Most quick-service-restaurants now have a loyalty program, with popularity only rising. QSR brands must go beyond their product itself and offer more in return for customers’ loyalty. But what is causing the failure of these programs? Get comfortable and discover the rise and fall of restaurant loyalty programs, and how you can overcome the challenges of engagement drop off and retention loss.
What is a QSR loyalty program?
Put simply, a loyalty program is a value exchange between a business and their customers in return for customer loyalty. This could be in the form of exclusive discounts, points-based freebies, rewards and more. Loyalty programs have changed a lot over the years, and are now incorporated into the digital landscape, allowing for easier access on the customers’ behalf, and better insights on the businesses.
With more and more QSR’s popping up, the saturation of the market has made it more difficult for restaurants to retain repeat customers in the same way.
As of April 2024, 52% of adults in the United States participate in a dining rewards program at restaurants, coffee shops, snack places, and delis, according to the National Restaurant Association’s Restaurant Technology Landscape Report. This is a significant increase from 2022, when 45% of consumers used restaurant loyalty programs.
Most QSR loyalty programs are delivered through digital apps, scannable at the counter or order kiosks. They tend to be a digital version of stamp cards, which enable users to collect a free item after X number of visits. Or they offer discounted items exclusively for members. Sometimes the programs are a combination of discounts and freebies, all racked up through the collection of points.
This is what we call ‘earn and burn’. This model is characterized by its fast implementation, convenience for brands to GTM and ease of use for customers. However, when used in conjunction with low-value rewards (such as discounts) as an incentive, or setting the target too high for redemption, these programs lose their appeal.
What are the benefits?
The obvious one; increase loyalty. Loyalty is important for brands because customer acquisition is more costly than retention.
Brands need to differentiate themselves in the market with a high value exchange model, this will help you stand out from your competition. Younger generations, frequent restaurant goers, parents, and high-income households are most likely to belong to multiple rewards programs.
According to a TouchBistro report, 41% of millennials and 40% of Gen Z belong to a restaurant loyalty program. The better your program, the more appealing your brand will be to customers who belong to multiple loyalty programs. With quick-service food, its often about a snap decision. Often these restaurants exist in close proximity to one another and there can be little thought in the decision between fried chicken and burgers. So, having a memorable, stand out program that builds long-term positive brand connections is important in beating the competition.
So, why are QSR programs failing?
Most QSR loyalty programs are not optimised for long-term loyalty. Points-based and monetary transactions alone no longer have the pull to keep customers interested. While most QSR loyalty programs offer free food and/or discounts, this is only enough to keep customers loyal to a certain point. This is when brands experience the drop-off.
Reasons: takes too long to earn points, rewards are not relevant or personal, too much of the same.
Racking up points to get a free dish, then back to square one. Rinse and repeat. It’s boring, and there’s only so much of one cuisine a person can eat. However, the price of loyalty is high for brands, and often finance teams have a hard time reconciling EOY budgets with so many points out in membership banks becoming a fiscal liability. How can you offer more value, more frequents rewards, and personalized content without spending exponentially more money?
Solutions
Rewards – number one
Games, competitions, prize overlays – this model plays on people’s desire for competition and excitement. Offering games, competitions, and prize draws switches up your program, keeping members on their toes and therefore coming back for more. If you can reward customers with prizes for their engagement, they’ll want to continue to engage in order to continue receiving these benefits.
By using personal data to deliver these (such as member anniversaries), restaurants can benefit even more.
Tiers – reward customers on a tiered basis to make them feel even more important, and to have a goal to work towards. By earning more points, customers can move up and down the tiers, being rewarded with even better benefits as they climb. This not only motivates them to spend more, but it’ll help to retain members as they feel valued by you, and have a sense of exclusivity in this elite club.
Data + Personalization– Walking a fine line around collecting data, but using it to curate personalized content that feels exclusive to your customer segments, can be difficult to navigate. However, when customers receive personalized content in return for data, they are more likely to share their information. Netflix, for example, uses your watch history & genre preferences to curate a recommended list of movies and shows you might enjoy. Another brand that does this really well is Amazon who tailors customers’ homepage based on purchase and browsing history.
Additionally, rewarding non-transactional behaviors to collect that data has been extremely beneficial to brands. Customers feel the value exchange is a positive one when they provide information and get something back in return for doing so. Read more about the benefits of non-transactional rewards in our blog: https://www.tlcworldwide.com/usa/non-transactional-customer-loyalty/
Programs that work
Chick-fil-A has been consistently revered as favorite loyalty program of customers and voted best QSR Loyalty program by Tasting Table. Here’s why they voted it #1:
Chick-fil-A offers more than just great chicken sandwiches and nuggets. Its loyalty app ticks all of the boxes when it comes to a fast food rewards system. You get a good number of points with each purchase, those points are based on total spend, and the rewards get better the more you use the app. Though it may require a bit of spending to unlock a full meal, the tiered redemption options are fair when it comes to point cost. Where the Chick-fil-A app really stands out is with its airline-like status system.
In addition to the standard membership that comes with the app, there are three additional tiers: silver, red, and signature. The higher tiers offer better rewards, point bonuses, and unique perks like the ability to request a tour of Chick-fil-A’s Atlanta headquarters.
Read More: https://www.tastingtable.com/1424948/fast-food-loyalty-apps-ranked-worst-best/
How to make it work for you
Ask yourself:
What are your primary goals?
What key insights do you hold about your audience and what motivates them?
Which rewards to offer
By answering these questions and implementing the strategies discussed, you can develop a loyalty program that stands out, keeps customers engaged, and drives long-term loyalty.
Conclusion
In the competitive world of QSR, a well-designed loyalty program can be a game-changer. Moving beyond the traditional ‘earn and burn’ model to more engaging and personalized experiences will help your brand retain customers and build lasting loyalty. Embrace innovation, understand your audience, and continuously adapt your program to stay ahead in the loyalty game.
