During the crisis, the coffee giant made another major change to its loyalty program, expanding the number of payment options to include cash and PayPal. In the second quarter of this year’s Starbucks, 52% of US company-owned cafe sales came from Starbucks Rewards members. Mobile orders accounted for 26% of US company-owned transactions, up from 18% a year ago.

This is the kind of digital growth and loyalty that McDonald’s wants to emulate in future rewards programs. U.S. President Joe Arlinger of the chain told analysts in April that the company saw about $ 1.5 billion in digital sales in the first quarter, including orders for digital kiosks, mobile apps and distribution platforms. However, that number can be even higher. As of February, we are testing the program in 900 of the 14,000 US restaurants in Arizona, Nevada, and New England.

Restaurants also rely on loyalty programs to give them a more personal touch when interacting with their customers, even when zooming in and out on drive-through lanes. Panera Bread’s latest restaurant design automatically recognizes loyal members whether they pass through a drive-through or enter a location.

In an interview in May, Panela’s Chief Brand and Concept Officer, Eduardo Ruth, said, “Once you are identified, we will interact, recognize and treat you as a person.” , You can expect it. “

To achieve this, Ruth said the company is considering several options, such as code scanning and microfencing technology. The first location for the new restaurant design will open in November in Ballwin, Missouri.

One of the big issues for restaurants with existing loyalty programs is how to retain loyalty members even if other restaurant chains launch rival plans. Fast food chains may need to increase the number or quality of member rewards, betting that the benefits of consumer data will make up for those losses.

“The limit or turning point is that we don’t want to download the app everywhere we visit,” Allen said. “So I think it’s another impetus that separates what it has from what it doesn’t.”

Large restaurant chains like McDonald’s and Chipotle have the capital to invest in technologies such as improving mobile apps and building frictionless reward programs. But small chain stores and independent eateries can’t catch up as well. Instead, third-party companies can build loyalty programs for smaller players, but companies using these plans will not receive the same customer data as the chain that built their own rewards program.

Competition is likely to occur even among large chains. Allen predicts that restaurant giants will become more savvy and proactive by adopting a strategy similar to that of the hospitality industry. For example, Hilton Honors matches the reward status of a rival hotel owner’s customer.

Kross pointed out Dunkin’s one-year review email for loyal members, similar to those created by Peloton and Spotify, as an example of an already creative fast-food chain. These types of summaries summarize members’ years and provide data on the number of free drinks earned at Dunkin or the number of hours worked at Peloton.

“I think this is really great because two emails are never the same and two consumers are never the same,” she said.

Restaurants are committed to loyalty programs to maintain digital profits

Source link Restaurants are committed to loyalty programs to maintain digital profits

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