Although a new study reveals 96 percent of millennials are using restaurant loyalty programs, 63 percent of restaurants don't offer POS systems, which is one of the easiest ways to implement a loyalty program, said Justin Guinn, market researcher at Software Advice, which conducted a study surveying millennials about technology use via an online poll.
"So it's not really a question of whether or not this demographic doesn't have loyalty to give because, given that finding, they obviously do," Guinn said. "The issue revolves around why restaurants have traditionally had such a hard time pinning down the loyalty from this demo."
Guinn's report also found that:
- 40 percent of millennials prefer to use an app to identify themselves as loyalty members.
- Of those 40 percent, 36 percent want to review rewards balance.
- 29 percent want to view menus and prices.
"This is a crucial piece of information for restaurant owners because they can use these apps to engage with loyalty members and get them back in the restaurant spending more often," Guinn said.
FastCausal.com discussed with Guinn why there is a disconnect among restaurants when it comes to adopting loyalty platforms.
FastCasual: Why did you focus on millennials for your study?
Guinn: Millennials have recently eclipsed Baby Boomers as the largest age demographic in the country, and they eat out (dine-in, take-out, delivery) more than any other age group. So, millennials are undoubtedly a highly-valuable demographic for restaurants to target. That's why we wanted to gather some insights on them in particular. There have also been reports and comments in the past accusing millennials of being frugal with their brand loyalty. We wanted to explore this further and see if it is indeed the case.
Along those lines, we tend to hear that, as valuable as this demographic is, they're quick to drop a brand or business.
FastCasual: Did your research point to anything that would back that up?
Guinn: Our research found 96 percent of millennials are using restaurant loyalty programs. We asked what the top reasons were that caused them to stop participating in a restaurant's loyalty program. Leading the pack of reasons was that 'rewards aren't valuable enough' or 'discounts aren't high enough' to justify sustaining participation.
I don't think restaurants need to be throwing huge rewards and discounts around to sustain millennial loyalty. At the end of the day, a loyalty program should have a hugely positive impact on revenue. Costly rewards and discounts have the negative effect. However, restaurants should have an understanding of where this value threshold exists.
Fastcasual: Well, on the flip side, are there certain incentives that might attract this generation to one restaurant's loyalty program over another?
Guinn: Though monetary value is crucial, millennials can be most incentivized to maintain loyalty participation through other means. We found that how quickly it takes rewards to accrue has a profoundly positive impact on millennial loyalty participation, as 51 percent indicated it is a top incentive for them to join a loyalty program. The takeaway here is that restaurants should be rewarding loyalty members early on, regardless of what the reward value is. One strategy would be to offer a simple discount on their next purchase/visit. Ideally, this will get them back in the restaurant sooner.
FastCasual: What specific kinds of rewards did you find that millennials prefer to receive the most?
Guinn: Our study found 37 percent of millennials prefer to receive discounts, and 30 percent prefer to earn points based on the amount of money spent at a restaurant. These are two common and viable loyalty program strategies, but there's something else to keep in mind. Another top incentive for millennials to enroll in a loyalty program is the ability to earn a variety of rewards, with 38 percent indicating such. So while discounts and points are the most-preferred rewards millennials want to receive, restaurants need to sprinkle in some different offerings or find some kind of way to keep loyalty rewards fresh and incentivizing. The point here is that millennials remain engaged and will return and spend often.
FastCasual:Generally, how can restaurant operators take part in a loyalty program?
Guinn: Restaurant operators looking to adopt a loyalty program into their restaurant have multiple options. There are a plethora of app-based options on the market today, such as Belly, that are quick and easy options for a restaurant loyalty program. Restaurants opt-in to be included in these programs' catalogues and customers can download the app to start earning points each time they visit a participating restaurant. Though they are easy to use for both parties, some of these offerings don't allow operators to access valuable data collected on their customers.
Probably the most bang for their buck is for restaurant operators to adopt POS-based loyalty programs. The programs are integrated with the other various features of the POS system, which enables users to move from one function to another seamlessly. These are the kinds of things we hear and bring up in the conversations we have with restaurant owners everyday who are comparing the POS systems on the market.
Given these kinds of advantages, it's surprising that nearly two-thirds (63 percent) of restaurants still don't have a POS system today. All these various features, including the ones surrounding customer loyalty programs, are the things that restaurants need to think of when starting their process of comparing systems.
FastCasual: What about physical programs?
Guinn: Physical loyalty cards are not out-of-vogue just yet with millennials. Although 40 percent prefer to use an app to take part in a loyalty program, 38 percent would still prefer to use a card. So, if an app seems like too much to take on, it shouldn’t hinder your loyalty participation with millennials. As the years go on though, we'd probably expect those numbers to grow further and further apart in favor of mobile apps.
Before joining Networld Media Group as director of Editorial, where she oversees Networld Media Group's nine B2B publications, Cherryh Cansler served as Content Specialist at Barkley ad agency in Kansas City. Throughout her 17-year career as a journalist, she's written about a variety of topics, ranging from the restaurant industry and technology to health and fitness. Her byline has appeared in a number of newspapers, magazines and websites, including Forbes, The Kansas City Star and American Fitness magazine. She also serves as the managing editor for FastCasual.com.