Thursday, February 7, 2013

Loyalty programs vs. Daily Deals - Article

Try loyalty programs if deal fatigue sets in

Fickle restaurant customers go crazy for one-off deals, yet traditional loyalty programs can still attract lots of business.

Full-service operators know that short-term specials and deals will give their restaurants a temporary revenue boost. But findings from a new study indicate that restaurants can use tried-and-true customer loyalty programs to build and retain a customer base without relying on costly dollars-off promotions.

Restaurant loyalty program consulting firm Loyalogy commissioned this research. Its 50-question online survey of households having incomes of $75,000 and above drew 1,124 responses.  Here’s what the study, titled LoyaltyPlus, found:

• Consumers estimate a restaurant rewards programs would increase their visit rate to a particular restaurant by an average of 35 percent.

• Nearly two-thirds of consumers (65 percent) report they would recommend a restaurant more to others if that restaurant offered an appealing rewards program.

• Four out of five consumers prefer a rewards program with a clearly defined proposition in which they earn points for rewards than a program built solely on periodic, surprise free items.

• Consumers desire a simple reward program enrollment process in the restaurant and would prefer to supply additional information online after they have left the restaurant.

• Although consumer wallets are bulging with plastic cards, 60 percent of respondents stated that they don’t mind carrying a membership card for a rewards program if it’s necessary.

•  While only 10 percent of respondents have paid a fee to join a restaurant rewards program, fully 50 percent state they would be willing to do so if the program offered adequate value.

• A single rewards program membership covering multiple restaurant brands has significant appeal to consumers.  Some 73 percent of respondents agreed they would like to have one rewards program membership that was honored at multiple restaurant chains.

“The LoyaltyPulse study provides clear evidence directly from consumers regarding the effectiveness of restaurant rewards programs and the value associated with using the rewards program data to tailor and target guest e-mail communication,” says Dennis Duffy, Loyalogy president.

Some readers may be surprised to learn that in an era when social media marketing delivers a torrent of restaurant deal offers to potential diners’ email inboxes each day, 10 percent of customers still pay actual money to join a restaurant loyalty program. And fully half said they would consider doing so in the future.

What’s the attraction for the customer? Typically, a new loyalty program member gets an immediate credit for the amount of his or her membership fee. For example, a customer who forks over $25 to purchase a membership in Landry’s Select Club (Morton’s, McCormick and Schmick’s and other Landry’s brands) get an immediate $25 reward with the promise of many more to come.

For its part, the restaurant gets, at no dollar cost, a new customer likely to return to acquire those future rewards. Of note: Fee-payers are the customers you want. The study found that “among those consumers who dine for business (either business exclusively or business and pleasure), nearly one in four have paid a fee to join a restaurant rewards program (22 percent).”

These are the kinds of customers most full-service restaurants are dying to attract. If half-off daily deals or short-term value-priced specials have lost some of their marketing oomph for your restaurant, you may wish to revisit loyalty programs. The LoyaltyPulse study is telling us they’re ready to make a comeback.