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Are You Wasting Money on Loyalty Programs?

The days of punch card loyalty programs have come and gone. Membership in a loyalty program doesn’t automatically translate into repeat business, but a proactive approach will ensure that customers feel like their purchases are valued and appreciated. So how do you know if your loyalty program is working and giving you the return you need? Restaurants with successful loyalty programs establish and track three areas:  

  • How well you know your customers  

Customers are important, but business owners don’t have time to have a prolonged conversation with each person who walks through the door. Since that’s not an option, the next best way to get to know your customers is through your loyalty program. It’s a goldmine of data and provides crucial customer relationship analytics. This data can inspire a marketing campaign based on shoppers’ buying habits, frequency of their visits or loyalty to certain brands or products.

It’s not enough to offer blanket 10% off coupons anymore. Today’s shoppers speak “the new language of loyalty,” according to strategy and consulting firm Accenture. The firm’s recent survey reported that 59% of consumers feel loyal to brands that gift them with small “tokens of affection” like personalized offers based on their interests, purchase history, or gift cards for birthdays. The results also showed that customers gravitate towards brands that value their privacy, offer new experiences or products, and partner with celebrities.toa-heftiba-195458.jpg

  • How effectively loyalty programs hold customer interest

Industry standards, in general, set loyalty penetration at 15%. That means 15% of transactions should be associated with your loyalty program, although many large restaurants use the 15% benchmark as a minimum and significantly exceed that number. Once the number begins to decline, it’s a red flag that customers are losing interest in the program or employees aren’t enrolling people as often as they should.

When 15% of your sales are not being generated by loyalty-related customers, it’s time to reevaluate your strategy. Consider whether it’s too hard to earn rewards, which is causing people to lose interest — you may want to switch to a multi-tier approach that offers achievable rewards at every level. Also, if your business goals have recently changed, your loyalty program needs to evolve too.

  • How millennial customers are interacting with the loyalty program

yutacar-28290.jpgEarly loyalty program goals were for customers to earn free products or discounts. That’s not enough to entice consumers in the millennial generation demographic to sign up nowadays, though. This segment of the population wields enormous buying power, as Advertising Age projects they will spend around $200 billion a year collectively and have a 70% loyalty rate to brands they care about.

Millennials aren’t joining loyalty programs because they can earn a free drink or side dish, they look for fun initiatives that offer exclusive benefits and new experiences. Millennials are more likely to join a loyalty program that highlights lifestyle choices and social awareness, benefits a charity, or offers access to members-only events, products and sales. Millennials also look for programs with mobile capabilities like online ordering, stored loyalty cards/information and other benefits they can use online or via smartphone.

Previously, loyalty programs were a way to boost profits by offering customers a free pizza or meal after they purchased ten, but today’s programs cannot use the same “one-size-fits-all” approach. Business owners should get to know their customers through customer analytics and create a multi-tiered, proactive program that offers customized rewards based on visit frequency or previous purchases. Every customer is a valued one, so loyalty programs should make them feel appreciated whether they spend $1 or $100.