Operations

How operators can optimize loyalty programs to thrive during inflation

Learn how restaurant operators can enhance their loyalty programs during inflation by focusing on personalization, leveraging AI technology and rewarding long-term customer loyalty.

Photo: Adobe Stock

August 23, 2024 by Mo Chaar

As inflation continues to rise, restaurant operators are feeling the pinch with increased costs. At the same time, consumers are thinking more carefully about where they go out to eat as they cut down on expenses. In challenging times, customer loyalty becomes even more crucial. A well-executed loyalty program that leverages AI can help restaurant operators retain existing customers, encourage repeat visits and ultimately, boost revenue. The restaurant AI market is valued at $9.68 billion in 2024 and is projected to soar to $49 billion within the next five years. Here are some strategies for restaurant operators to maximize the benefits of their loyalty programs, especially with the use of AI.

Focus on personalization

A loyalty program that offers personalized rewards can make customers feel valued and understood, increasing their likelihood of returning. Since 83 percent of consumers report being part of at least one loyalty program, it's crucial to ensure the loyalty program stands out from the competition. Using artificial intelligence (AI) and data analytics, restaurant operators can track customer preferences and behaviors, tailoring offers that resonate with individual patrons. For example, if a customer frequently orders a specific dish, a reward offering a discount or upgrade on that dish could be particularly appealing.

Personalization also extends to how rewards are communicated. Leveraging AI-driven POS systems, restaurant operators can send timely and relevant offers through email, SMS or mobile apps, ensuring that the message reaches the customer at the optimal moment. This not only enhances the perceived value of the loyalty program but also increases the chances of the customer taking advantage of the offer.

Go beyond discounts

While discounts are a common feature of loyalty programs, inflation makes it harder for restaurant operators to offer significant price cuts without sacrificing profitability. Instead, focus on creating unique and memorable experiences that can be offered as rewards. These could include exclusive menu items, priority seating or invitations to special events. Such experiences differentiate the restaurant from competitors.

Moreover, consider offering rewards that align with current consumer trends. For instance, with the increasing popularity of sustainability, rewards that promote eco-friendly practices, such as discounts on plant-based menu items or reusable containers, could resonate well with customers.

Leverage technology

Integrating AI with the POS system can help streamline operations, making it easier to track customer interactions and manage rewards. This can also reduce the administrative burden on staff, allowing them to focus more on delivering excellent customer service.

Additionally, mobile apps are becoming an essential tool for loyalty programs. They provide a convenient platform for customers to track their rewards, place orders and receive personalized offers. Given that inflation often drives consumers to seek more convenience and value, a well-designed app can enhance the overall customer experience and encourage more frequent visits.

Reward loyalty, not just transactions

In times of economic uncertainty, it's crucial to recognize and reward loyal customers not just for their purchases but also for their long-term commitment to the brand. A study found that a 5% increase in customer retention can correlate with at least a 25% increase in profit, meaning rewarding loyal customers is well worthwhile. Simply having a loyalty program already gives the restaurant a leg up. According to a recent study in the U.S., 65% of respondents found value in loyalty programs, and nearly half (47%) are attracted to Happy Hour deals.

Consider implementing a tiered loyalty program that offers escalating rewards based on the length of time a customer has been part of the program. This can strengthen emotional bonds with the brand, making customers less likely to switch to a competitor even if prices rise.

Moreover, encourage social sharing as part of the loyalty program. Customers who share their experiences on social media can be rewarded with bonus points or exclusive offers, turning them into brand ambassadors. This also increases visibility.

Adapt to changing consumer behavior

It's important for restaurant operators to monitor shifts in behavior and adjust their loyalty programs accordingly. For instance, if customers are dining out less frequently, consider offering rewards that encourage them to return, such as a free appetizer after a certain number of visits or a discount on takeout orders.

As inflation continues to impact the restaurant industry, a well-strategized loyalty program can provide a competitive edge. By focusing on personalization, leveraging technology and rewarding long-term loyalty, restaurant operators can not only retain their existing customer base but also encourage more frequent visits, helping to offset the rising costs of doing business.

About Mo Chaar

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 as well as 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.

Connect with Mo: