A lot of industry and financial chatter seems to be coming to the same conclusion: 2018 is looking to be a lot like 2017 was for restaurants.
Yes, the consumer price index remains strong, and disposable income appears stable (maybe even ticking up). Nevertheless, we’re still wrestling with key performance indicators in the negative restaurant industry-wide, with TDn2K Black Box Intelligence reporting -1.1 percent in same store sales and -3.2 percent for traffic growth for the full year 2017.
In short, customers continue to cut back on dining out.
Early speculation among pundits is that we’re looking at nearly flat growth for the restaurant industry as a whole in 2018. This could be trouble for restaurants in already crowded markets, as competition for those customer dollars is tight. Restaurant chains are definitely the hardest hit so far, but every segment of the business is having to work harder for traffic amid labor concerns, changing demographics, and changing consumer habits.
So the question is: how can restaurants weather a year with flat—or possibly less—spending, and that continues to hit them with more and more competition?
Loyalty offers an edge.
Loyalty programs that offer rewards for every day purchases, and particularly for discretionary spending, like dining out, do two very important things for restaurants: drive in customers and increase the amount they spend. It’s an effective one-two punch of a marketing tactic that is win-win for both the restaurant and their customers.
The 2017 Loyalty Report commissioned by Bond Brand Loyalty in collaboration with Visa, gives insight into why loyalty programs benefit businesses that engage them:
- 81 percent of customers said that loyalty programs make them more likely to continue doing business with a brand.
- 73 percent are more likely to recommend a brand that has a good loyalty program.
- 66 percent modify how much they spend to maximize the rewards they get from a loyalty program.
Customers are willing to spend more precisely because they feel like they are getting more incremental value from the experience. And unlike discount menus or couponing, rewards do not devalue the brand from which they are offered. Customers are motivated to spendmore, not less, to collect their miles, points, or cashback, or attain a higher earning level, if the reward is something they care about and it is easy to attain.
As a result, it’s critical for restaurants to engage the right type of loyalty program for their customers—one that offers a choice of reward and removes all barriers to earning. Having to add an app to your phone is a barrier. Having to enter coupon codes or pre-register for a deal is a barrier. Having to remember a membership card or even enter your email is a barrier. And barriers make for bad experiences.
“Customers will remember their experience with a brand long after they’ve forgotten a discount,” says Howard Schneider, senior consultant for Kobie Marketing. "Companies cultivate true customer loyalty by making customers’ lives easier and making sure each engagement ... is valuable for them."
In short, customers are looking for a seamless, convenient experience at a restaurant—not just a quick savings on their bill. Ensuring long-term value in an easy, frictionless way is the key to their loyalty.
And loyalty programs that manage rewards through card-linked offers are the way to do that.
According to a CreditCards.com survey commissioned by Gfk Custom Research North America, 42 percent of consumers who use credit or debit cards prefer getting an automatically applied discount or reward, rather than showing a coupon or card. Among cardholders 18 to 34 years old, that number jumps to 54 percent.
That’s exactly what a card-linked offer does. When a customer enrolls in a loyalty program that offers rewards by dining at a participating restaurant (like those operated by Rewards Network), the customer can get their points, miles, or cashback amount applied to their program account automatically after paying the bill—provided the restaurant is one of the loyalty program’s merchants.
It’s a unique proposition in the landscape of promotional offers because it doesn’t require any coupons, promo codes, or membership cards to be shown at the point of purchase. Restaurants don’t need to collect email addresses or get club sign-ups at checkout. All that a card-linked offer needs in order to be processed is the customer’s credit or debit card to be registered with the loyalty program supplying the reward or cashback offer.
“If [a customer] can get points or some kind of a benefit, it’s a psychological edge,” says Raveen Arora, owner of The Dhaba, a Rewards Network client. “And check averages improve. We get a better mix of customers—corporate travelers who tend to spend more. They’re more engaged.”
It’s precisely the seamless, positive experience that customers are looking for with a restaurant, and the added value that will drive them to spend more when they do dine. And in a year like 2018, where there is more competition among restaurants than ever, restaurants need an advantage that’s going to drive more business—not just now, but for years to come.
That’s the edge loyalty can provide.