How to create a restaurant loyalty programme in 4 steps
According to a 2016 report, 66% of consumers actually change the amount they spend in order to maximise the points they'll earn — buying more and spending more than non-loyalty members (and resulting in a 5% – 10% revenue increase, on average). Not only do rewards encourage customers to return, they increase your average guest check too.
Aim to have your customers receive a reward for returning a third time to your restaurant
According to Jon Taffer of Bar Rescue,
The first time a customer goes to a restaurant and has an enjoyable experience, the statistical likelihood of a second visit is 40%.
The second time a customer visits a restaurant and has a flawless experience, the likelihood of him returning for another visit increases only marginally to 42%.
If the customer returns for a third time, however, the likelihood of him coming back for a fourth visit shoots up to over 70%.
Your aim should be to get the customer to visit your restaurant thrice, not once – and a well-engineered loyalty programme can help you to do that.
Step 1: Customers receive a reward on the third visit
The rewards programme should be designed such that there is an incentive for them to make a third trip there.
The reason for this is twofold: As mentioned above, after customers visit your outlet 3 times, the chance of a return visit is over 70%. Additionally, the main reason why people drop out of loyalty programmes is because it takes them too long to accumulate enough points for a reward. Rewarding them on the third visit makes your programme feel worthwhile.
One way to do it is this:
Calculate how much a customer would typically spend in three visits to your outlet. You can do this easily by checking how much your average guest check is on your POS backend.
That’s how much your customer should spend in order to receive his first reward.
Now you can work backwards and determine how many points that should be and hence your point conversion for your loyalty system. The conversion should be easy to remember! E.g. $1 = 1 point or $10 = 1 point (if your menu items are on the expensive side)
Step 2: Choose your rewards
They should be something substantial (relative to your business, of course) so that your customer feels that he is getting good value. Some restaurants offer free upgrades or free upsize as a reward. Nothing wrong with that, but since your goal is to get the customer to return: Would you visit a restaurant again simply for a free upsize?
Dessert as a reward gives customers who don’t normally order dessert a chance to try out your desserts, and might convert them to dessert-buyers.
Another idea is to put up your bestseller as a redeemable reward – you know it is something most customers would want and if it is their regular order, they would be stoked to get it for free. It does not have to be the first reward customers get to redeem, but rather something they earn after a few more visits so that it feels more valuable.
When you have earmarked your rewards, set up point redemption for these items in the backend of your system. The points associated with the reward should be proportionate to the item’s price in the menu so as to not devalue your products.
Step 3: Encourage customers to become members and start collecting points
Make sure all your front of house staff know about your membership programme and are big advocates of it. The less hassle it is for the customer to sign up, the more traction it’ll get.
Physical loyalty cards for collecting stamps are easily forgotten or lost, and once lost, the customer has to begin collecting stamps all over again. They also require regular replenishing and consumers find it troublesome to carry around a stack of rewards cards and shuffle through them whenever they are making an order.
Some businesses make use of rewards apps, but less tech-savvy customers may be resistant to these. Others find it a chore to have to download and register a new app for a restaurant they aren’t sure they will be returning to yet.
Ideally, your staff should be able to register a new customer as a member even as they are placing their order, so they can collect points immediately.
Instead of having to fill in a questionnaire, all the customer has to do is say their name and phone number, which are then logged into the system. Each subsequent time they return to the restaurant, they earn points and redeem rewards by providing their phone number when ordering.
Step 4: Promote your loyalty programme
Posters, signage should be up at your restaurant promoting your rewards (A variety is good, it encourages customers to try more and also more options = more perceived value)
Try partnerships with other brands that complement yours (e.g. if you are a health-conscious, organic sort of place, do giveaways for new membership sign-ups with companies that promote the same kind of lifestyle; these can be circulated on Instagram.)
Consistency is key and instead of a big push for membership in the beginning, only to get slowly forgotten once business is steady, every employee of your restaurant’s goal should be to get customers to return at least 3 times.
Why let customers exchange loyalty points for items instead of discounts?
When you offer discounts on your menu items, it gives customers the impression that your food’s regular pricing is marked up. Customers will be less willing to spend at your restaurant when they feel like they are getting ripped off. Sceptical about your normal pricing
Will giving away free food as rewards result in my restaurant losing money?
Think of the rewards you give away as marketing costs. You won't be spending money unless it's working. They are being used to convert first-time customers into customers who return time and again, and hopefully become advocates. The added bonus is that return customers have a tendency to spend more than new customers.
When customer returns to your outlet and redeems a reward, the only marketing cost is the food cost of that item.
For example: Assuming your customer redeems it on his third visit, as long as the food cost of the complimentary item is lower than the profits made from his first two visits, you will not lose money.
As an added precaution, you can also mandate minimum spending in order to redeem any rewards.
Cheryl Tay is the editor and content marketer at iCHEF Singapore. She also manages iCHEF Club, a growing community of F&B owners in Singapore – organising events, the blog, an online newsletter and the F&B Entrepreneur Bootcamp, the only regular workshop on opening a new restaurant in the country. In her spare time, she attempts to read every book that’s ever won a literary prize and watches cat videos. Like any proper Singaporean, her love for food runs deep – especially spicy food. Chili is life.