Marketing

How to tell the difference between loyalty programs and offers (and why it matters)

Offers and rewards have two distinct purposes for QSR brands, and it's important to consider the differences and ensure that you're creating programs that serve your customers best.

Image: Adobe Stock

November 20, 2023 by MaryBeth Maskovas — Founder, Principal Analytics Consultant, Insight Lime Analytics

In the QSR world, offers and rewards are so intertwined that we often talk about rewards when discussing offers. Many platforms that are intended to manage rewards programs have many features to help brands send specific offers as well. But offers and rewards have two distinct purposes for QSR brands, and it's important to consider the differences and ensure that you're creating programs that serve your customers best.

QSRs and offers have a romance that most Americans are incredibly familiar with. We all remember receiving mailed inserts for different fast food brands in our mail, and many Americans still receive these inserts. In the digital age, offers have also been used to encourage the adoption of unique new products and have become a huge part of promoting events and product launches for brands. If you work for a brand and you developed something new, you better believe that there is an offer that the product and marketing teams are discussing that will introduce it.

Where QSR brands need to be mindful is that although giving coupons and discounts has become an integral part of how many brands market, rewards programs are different from your offer strategy. Yes, you can give exclusive offers to your rewards customers but that shouldn't be all. Rewards programs should not exist to serve you, the brand, but to serve those loyal customers that you value so much.

Here's an in-depth comparison:

An offer is an incentivized discount that can be delivered to various audiences. Many brands still send magazine inserts; offers can be digital.

Their main purposes:

• Encourage incremental purchasing/increase frequency.
• Introduce new products and encourage adoption of said products (new milkshakes, fries, etc.).
• Event-based like National Cheeseburger Day.
• Drive more sales on the local level.

Rewards programs should exist to serve your most loyal customers and make them feel special. In QSRs (and many other businesses) the 80/20 rule applies. 80% of your best revenue can come from the top 20% of customers.

The main purpose of a rewards program is to:

• Highlight exclusivity for people who regularly purchase from your brand by giving them exclusive offers, news, and more.
• Encourage additional spending with rewards points or other benefits.
• Give your VIP customers a personalized experience.

Rewards programs Do's and Don'ts

QSR brands that are growing beyond a single-unit model have an expectation these days to launch a rewards program. Investors ask about it, franchisees ask about it, and it has become a core part of the "marketing stack" of any brand.

When you go to conferences like Fast Casual Executive Summit, multiple loyalty programs are vying for your attention. There will always be at least three topics on the agenda, all about rewards.
From the brand side, the reasoning is clear. Here are some of the major benefits of rewards programs that we all have our eyes on:

• Better customer data. When someone signs up for a loyalty program and an account with us, we get digital data tied down to the user level. This is incredibly valuable for marketing to this person in the future.
• Higher revenue.Typically, brands see that rewards program users have a higher average check than non-loyalty/rewards users
• These are your 20%, and now you know them. Back to the 80/20 rule, having a rewards program where you can send push notifications and other marketing toward your best customers is incredibly valuable to the brand

With all of those juicy benefits, we can sometimes lose sight of the real purpose of loyalty programs, which is to make that 20% of customers feel incredibly special and continue to win their business (not just market the heck out of them!)

So, how do you ensure you're creating a loyalty program that drives value for your customers, not just your shareholders?

Here are some areas to consider adding to your strategic plans for your program:

• Using loyalty as a way to personalize to your top customers.Using both the behavioral data (what they buy) and things like surveys (what they say they buy) you can make sure to personalize any offers or messaging you send their way. A customer who never eats beef will feel much more appreciated when you send them only vegetarian and chicken offers. The customer has given you information because they want you to know who they are — make sure to honor that!
• Create exclusivity. Just because many QSR brands have lower price points than other restaurant concepts does not mean that exclusivity is lost on our customers. Think about it — many brands have had smashing success where their sauces are snatched up by customers and resold or have a cult following for certain products. Loyalty programs can help reward those super-users by giving them early access to products, news, and more.
• Encourage them to return to you, not your competitor.This is where building points or exclusive offers can come into play. You want to make sure you hold onto those top spenders and giving them rewards for their frequent purchases can help "gamify" the experience of eating out and, if done right, encourage them to choose you over a competitor because they already have earned points with you.

While offers and rewards programs will never be detangled from one another for QSRs, considering the purpose of your loyalty programs will help you have more programs that encourage the stickiness you're looking for — and maybe even give you an opportunity to not discount to those top customers — which can mean a lot of average check!

About MaryBeth Maskovas

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MaryBeth is a data and digital transformation expert with 10 years of experience working with both large and small brands to uncover the mysteries of data and drive business performance. She has worked with notable brands like KAYAK and Wendy's. She owns Insight Lime, a consulting firm focused on making data usable.

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