Article

Building brand loyalty

Fast casuals are looking to loyalty programs to boost revenue and increase repeat traffic.

January 22, 2007

**About the author: Tracy Powell is a regular contributor to Fast Casual magazine. His works include an article about radio advertising and a profile of former Tony Roma's CEO Ken Reimer.

According to the National Restaurant Association, about one in four full-service restaurants offer loyalty or rewards programs. The NRA predicts that 15 percent more will offer loyalty programs in 2007.

Given the trend, it is little wonder that San Diego-based Garden Fresh Restaurant Corp. recently joined the ranks of restaurants that offer a frequent-diner program.

"Our main focus is listening to our guests and responding to them, and a loyalty program can help us achieve that," said Ken Keane, executive vice president of marketing for Garden Fresh Restaurant Corp. "We're huge loyalty advocates. That's how we drive our brand."

According to NRA's 2007 Restaurant Industry Forecast, 51 percent of adults surveyed in 2006 said they are more likely to patronize a restaurant that has a frequent-diner program, up from 46 percent in 2005.

But the foodservice industry lags in its commonplace use of loyalty programs — typically used in industries such as airline, casino, hotel and grocery chains. In part that's due to impulsive programs, said Victoria Glickman Hodgkins, director of marketing and business development for Waltham, Mass.-based Peppercoin Inc., a small-payments-technology firm that offers the loyalty program currently under development at Garden Fresh.

"Right now you see a lot of ready-fire-aim approaches," Hodgkins said. "There's quite a bit of consternation in the merchant community about the difficulty in assessing the success of these types of promotional programs."

Peppercoin's answer has been to work in tandem with a restaurant's payment-processing system. Rather than receive a loyalty card for in-store restaurant use, customer-loyalty data is gathered and tracked at the point-of-sale through their debit or credit card use.

The operator can either decide to enroll every customer at the time of check-out, or customers can be asked to opt-in. They are then activated by pressing a button on the credit card terminal.

Peppercoin's method allows customers to join a loyalty-based program without filling out a form or carrying a separate card. According to a 2006 survey conducted by Peppercoin and Ipsos Insight, 21 percent of respondents found carrying a separate card inconvenient, and 18 percent found program enrollment to be too much of a hassle.

Tried and true

Loriann Sorce, chef/owner of Mount Arlington, N.J.-based Pomodoro's, credits Moving Targets' Loyal Rewards program for an initial sales increase of 28 percent. Like Sorce, Garden Fresh analyzed current customers' visit frequency, and other customer data points, to determine a good starting point from which to measure a program's success.

"We're doing a lot of analytics up front, determining what our purchase patterns are and going after the highest-leverage activity," Keane said. "Peppercoin has really partnered with us in getting this information and showing us how we can access information, like day parts and who is spending how much, and on which menu items."

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Keane said past approaches haven't panned out because "no one ever asked if the program would make a difference, or if it was just something that looks good, without a basis of understanding what the start point was."

Knowing where the starting line is allows a company to make a more-informed decision — one based on return of investment — rather than a hopeful decision. Andrea Von Utter, chief operating officer for Alexandria, Va.-based Fishbowl Marketing, has seen a variety of methods applied to loyalty marketing in her 20 years in the business. Now, she assists restaurants with e-mail marketing that specializes in loyalty programs.

"When you think of our e-mail program, it's like three layers of a cake," Von Utter said. "The first layer consists of loyalty e-mails; the second layer is brand messaging; and the third layer is community-oriented, or local-store marketing. All the layers work together to bring customers to your store and keep them coming, which is what loyalty is all about."

Fast casuals that utilize Fishbowl's program offer customers the opportunity to opt-in to an e-mail list that distributes offers as frequent as the operator chooses. E-mail campaigns include a welcome letter, birthday gift, and anniversary gift offers sent one year after a customer's enrollment.

Von Utter considers e-mail marketing a precursor to card swipe-based programs. Instead of traditional marketing efforts such as newspapers and radio — efforts that likely reach many who may never become a customer due to geographical distance or demographics — opting-in at the restaurant results in direct marketing to existing customers.

"It's the difference between frequency marketing and acquisition marketing," Von Utter said. "You don't need a card, you don't need a special machine, there's no integration to your POS system. You just need to build a list and communicate with your customers on a regular basis."

Once a loyalty program is set up, whether swipe-based or cardless, the last thing a company should do is dash customers' expectations.

"If it doesn't make money for you, it's not important at all," Keane said, with one proviso: "But in terms of having loyal guests, it's the most important thing of all."