Mastering the Menu of Loyalty
Why Loyalty Matters for Restaurants of All Sizes
In recent years, the restaurant industry has experienced a transformation. While the pandemic pushed forward certain trends (like the prevalence of online ordering and outdoor dining), a variety of macro trends have pushed forward the importance of customer retention and engagement (“loyalty”).
With increased privacy restrictions around digital advertising and the demise of the cookie, brands have been looking for ways to better understand who their customers are through first or zero-party data.
An emerging business strategy for many restaurants has been paid subscription programs to create clear value for customers and more personalized, VIP experiences. While industry giants like Panera Bread and Sweetgreen have set the table with their successful paid subscription programs, effective loyalty & membership programs no longer require years and millions of dollars in technology investments to build out.
The days of the humble loyalty punch card are behind us.
With Hang’s next generation brand loyalty platform, smaller restaurants can feast on the trend of implementing subscription membership programs into their customer experience too – in only a matter of weeks and at a fraction of the cost.
The Incumbent Paid Loyalty Champions
Several wildly successful paid loyalty programs have emerged over the past few years. And beyond the obvious benefits of ROI these programs have created for the brands who implemented them, the timing of paid loyalty programs flips the cash flow cycle for businesses.
The financial benefits of paid loyalty programs are obvious – better predictability, recurring revenue, and upfront cash payments (as well as the obvious benefits of having more loyal customers).
When a customer pays upfront for a service (in the form of subscription payments), the business receives the cash before they actually perform the service (as opposed to after, which is typical in the restaurant industry.
One study by Bain & Company found that increasing customer retention by just 5% can lead to an increase in profits of 25-95%.
Below are examples of two successful loyalty programs by large-scale restaurant chains that, with modern technology, can be replicated on smaller scales with any restaurant or coffee shop.
At $10/month, Sweetpass+ members receive a discount of $3/order (once a day) on every order they place. It’s remarkably simple, and all members need to do is order over 4 times per month to justify the cost of their membership.
While every subsequent order is $3 less in revenue than Sweetgreen would have earned if members did not use the discount, the number of incremental orders that customers place because of the membership program more than offsets the slight decrease in margin on every order. Put simply, paying a monthly subscription encourages customers to go in as much as possible.
Beyond the clear transactional value created, customers also receive special VIP perks that don’t have a direct marginal cost for Sweetgreen, such as priority ordering over non-Sweetpass+ members. Sweetgreen’s simple mobile app experience makes it easy to order ahead at any location and utilize the benefits of the program.
Beyond tasty salads, Sweetgreen has cultivated a community of health-conscious, loyal patrons who have transformed visiting Sweetgreen into a normal habit in their day-to-day lives.
Panera Bread’s Unlimited Sip Club
For just $11.99/month, members of the Unlimited Sip Club enjoy unlimited drinks and free delivery. Similar to Sweetgreen’s program, customers can easily run the math and figure out the number of times they need to visit Panera to make the cost of their membership worth it.
With the competitive industry that is coffee and QSR beverages, customers may have split their visits across a number of competitors and visited Panera far less (if at all). But psychologically, when a customer makes an “upfront investment” in a membership, they now feel like they are saving money on every purchase after they break even. As a result, it’s easier for customers to justify incremental purchases (purchases that may not have occurred at all in absence of the membership program), and when they do, it will be through Panera.
And the crazy part? Panera’s core business isn’t even coffee. But they identified that coffee is the item people most consistently go to a place to purchase, so they essentially turned themselves into a coffee shop with the ability to upsell for breakfast and lunch items (which is actually their core competency).
Remarkably, one in four Panera transactions now comes from an Unlimited Sip Club member. People are going to buy coffee and beverages regardless, but when they feel like they’re saving every time they do, they’re far more likely to order from Panera.
Recipe for Success: How Smaller Restaurants Can Create Their Own Programs
Drawing inspiration from industry leaders like Sweetgreen and Panera, smaller restaurants on Toast or Square can craft their own version of these powerhouse loyalty strategies. In the past, Panera and Sweetgreen invested millions of dollars in their digital loyalty build-outs that took years to create.
But now, technology has leveled the playing field.
Whether it’s a small single-location wine club or a multi-location, rapidly growing chain, Hang’s software platform enables any restaurant chain to build a loyalty or paid membership program in weeks and at a fraction of the cost.
As a restaurant utilizing Toast or Square POS systems, what can you do to transform your business into a modern brand with a next-gen digital experience?
Demonstrate Clear Value: As we discussed above, the most successful restaurant loyalty programs demonstrate clear transactional value, which is table stakes for proving the program is worth signing up (or paying for, in the case of a paid membership program). When the customer feels like they are saving by purchasing more from your restaurant, the increase in volume will far outweigh any incremental cost of benefits.
Create Exclusive Perks: People love to feel special. Offer benefits that resonate with your audience and are exclusive to members of the program, which provide an additional incentive beyond the transactional value. These exclusive perks are even better for the business if they have zero marginal cost to create. For example, restaurants might offer priority ordering, hold a certain number of reservation spots for members, or access to specialty menu items or early access to new dishes that aren’t available broadly.
Omnichannel Integration: The most effective loyalty programs are integrated across multiple channels (both online and offline). With a next gen loyalty platform like Hang, restaurants can connect all of their physical stores, their online stores, any IRL events they host, partner brands, and all of their digital touchpoints (social media, SMS, email, etc.). The result is a seamless experience where customers bring their program membership with them wherever they go and can both earn rewards and redeem rewards across channels.
Offer Multiple Tiers (i.e. paid or non-paid): Tiered loyalty programs (with both free and paid offerings) allow customers with different preferences and willingness-to-pay to join the program. Even if free customers spend less than paid customers, it can be valuable to better understand how they interact with your restaurant’s brand and still offer incentives to become loyal customers.
Fun & Engaging: When considering experiences that successfully bring people back, they are often exciting experiences that utilize elements of gamification. Features like variable rewards, mystery boxes, raffles, quests, and other engaging features are far better at creating fun experiences for customers than basic transactional reward redemption.
Personalized: As we mentioned before, everyone loves to feel special. And beyond that, each customer is unique in the products they personally prefer, the ways they like to dine (i.e. ordering ahead on an app versus dining in-restaurant, certain times of day). Aggregating more information about your customers allows you to better understand them and optimize the loyalty experience such that customers have higher perceived value, while your restaurant minimizes its costs.
The Bottom Line
While big brands have proven that paid loyalty programs can work wonders in creating a unique brand community and driving incremental revenue, smaller restaurants now have an equally valuable opportunity.
By understanding their niche, offering exclusive perks, and seamlessly integrating their various customer touchpoints, even a single-location diner can create a special group of loyal guests.
Loyalty isn’t just about serving great food – it’s about creating unforgettable experiences and true emotional connections with customers. Turning occasional diners into lifelong patrons.
Hang is building next generation loyalty & membership programs for restaurants of all sizes, and they are the only product that offers subscriptions on Toast or Square, as well as the only platform that can connect physical POS systems with ecommerce stores built on Shopify.
Fully integrated with Toast and Square, the most popular restaurant POS systems, Hang expands the number of customer touchpoints and makes the loyalty experience incredibly seamless for customers and brands alike.
Customers can sign up for a Hang-powered loyalty program with nothing more than a phone number, easily add their membership passes to their Apple Wallets, and access their membership portal at any time in a sleek mobile or desktop experience.