Marketing

Loyalty is key to keeping customers happy in the face of rising prices

Restaurants should rely on sophisticated loyalty programs to offer non-discount rewards that entice with exclusivity and access, according to Thanx CEO Zach Goldstein

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July 13, 2022 by Zach Goldstein — CEO and Founder, Thanx

Price hikes may be inevitable, but discounts don't have to be.

As the restaurant industry continues to fight disruptions in supply chains, combat the scarcity of goods and overcome the rapid increase in the cost of goods due to inflation, many restaurants have been forced to raise prices. Consumers have been vocal as of late about the woes of inflation and soaring prices from gas to groceries. However, unlike these traditional consumer product goods, restaurants have a unique opportunity to keep customers happy despite price increases —thanks to loyalty programs.

For too long restaurants have depended on discounts, coupons, dollar-offs and freebies for customer acquisition and retention, but discounts and coupons are expensive to the bottom line and to the brand, posing an increased risk for brand erosion. Additionally, if a restaurant has to inevitably raise prices, discounting items negates the necessary profit gains. A modern and customizable loyalty program can help alleviate some of these concerns.

Loyalty programs allow restaurants to build direct relationships with their customers. And through data capture enabled by loyalty platforms, restaurants can better understand who their most valuable customers are as well as their behaviors and preferences. For example, Starbucks, with one of the most sophisticated programs in the industry, shared program success in their latest earnings call. The coffee chain's loyalty members accounted for 54% of the revenue in US company-operated stores, the highest level of engagement on record, up 2% from last year. And this makes sense. Our data shows that targeted campaigns delivered six times more revenue than generic campaigns. With robust customer data captured through loyalty programs, it is possible to deliver messages and offers that truly resonate with each customer to drive customer lifetime value and predictable revenue.

With sophisticated loyalty programs, restaurants may offer non-discount rewards that entice with exclusivity and access. Instead of giving a coupon, effectively nullifying a price increase, restaurant marketers can attract customers, reward VIPs, incentivize direct orders, respond to guest satisfaction feedback and ultimately drive customer lifetime value — all without offering a single dollar off.

Special perks like merchandise or swag, dedicated parking, exclusive seating or a skip-the-line pass all thank loyal customers without steep discounts. Drive first-party ordering by offering a secret menu only available on owned channels. Grow check averages and frequency by creating a challenge within a brand's loyalty program, like earning an exclusive invitation to a chef tasting event by spending a specified amount in a given month.

Despite inevitable price increases as a result of inflation and the shortage of supplies, restaurants can delight customers with exclusivity and access to valuable experiences without sacrificing profit gains to discounting. With a sophisticated loyalty program, restaurants place their brand in a position to engage loyal customers and build stronger relationships.

About Zach Goldstein

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Prior to earning his MBA from Stanford, Goldstein honed his experience in the customer loyalty space at Bain & Company, helping companies perfect their retention and reward strategies as early as 2005. Goldstein was recognized by Nation's Restaurant News on it's 2020 Restaurant Power List and has earned a reputation as a vocal thought leader in the restaurant-tech space through his Food Fighters podcast and authorship such as the widely-revered "Four Horsemen of the Restaurant Apocalypse?". The San Francisco resident is an avid cyclist and die-hard Sacramento Kings fan.

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