Join the loyalty clubJoin the loyalty club

Mark Brandau

Marketers generally agree that loyalty programs can provide a bonus by delivering useful customer data and increased guest frequency, but they also caution that operators must weigh the pluses and minuses of the various rewards they offer.


Few operators would argue the point that the food cost associated with the occasional freebie is worthwhile when measured against the benefits provided by some loyalty programs.


But what happens when customers come to expect not only a free 10th entrée after their ninth visit, but also discounted offers on daily deal sites or even nontraditional rewards like Facebook Credits? 


While restaurants try to work out which rewards their customers want and which ones make sense, executives say the key is to take a balanced approach to loyalty marketing.


Dana Benfield, director of loyalty and retention at Red Robin Gourmet Burgers, said the most important benefit of the Red Royalty program for the brand is the customer data gleaned from recording transactions through the loyalty cards. To receive that crucial information, Red Robin must reward customers in a balanced way, she said. Offering only deep discounts does not get loyal customers, and unappealing rewards are not a strong enough incentive for people to give a brand their customer data via a loyalty club.


“Any brand can drive frequency through discounts,” she said. “But the key to building affinity for a brand is to drive business without needing to discount. The only way to do that is to understand customers’ behavior and make sure the messaging you send is relevant to their interests.”



Brands perk up


Brian Lee, president of Revelation PR, Advertising & Social Media in Madison, Wis., said a standard frequency reward, like the 10th entrée free, is a commonplace and almost predictable reward, so operators should consider supplementing loyalty programs with other, more differentiated gestures.


“Loyalty marketing by itself is one thing, but you have to stand out in the crowd,” Lee said. “You could couple your loyalty marketing with an acquisition tool, like selling a punch card on Groupon to get more people signed up, or you could offer members other perks that make sense for your finances. Maybe you have one table where everyone always wants to sit, and you can limit that to loyalty club members.”


Typically, customer data tracked from loyalty purchases lead operators to the offers and perks that have the best return on investment, Lee said — such as wine and cocktail specials on Wednesday, if that’s when most female club members come in for happy hour.


Starbucks Coffee has built perks into its My Starbucks Rewards loyalty program for years, and its latest upgrade introduced April 13 gave members the privilege to vote on how the company would distribute $4 million in charitable donations to local nonprofit groups. The program’s current incarnation includes rewards like free refills and shots of syrup or soymilk, and a free beverage with the purchase of coffee beans.


Balancing perks and freebies is a way to keep loyalty programs attractive in the face of daily deals’ aggressive discounts, as well as profitable for operators, Red Robin’s Benfield said.


“There need to be discounts, and we do have some, but we’re also one of the few brands to offer a free meal, rather than an appetizer or dessert, for somebody’s birthday,” Benfield said. “You have to understand how one reward mixes with the others so that it stays profitable for the brand.”


Consumers “absolutely love those deep discounts” they’ve become used to redeeming from a daily deal site like Groupon or LivingSocial, she added. But those offers will not attract loyal customers to a restaurant or make current customers’ feelings for a brand stronger.


“That doesn’t drive loyalty; it just shifts traffic from one brand to the next,” she said. “What guests want more than anything is relevant communication.” 


Wanted: Unique rewards


As part of its balanced approach, Red Robin also is one of several restaurant brands that signed up with Plink, an online platform that rewards restaurant customers with Facebook Credits for their purchases. Arby’s, Dunkin’ Donuts, Quiznos, Taco Bell and Outback Steakhouse are partners, as well.


Plink users register a credit card with the site, which then links purchases to the users’ Facebook accounts. When purchases with that registered card are made at a participating restaurant, Plink adds credits to the user’s Facebook account, which are Facebook’s digital currency used to play social games like Farmville or Mafia Wars. Plink takes a percentage of the transaction at the restaurant.


Facebook revealed in its initial public offering filing that 15 million people, or less than 2 percent of its 845 million users, purchased Facebook Credits last year. That number presumably would grow if the currency could be used to purchase other things like music downloads from Facebook in the future.


Benfield said Red Robin’s partnership with Plink enabled the chain to build loyalty with guests by offering something other than a free entrée or appetizer.


“Plink was our way to get out and do a first test in the social sphere and understand the appetite for consumers to earn Facebook Credits at an outside establishment and use them to play online games,” Benfield said. “I think the industry is going this way. With social [media] taking on an elevated presence in the way our guests interact throughout their lives, I think we’ll see more of these rewards emerge.”


Arby’s, another restaurant brand testing out Plink, views the platform as a fit “with our strategy of experimenting with new social media opportunities,” said Bob Kraut, the chain’s senior vice president of advertising and brand communications.


“The appeal of this program is that it gives an opportunity to tie frequency and loyalty among Facebook users, without the need for training on the store level,” Kraut said.


Revelation’s Lee agrees that platforms experimenting with new rewards, like Facebook Credits on Plink, are onto something.


“If you can get these credits that you would have spent money on anyway, people are going to jump all over it,” Lee said. “It’s a great way to do another aspect of loyalty. It’s telling how many big boys are signing up.”


Contact Mark Brandau at [email protected].
Follow him on Twitter: @Mark_from_NRN.