Article

The changing face of QSR customer loyalty programs

Digital loyalty programs can increase the visit frequency of those loyal customers by 12 to 44 percent.

September 3, 2013

By Chris Luo

Vice president, Marketing, FiveStars

Digital loyalty programs have long been a mainstay for national restaurants and retailers, who spend millions on their development but reap their rewards by leveraging the data collected to boost sales, increase marketing efficiency, and drive loyalty. Local businesses and restaurants, however, lacking the funds to develop more sophisticated programs, have largely been relegated to the world of punch cards and stamps. While cheap and easy, they don't allow businesses to track spending or collect any data on their customers' purchasing behavior. Some local businesses and restaurants have tried check-in apps that run on smartphones or iPads, but they are easy to game (you can check in on FourSquare from the street without buying anything) and exclude both customers who don't have smartphones and those who do but don't care to download new apps.

Fortunately for QSRs, a new crop of technology tools have emerged that are bridging the gap between expensive custom programs like those at CVS and Starbucks and the paper/stamp card world. Most offer not just the ability to track and bestow awards, but also provide critical data and insights that can help you better understand your customer base, reach customers with relevant promotions, reduce churn, identify VIP customers, and help create brand ambassadors via social media.

Thinking of implementing one of these tools? Here are some factors that you might want to consider as you explore options:

Does it integrate with your existing POS system?

Consider what you're trying to accomplish: rewarding customers for spending money at your business, in the hopes that they'll come back and spend even more. You want a greater share of their wallet, right? The only way to do that is with a customer loyalty program that integrates with your POS system. While there are plenty of loyalty program options — ranging from apps customers download, to iPads at the registers, to web-based software — we think the best options involve POS integration. It's the only way to tie rewards to true spend. It also allows you to improve customer service by providing your staff with important customer information at the point of sale, like their name, time of last visit, if they're a VIP, or what they like to order. If you choose a smartphone or tablet solution, you have to keep in mind that your customers will be interacting with machines, not your staff, and because rewards are based on check-ins and not spend, it's likely that your program won't flag your highest spending customers as VIPs — which can be a costly mistake.

Will you retain ownership of customer data?

You probably already have a good idea of the types of data you'd like to collect, such as name, phone number, email, birthday, 'favorites,' etc. Make sure the vendors you're evaluating can collect that data, and then — this is really important — check the terms and conditions of their contract to make sure you will own all of the data you collect. Incredibly, some vendors will charge you an additional fee to control your own customer data. Don't let that happen to you.

How quick and easy it is for customer to join the program?

Customers expect QSRs to be just that — quick service. Make sure you find out how long it takes to register a customer to your new loyalty program, and how easy it is for your staff. The more steps required, the longer it will take and as a result, fewer customers will join. Initial registration for a loyalty program shouldn't take any longer than a few seconds — we recommend simply collecting name, phone number and/or email to join, though you could collect just the phone number if you want. Avoid handwritten forms and QR codes — both are notoriously slow.

Does the program provide marketing tools for customer outreach?

Now that you're collecting all of this valuable customer data, what can you do with it? Most Fortune 1000 companies use some type of marketing automation platform that allows marketers to send highly targeted promotions to customers based on specific spending behaviors, often automatically. But you probably don't have $300,000 to spend, so look for a loyalty platform that incorporates some of these great features, like simple email marketing, text message campaigns, and social media marketing. The good platforms will auto-segment your customers, so you don't need to have a master's degree in marketing or a CRM specialist to run targeted campaigns.

Use of digital loyalty technology among QSRs is gaining traction, especially among those who have tried daily deals. This is because so many have learned that unlike daily deals — which often deliver unprofitable one-time customers — loyalty programs are about building long-term customer relationships and increasing customer lifetime value.

FiveStars' recent analysis of small and medium businesses found that 20 percent of the average business' customers generated over 70 percent of their visits and 80 percent of their revenue. Moreover, digital loyalty programs can increase the visit frequency of these loyal customers by 12 to 44 percent, depending on the vertical. Identifying and nurturing loyal customers can have a tremendous impact on the bottom line, and without a digital loyalty program you're most likely leaving revenue on the table. So what are you waiting for?

Photo provided by Wikimedia.