Ultimate Guide to Restaurant Loyalty & Rewards

February 28, 2024
Read Time: Example Minutes

Everything You Need to Know to Create a Successful Restaurant Loyalty Program

Keeping your existing customers coming back is key to the success of any restaurant venture. That’s because acquiring a new customer costs on average about five times more than keeping a current one. In fact, increasing customer retention rates by just 5% with a restaurant customer loyalty program translates into a profit increase of anywhere from 25-95%, which is why they are crucial to a restaurant’s success.

What is a restaurant loyalty program?

A restaurant loyalty or rewards program is simply a program that incentivizes your existing customers to come back more frequently and spend more with you when they do. There are a variety of ways that a loyalty and rewards program can be structured. It can be as simple as a card that gets stamped or punched any time a guest patronizes your establishment; or a tiered points system with rewards that increase based on the amount of spend or number of visits. This flexibility ensures that there is a rewards program that will make sense for almost any type of restaurant.

Understanding the benefits of a restaurant loyalty program

Encouraging repeat visits can have a significant effect on your profitability, but a loyalty or rewards program can impact more than just margins. Loyalty programs can also increase customer satisfaction; provide you with valuable data you can use to improve your business; generate larger guest checks; and even function as a way to test new initiatives and menu items. Understanding what benefits you’re interested in will help you ensure that you’re choosing the right type of loyalty program for your restaurant’s needs.

Increased customer retention, spend and frequency

The rising costs of digital and social media are pushing customer acquisition costs higher than ever before, so it’s vital to ensure that you’re doing everything you possibly can to retain your existing customer base. Instituting a loyalty program has been shown to boost customer retention rates by as much as 25%, and customers who belong to loyalty programs have a 20% higher purchase frequency rate than those who don’t. Plus, loyal customers have been shown to spend 60% more than other customers. It’s hard to argue with those kinds of numbers.

Promote customer satisfaction and word of mouth

People are predisposed to value the things that make them feel valued. It’s just human nature. A well-designed loyalty program will make your customers feel appreciated, which leaves them likely to share their positive feelings with others. 73% of loyalty program members recommend their loyalty program brands to others.

Provide valuable business insights

Guests who join your restaurant loyalty program tend to also be your highest lifetime value (LTV) customers. The more you know about their likes and dislikes, the more ways you will find to attract others like them. This also makes them a perfect test market. A successful restaurant rewards program can help with everything from innovating new menu items to vetting event ideas. Imagine a loyalty program that rewards your most fervent fans with a limited edition secret menu or promotional swag gear. They feel like VIPs, and you can test new creations. In other words, don’t be afraid to think beyond the discount for best results.

Understanding the different types of loyalty and rewards programs

Loyalty program options have become increasingly sophisticated and customizable. While some broad mechanics that are commonly featured, there is an incredible amount of freedom to choose how customers earn rewards, and what kind of rewards your restaurant offers. Nearly every loyalty program is really a rewards program that is transactional in nature: the restaurant offers certain incentives in exchange for continued patronage. A good rule of thumb is to create a loyalty program that reflects your brand. While a top-tier restaurant might not want to offer a financial discount as an incentive, perhaps access to a special wine library or an exclusive event might fit perfectly, and could be a huge draw for a certain type of clientele.

Stamp or punch card

This is the simplest type of loyalty program to implement, requiring no investment in infrastructure or technology. However, it also offers very little in the way of insight or operational intelligence. That being said, if you’re looking to incentivize return visits in the simplest way possible, a “buy x, get x” printed card solution might be a good option.

How it works

Customers get a custom stamp or punch each visit. When they reach a set amount (usually 10 or 20) they receive a free item. Because of the low barrier to entry, this kind of promotion is often used in small, independent QSR operations.

Points-based loyalty program

If you’re looking for flexibility, a points-based restaurant loyalty program might be a better solution to implement. Customers earn points by visits, dollars spent or any other metric you desire, and then redeem those points for rewards. As this type of program is managed digitally; and it’s easy to change incentives, reward levels or other aspects of the program on the fly, so you can adjust it as your restaurant’s business needs shift. To implement it, you’ll need to have a tech solution that tracks customer actions, and that empowers them to check their balances and understand rewards levels easily. Most reward program software integrates directly with your POS, to help you streamline implementation and track loyalty values. This also means you’ll glean a lot of data about their preferences, frequency of visits and common actions, and measure how those events directly impact sales.

How it works

This type of rewards program awards a set number of points for a given action, usually per visit or customer spend. Those points can then be redeemed for items, merchandise, experiences, or whatever else you think your customers will value.

Tiered loyalty program

Want to ensure your best customers are also the most highly rewarded? A tier-based loyalty program is the answer. As a valued guest, growing or keeping your status is a powerful motivator for return visits. This type of program lets operators provide high-incentive rewards that are scaled to the value of each customer. Like the points-based system, you’ll also gain valuable data on what motivates your customers to return, and what they love most. Run digitally, it is easy to shift rewards structures as your needs or your customers’ preferences change, so it provides a lot of flexibility in implementation.

How it works

Tiered loyalty programs segment customers into different levels based on their spend or visit frequency. Moving up a tier usually requires some level of consistency and in return provides the customer with more covetable incentives.

Subscription-based loyalty program

In this type of rewards program customers pay a yearly or monthly fee for exclusive access to discounts, menu items, events, or other special benefits. Subscriptions can be used for anything from a members-only VIP dining room or lounge, to a special plus-up with every meal. The restricted nature of the program can be a powerful draw for high-end customers seeking ultimate rewards: imagine food items that wouldn’t be otherwise practical to include on a standard menu, limited edition spirits or wine varietals or vintages, or access to very special seating for meals or special events. Subscription-based loyalty programs can become a VIP showcase for your kitchen or wine program’s creativity.

How it works

Guests pay monthly or yearly to unlock benefits, providing the restaurant with a dependable revenue stream; in return the customer receives exclusive premiums.

Personalized loyalty programs

Advancements in technology mean that it’s possible to know more about your best customers’ preferences, milestones and needs than ever before. With the right tech stack, it’s possible to create a loyalty program where the rewards and incentives are tailored to the individual and accurately scaled to each customer’s value to your restaurant. Imagine an incentive program where everything you receive is something that is sure to delight. Current technology can help make that level of personalization happen.

How it works

Data analysis tools are used to parse customer preference and visiting habits, resulting in dynamic customized rewards that reflect who they are as individuals, and the current business goals of your restaurant.

Tips for building a more rewarding rewards program

A loyalty program can do more than just incentivize return visits. Loyalty programs are incredibly versatile, so start with your broader business goals, and then ask yourself if there is a way to structure your restaurant’s loyalty rewards program to help you achieve them. As a bonus, the more unique your program is, the more it will feel like a personalized model for your guests, and the more memorable and enticing it will be. There are a few principles to keep in mind as you get started.

Be strategic

Before you decide which restaurant loyalty program is right for you, spend some time thinking about your business needs and see if there is a way to structure your program to help you achieve them. Do you want to use your rewards program solely to build incremental revenue? Or do you need it for market research? As a test market? To build your online reviews? As a social media incubator? All of these things are possible if you carefully think through your strategy and define your goals first.

Think of how it can help you build your brand

Everything you do contributes to the way your restaurant’s brand is perceived. A loyalty program is no different. If you want your restaurant to be thought of a certain way, consider how your loyalty program can reinforce that. For example, if you have a chef known for experimentation and creativity, maybe your reward system is a taste of his or her latest culinary experiment. If you’re known for quality ingredients, your reward might be an invitation to a special dinner centered around the produce from one of the local farm suppliers. Find a way to make your loyalty program reflect who you are as a restaurant, so it becomes an instant brand builder.

Don’t be afraid to get creative

Just because most loyalty programs are run a certain way doesn’t mean yours has to be. Get creative with your rewards structure, and you’ll get people talking. An Italian restaurant might have a yearly Medici dinner and ball as a top reward for its most active loyalty program members. A farm-to-table restaurant might offer a farm visit with their chef at the highest reward level. Don’t be afraid to do something original.

Learn as you go

The most successful rewards programs are the ones which are highly monitored. Run regular reports, and look for ROI and profitability. Don’t hesitate to shift gears if something isn’t adding up.

How to set your restaurant rewards program up for success

With so many options for creating a successful restaurant rewards program, it’s easy to get lost in the details. A great tech partner will make all the difference. Find one that offers the flexibility you need to create a loyalty program that reflects your individual goals; a platform with the support and ease-of-use necessary to manage the program and understand its ROI. That’s where Fishbowl comes in. Fishbowl’s Delightable Guest Relationship Management platform integrates with all your existing systems, so your POS and rewards software connect with and inform your customer data. These inputs help you identify your highest LTV customers, as well as the promotions that generate the highest ROI. With these bits of information you have a powerful understanding of what different guests want, and how to segment them into highly-engaged audiences. Fishbowl was developed by industry experts with more than two decades of experience in restaurant marketing, data, analytics, and tech. We know how to help restaurants create news-worthy loyalty and rewards programs. After all, we’ve been helping restaurants create them almost as long as loyalty programs have been around.

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Adam Ochstein
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