Are You Getting the Most out of Your Data?: Why You May Want to Consider a Loyalty Program

By Kirstie Tiernan

One of my first restaurant clients was a place I visited often, sometimes multiple times a week—my go-to for business lunches.

When I approached the restaurant with an opportunity to help them better serve their customers leveraging the power of their own data, the first step was to review what they already had. Since they didn’t have a loyalty program in place, we started with a simple review of their OpenTable reservation data to identify the number of visits the restaurant received per customer.

As we walked through the report, we noticed mostly one or two visits per person—unsurprising, given the restaurant was in a tourist area of downtown Chicago. However, as we made our way down the list, we saw one patron who had visited 36 times within the last 6 months. That loyal patron was me! It made for a bit of an awkward moment, but the general manager quickly realized how easy it would have been to reward my loyalty had he just known who I was. Implementing a loyalty program is one way restaurants can harness the power of data analytics and better understand who their customers are, as well as what will keep those customers coming back and spending more.

Choosing a loyalty program
A loyalty program rewards customers for repetitive business by offering discounted items or VIP experiences. There are several types of loyalty programs used by businesses to reward customers. The methods that work best for restaurants are either points-based or tiered, which reward customers for dollars spent and frequency of visits.

Points-based systems are more short-term focused and provide more immediate rewards for customer business. Whether it be a free appetizer or a discount on a meal, the points system encourages customers to come back to use their reward. The tiered system gives customers a unique benefit for being a long-time customer. They enhance the customer experience by providing special access or exclusive opportunities.

You can leverage data you’ve already collected to determine the type of loyalty system to use. For example, how much more do patrons spend when they use a discount or coupon on an appetizer? Restaurants with customers that spend more using discounts may want to consider a points-based loyalty program. If you have customers that frequently attend special events and spend more to do so, the tiered system may be a better fit.

Use the data!
It’s easy enough to develop the right questions to determine which analytics to run. The hard part is getting the data analytics-ready. To be analytics-ready, the data needs to be clean—populated, accurate and complete—in order to be used effectively.

When implementing a loyalty system, it’s important to ensure that you have the resources in place to make use of the data you gather. The analytics should be concise, informative, accurate and user-friendly. A variety of off-the-shelf analytics tools are available to run general analytics on labor, inventory, food cost, menus, customer behavior and social media.

If you already have database software in-house, you can create your own analytics by pulling your Point of Sale (POS) data, accounting information, social media references, online reviews, loyalty program details and reservation data all into one database and running your reports there. Visualization tools, like Tableau, are a low-cost way to help make results easy to interpret and actionable. Once you have the data in one place, you can begin to analyze it and adjust your business practices accordingly, moving from volumes of unused data to intelligent business decision making. For example, you can analyze your customers’ spending on alcoholic beverages and assess their potential appetite for a wine-pairing dinner.

Best Practices
Now that you have a preliminary grasp of the data and are getting ready to deploy a new loyalty program, you should consider the following:
  • Provide an immediate incentive and make it easy to join. Discount the meal when they sign up and take only the information you absolutely need, like the name, birth date and contact information.
  • Personalize offerings to members. One of the top reasons loyalty programs fail is because the contact with the guest is too general. Use the data to learn more about your customer and create specialized incentives and offerings aligned with what they want.
  • Reward customers for any sale associated with the business (e.g., catering, restaurant dining, merchandise purchase, etc.).
  • No one puts those plastic tags on their key rings anymore. Use a phone number and/or email address as the ID for the card.
It costs more to acquire a new customer than to retain an existing one. Loyalty programs might not be right for every business, but for some, implementing a system can help you to better know your customers, offer them meaningful and relevant promotions, and connect with them on a regular basis, ensuring that they will come back for more.

For more information about the use of data analytics in loyalty programs, contact Kirstie Tiernan at ktiernan@bdo.com.

And be sure to keep up with the Restaurant Practice’s latest thoughts by subscribing to our blog on the Selections homepage here and following us on Twitter at @BDORestaurant.

Blog-subscribe-ad_Rest.jpg