Loyalty programs: growth gathers pace

Loyalty programs are on the rise according to new research from Gartner – but restaurants are at risk of being squeezed by more innovative operators

With a couch-bound customer base, foodservice operators are having to work harder than ever to turn their produce into profits. The most recent data suggests it’s giving a new lease of life to one marketing phenomenon in particular: the humble loyalty program.

According to some sources, savvy marketers have been experimenting with loyalty programs in some form as far back as the 18th century. But their growth in the foodservice market over recent years has been impressive.

Gartner’s research shows 59% of brands surveyed offered loyalty programs in 2018, up 20% compared to the previous year. This has been fuelled by nationwide campaigns from big operators, with notable new schemes including MyWay from Subway and Rewards from Mod Pizza.

An innovative app-roach to loyalty

Where the merchants of the 1700s used copper tokens to keep their customers coming back for more, today’s restaurateurs are making the most of the digital tools at their disposal.

Many programs are app-based, with 30% of brands only allowing points to be collected and rewards redeemed following sign-in via a mobile app. This has the dual advantage of allowing brands to further tailor their message to customers; 89% of loyalty programs use collected data to send follow-up reward notifications to users.

FCSI has reported on the decline of casual dining in the US, and how consultants see technology as a possible panacea. But it’s not clear restaurateurs are getting in on the action. Techie insurgents, notably courier services, have already moved in on their territory. The launch of Uber Rewards at the start of 2019 puts Uber Eats ahead of the pack thanks to its huge pre-existing customer base, while a new loyalty program from Dashpass means the loyalty program scene is becoming increasingly crowded.

Tips from the top

Should struggling operators wish to make the most of the reward scheme boom, taking inspiration from tried and tested outlets at the top of the market might be the recipe for success. Starbucks’ story over the last two years is one clear example.

In 2017 the coffee giant had 13.3 million Starbucks Rewards members who accounted for 36% of total sales. The most recent figures from 2019 show Rewards membership has increased to 16.8 million and their sales share has gone up to 41%. Significantly, Gartner reports Starbucks has seen consistent growth in digital sales.

There are two clear trends operating in parallel. On the one hand, a digital-first reward scheme is a sound bet for generating sales. On the other, however, only the biggest operators, such as Starbucks, and distributors, such as Uber Eats, seem to be making the most of it.

For consultants at the smaller end of the market, the potential benefits of digitising traditional marketing methods – like loyalty programs – is surely essential food for thought. It might be the only way to bring those former customers confined to their living rooms back into the fold.

Thomas Lawrence

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