The Basics of Building a Loyalty Program

Loyalty programs are a simple and progressive method to build a clientele and increase the amount of repeat customers.
Loyalty programs are a simple and progressive method to build a clientele and increase the amount of repeat customers.

Loyalty customers are 70 percent more likely to make a repeat visit, according to data, so experts say it's crucial restaurants set up loyalty programs if they want to build a core of happy repeat customers.

"One of the big things that we've found is that the smaller guy, whether it be restaurants or anybody else, is trying to compete with the big brands," says Lance Brown, vice president of product development for Huzzah Media, a developer of iPad-based loyalty programs for small businesses. "Restaurants are always good at communicating and the word of mouth seems to be strong, but giving people just one extra reason to come back seems to really start chaining the dynamic in the table turnover and the ticket."

That's the first reason to turn an eye to loyalty: restaurants see a noticeable increase in the same customers coming back as they chase their next reward or try to build up points for a redeemable food item.

Often, the most popular items on the menu make for enticing treats for customers to chase. They enjoy freebies, Brown says, though it's up to the restaurant to decide whether the item they offer up for free is high- or low-margin. 

"I really push restaurants to find something that they can give away quickly," Brown advises, "something that normally they would give out anyways as their grab bag of giveaways or in coupons they run." He suggests that restaurants have a reward ready to go by the time a customer registers a third visit, whether it's a free appetizer, coffee, drink, or dessert. At the fourth, fifth, or sixth reward, restaurants should up the ante to a free entrée or buy one, get one free entrée, he says.

What makes the most difference in the success of a loyalty program is staff training. Brown recalls talking with the head of a wine bar in Houston recently that has Huzzah Media's loyalty system but wasn't using it to the full extent to leverage the repeat business.

"The staff wasn't trained and the staff wasn't promoting it," he explains. "So, that entails sitting down with the owner and saying, 'This is only as good as the number of people who know about it, or it's only as good as your staff gets excited about it.'"

Once staff is fully trained, restaurants can start using the loyalty system to track how often a customer returns, how many points she's accumulated, and how many times she visits. These data reinforce the marketing, such as whether it's time to acquire new customers or work on retention.

The return on investment for loyalty programs is typically high, Brown says, citing Huzzah Media's cost of $69 per month. Walking through the simple steps of awareness, education, and verbalizing of the program means a loyalty program pays for itself rather quickly.

"My guess is, it wouldn't take very much at all to have some people come in, either one extra visit a week or an increase in their ticket size, to start justifying a loyalty program's monthly fee," Brown says.

By Sonya Chudgar


Anyone who advocates "free" and "discounts" as the basis for any loyalty program is selling nothing but snake oil.

Add new comment