How many times have you heard about the restaurant industry's razor thin margins?
Chances are, you're intimately familiar because you live the reality day-to-day.
It's a daily shave you never want to happen. 🪒🪒🪒
You also know that to fight these razor-thin margins, there’s a heavy emphasis on increasing loyalty to drive up retention revenue for your brand.
You're so familiar that terms like "increasing loyalty" and "driving retention revenue" have become a snooze fest. 😴 You have vendors pitching to you left and right about what they can do, but it all feels the same.
Let's pause for a second and address an elephant in the room.
What do we all even mean when we toss around the word "loyalty"? How exactly are we all defining loyalty and how can we measure loyalty over time?
Restaurant loyalty is an emotion that leads to a behavior of increased engagement with a brand. It’s a feeling of highly-positive sentiment thats results in increased visit frequency and lifetime value. Loyalty could look like:
Every restaurant owner and marketer needs an actionable way to identify loyalty for their brand and to increase revenue by recognizing their guests and making them bigger advocates. To know this, you must understand your average frequency, recency, and retention rates. We’ll get more into this later, but definitely contact us if you need a way to do this across your entire tech stack.
It's also important to understand that loyalty will look different for every brand. For a fast-casual brand it might mean ordering takeout more the twice a month and spending more than $30, on average. For a full-service brand, it could be dining in person at least once a month and spending more than $100.
Makes sense, right? Okay now let's cover some misconceptions that most vendors and other businesses in the industry are operating under.
The biggest misconception with restaurant loyalty is that “loyalty” = rewards. Loyalty does not necessarily mean a membership program. It is a measurable behavior from a guest.
Here’s looking at you, real-life loyalty. Discount-free strategy and tactics that result in more happy customers. Every business's dream, right?
Okay, so what are some other loyalty misconceptions?
Misconception: There’s one big secret to driving more revenue.
The Truth: There’s no one, single secret.
Assuming there is one tactic would be like thinking a track runner wins a race with one simple practice technique. That’s not how it works. Month and years of practice, sleeping habits, practice during the week, eating well — all of these things factor into success.
For loyalty, there are the elements of:
That last one is where marketing can control. It’s one out of five bullets, but it’s an important one. Even if the stars align for the first four, you absolutely need that proactive outreach to stay top-of-mind and keep a happy guest remembering to come back.
Misconception: You need a formal guest program in place to say that you focus on “loyalty.”
The Truth: No, you don’t. Focusing on loyalty means you simply have internal processes in place to get a first time guest to come back.
Let’s rethink of how we all define “loyalty.” It could mean increasing brand value in the eyes of your guests. Or driving up the lifetime value of a customer by using targeted marketing. In fact, it’s both! Think about it this way:
Are you marketing to first-time guests?
Do you recognize their behaviors and speak to them outside of order confirmations?
Do these guests feel seen by your brand after their first order?
If the answer is yes, then you focus on loyalty. “Loyalty” does not require an opt-in program.
Here are some great examples of loyalty in practice without a formal program:
See what we mean? Okay, let’s demystify another misconception.
Misconception: “Loyalty” is a word that’s cheap. “Doing loyalty” means I’m cheapening my brand.
The Truth: Maybe, if your “loyalty” program means you’re constantly giving away freebies or discounts, where you’re coaching a guest to start to expect those lower prices. But again, this isn’t what true loyalty means. True loyalty means actually increasing the value of your brand so that you can keep the same prices and they are perceived as lower by the guest, because value outweighs true cost.
What it looks like:
🏁 A guest has an amazing experience.
🏁 They go home and receive a personal welcome from the owner of the brand by text.
🏁 They also receive a warm welcome over email from the general manager.
🏁 Over the next few weeks they learn more — by email — about the brand’s values, their mission and the story of how they came into being, and they get a couple sneak peaks at staff recommendation for menu items.
🏁 This guest now has a warm feeling when they think about the brand. They tell their friends about it. They learned that a core value of the brand is sustainability and community, and they really connected to that. Plus, they want to try the paella that the owner recommended.
🏁 They bring a family member with them and go back in the same month. They are happy to give business to this brand because they know they are doing something good for the world.
That right there, is loyalty.
Misconception: “Loyalty” is just for quick-service brands. It has no place in the seats or minds of full-service restaurants.
The Truth: Any full-service restaurant that’s interested in bringing a first time guest back (in other words, every single full service restaurant) should be focusing on loyalty.
Casual dining, fine-dining, we’re looking at you.
In 2022, no brand should be resting on its laurels and assuming that every guest will be coming back again based on the food and atmosphere of their dining experience.
Even if your leadership feels strongly against sending proactive emails or other marketing campaigns, if you’re not focused on “loyalty” then you have no way of knowing who your top customers. And if you think seeing them at your host stand is enough, you’re wrong.
Think about the opportunity cost of having a regular who spends thousands and thousands of dollars with your brand.
Have you ever asked them why?
Have you ever asked them to give you feedback about what they would change?
Have you ever thought about targeting other guests like them for acquisition marketing?
Loyalty is all of this. It’s understanding who it is exactly who is already loyalty. Getting to the bottom of their values and desires, truly recognizing them, and using these values and behavior patterns to acquire new guests.
The strategy of “provide good service, and they will come” just doesn’t hold up in 2022.
There’s too much competition out there to think that you can sit idle and your business will serve as a magnet on its own, based on service.
Not sure the right way to go about this?
Misconception: Loyalty can't really be measured.
The Truth: It can! It just differs from brand to brand. We recommend that you look at these metrics:
You want to use measurable behaviors to find your top 10 percent of guests. You can play around with this by increasing your average and looking at audience sizes:
Your loyalty goal should be to get more guests to fit the criteria of your top 10%. So you want to widen that volume. To keep things simple, we recommend you stick with one metric, to start. Try your customer lifetime value, for example. Let's say right now, your average lifetime value is $300. Only 10% of guests hit that status. While most loyalty programs would focus on rewarding that 10%, your real goal should be to get more guests to fit that criteria. You want to widen your loyalty base.
Typically it’s a process that allows a customer to opt in to a program where they receive special messaging and offers — either manually on-premise with in-person punch cards or more recently electronically before or after first purchase online.
While a formal loyalty program has its benefits, it can also have these shortcomings:
Here are two tactical ways to counteract this shortcoming and drive loyalty across your entire customer base:
Pro Tip #1 — Use SMS texts to identify bad experiences immediately, reach out from your location’s general manager, and rectify the situation.
Did you know that 93% of customers go on to re-order when they receive excellent customer service? Turn a negative reviewer into a loyal guest with a personal apology and acknowledgement from your GM.
Pro Tip #2 — Use email marketing to encourage first-time guests to come back, and to come back faster.
Restaurants that use Bikky to track first-time guests for welcome message drip automations see a 25% increase in revenue in each guest’s first 30 days.
Let's talk about ways to achieve loyalty without a formal program.
Rather than relying purely on the dining experience to drive a re-order, use proactive email marketing with a 5-step welcome drip email campaign. Get a full campaign template.
People connect with people. Instead of having your brand emails all come from a logo, personalize your most important communications to send directly from your owner or general manager.
If you don’t have a way to access and analyze your entire customer database in one place, then you can’t measure loyalty in the first place. It becomes impossible! Learn more about data aggregation here.
If your marketing team or owner spends the day trying to find guest purchasing patterns manually and send one-off campaigns to customer segments, you have a problem. You need a way to monitor behaviors, have real-time segments that add guests based on their behaviors, and a marketing engine that triggers emails accordingly. (Hint: Bikky does this.)
Use personalization to build brand value. Right now, if you’re using a loyalty program to constantly offer discounts, in the eyes of your guest: value < price. You need: value > cost.
If you do have a formal program, make sure you have a system in place to drive signups with minimal manual labor (i.e. after first order, guests who have not signed up are prompted to do so; having a homepage pop-up to encourage all website visitors to sign up for your membership program
Ready to learn more?
Okay, let’s recap:
Not ready for a demo? Check out our blog post on customer loyalty FAQs.