Why some restaurant chains are ramping up their loyalty programs during this crisis

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When the COVID-19 crisis hit the US, fast food chains abruptly changed their business plans, moved operations outside, added security measures like plexiglass barriers, and trimmed their menus to make things easier.

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A number of chains have also expanded their loyalty programs.

In an unprecedented environment with an uncertain ending, loyalty may seem like a secondary priority. Many consumers even see it that way. According to recent data from Toast, diners said in January that loyalty programs were “very important” to their dining experience. But since almost a third of the guests rate loyalty programs as “not important at all”.

Still, many leaders believe that a strong loyalty program can mean the difference between concepts that succeed in this crisis and those that only survive.

Take Panera’s coffee subscription program, for example. It started just before the pandemic that nearly stopped the breakfast part of the day, but that hasn’t stopped customers from signing up in droves. The company credits its $ 40 million loyalty program for generating such interest.

In a recent interview, said Eduardo Luz, Panera’s chief brand and concept officer, that these loyalty members are six to ten times more likely to use the brand than non-members and generate “recurring income”. This is supported by Display Paytronix data that loyal customers bring more sales.

In addition, Panera is able to use this program to collect customer data from a wide range of people, undoubtedly a great benefit for companies that have been forced to be particularly agile in the past few months.

“When we think of loyalty, it’s not just the program. We think about the customer behind the scenes, the insights into those customers. Loyalty can give you insights into who your most valuable customers are and what patterns they have across all channels. For example, if you’re a brand that delivers breakfast then you know breakfast has been hit hard during this time and customers are postponing their expenses. A loyalty program provides insight into where this shift is taking place and enables a brand to adapt accordingly, ”said Sastry Penumarthy, co-founder and VP of strategy for loyalty platform Punchh.

In an exceptional setting, these insights and this dependable revenue may be why loyalty programs have become an important topic in recent earnings reports. Chains from Wendy’s to Taco Bell and Starbucks

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have added or improved their programs to attract and retain dedicated customers ready to come back and spend more.

Wendy’s Rewards was created specifically to drive customer footfall, executives said on the company’s most recent conference call for the company’s second quarter.

“This is a great opportunity for us to unleash the frequency”, CFO Gunther Plosch said. CEO Todd Penegor added that the new loyalty program is a “good margin game”.

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Taco Bell launched Taco Bell Rewards last month, five years after its first loyalty iteration. The updated program, backed by Punchh, created such a commotion that Taco Bell’s website and app crashed at launch time. Penumarthy said this backlog shows that now, in the midst of the crisis, is absolutely the right time to attract loyalty customers.

“The fundamental importance that has become clear is that customers have completely new expectations. Loyalty is now about more than just points, it’s about experience and personalization, ”said Penumarthy. This is exactly what Taco Bell is doing with its new program, which offers a tiered spending program, but also offers news about safety, new products, etc. in a “modern space”.

Pacemaker like Amazon for years

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and Netflix

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have shifted consumer expectations towards personalized offers and messages. That’s the point here, in this new iteration of restaurant loyalty. It helps that more customers are now ordering digitally, a trend greatly accelerated by the pandemic.

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In particular, not only customers benefit from these enhanced loyalty programs.

“Basically, COVID is a critical point from a loyalty perspective. Because customer acquisition is more expensive than customer loyalty. Plus, in good times, 25% of customers are responsible for 50% of sales. That’s probably even more now. If you focus on this segment, it’s cheaper and has a bigger impact on sales and bottom line, ”said Penumarthy.

In fact, during its Q2 call, Dunkin ‘touted its Perks program as a major factor in some of its isolations. The active enrollment of perks increased by almost 110% year-on-year. The company plans to accelerate its digital platform to provide a “smooth, personalized experience”.

Starbucks Rewards has long been a case study and the crisis hasn’t slowed that down one bit. The chain gained 3 million Rewards members in the last quarter, 17% more than the previous quarter. Starbucks Rewards’s share of tenders rose to 46% for the quarter. CEO Kevin Johnson also noted during his Q3 call that this program gives the company more resilience in times of crisis.

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The Chipotle loyalty program launched in March 2019 is comparatively new, but already has 15 million members. During his Q2 call, CEO Brian Niccol recognized its significant potential and perhaps illustrated why such programs have come into focus in the industry of late.

“What was really refreshing is that a lot of the people who joined our rewards program were new or light users,” he said. “So we use these customer journeys to influence behaviors that can lead to them becoming more frequent customers. I think that will be a nice tailwind for us in the future. ”

That tailwind that most brands are undoubtedly craving right now is precisely why Penumarthy believes the time has come to focus on loyalty alongside security and simplification.

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“If you’re out of your head and investing in that bigger picture, you won’t recover or grow as quickly as the rest of the world,” he said.

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