In a stagnant marketplace, a chain’s growth is tied to the operator’s ability to gain a greater share of their customers’ visits, increasing repeat visits and building greater chain loyalty, according to market research firm The NPD Group.
“Having a loyal customer base is the only way you’re going to survive in this marketplace,” said NPD analyst Bonnie Riggs. “If [you] take note of who is doing well, they have strong loyalty programs.”
But building a loyal customer base may be easier said than done. A new NPD study reveals that repeat visits and loyalty may not be the same.
While many consumers are creatures of habit, repeatedly visiting the same restaurants, NPD data show that only four out of 10 foodservice customers surveyed acknowledged that there is a restaurant they repeatedly visit to get something to eat or drink. In addition, NPD suggests that consumers may make many of these repeat visits not out of loyalty, but to simply to meet their “needs of the moment.”
For example, the No. 1 driver for repeat visits is convenient location, NPD found.
“Convenience isn’t a loyalty driver — that’s a repeat visit driver,” said Riggs.
When the convenience factor was excluded, the data reveal that the most important driver of repeat visits is good food. Repeat visits are also strongly connected to reasonable pricing and friendly and good service. But it is the complex combination of all of these features that provides the experience that inspires customers to want to visit again and again, NPD suggested.
Fast-casual operators appear to have figured out the loyalty equation, as loyalty is noticeably high in the segment.
“There’s not a fast-casual place on every corner, so [consumers] have to go out of their way to go there,” said Riggs. “Good food, reasonable prices and good service. That's why fast casual does so well.”
How do you build loyalty?
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Every brand has its own approach to building loyalty, but a few do it so well that they have an almost cult-like following.
Two such chains, Chipotle and Dunkin’ Donuts, offer insight into how they gain customer loyalty.
Dunkin’ Donuts
A leader in loyalty, Dunkin’ Donuts has been ranked No. 1 in customer loyalty in the coffee category by the Brand Keys Customer Loyalty Engagement Index for the last eight years.
“[It’s an] accomplishment that speaks directly to the hard work and dedication of our franchisees and crew members, who provide our guests with great service and great value all day, every day,” said Scott Hudler, vice president of global consumer engagement, Dunkin' Brands Group Inc.
While Dunkin’ Donuts has a number of loyalty initiatives, Hudler says the most successful have been the Dunkin’ Mobile App and the DDPerks Rewards program, which rewards guests based on their spending and visiting frequency. The mobile app, launched in 2013, has reached nearly 8 million downloads, and the DDPerks program, launched earlier this year, is already nearing 1.3 million members.
“Loyalty is a big focus for us at Dunkin’ Donuts for 2014 and beyond,” said Hudler. “We're constantly exploring new, innovative ways to foster loyalty and distinguish the Dunkin’ Donuts brand.”
Chipotle Mexican Grill
For Chipotle, loyalty is more about relationships then repeat visits. Customers are so loyal to the Mexican fast-casual chain that a recent menu price hike didn’t raise a burrito-loving eyebrow. Instead, it was followed by a surge in traffic and an increase in profits.
“People may go to a place a lot simply because they get a deal to go, but ultimately you want them to choose to come because it’s outstanding, because the food and experience are compelling to them, and they feel like they are appreciated when they go,” said Chipotle spokesperson Chris Arnold. “That’s what we work to do.”
The chain prides itself on not offering a loyalty or frequency program, limited-time offers or other price promotions.
“We’ve created a culture where empowered teams of high performers are constantly achieving very high standards with regard to service, consistency of food and all facets of operations,” said Arnold. “Those things conspire to create a really unique and compelling experience, and that keeps our customers coming back.”