The restaurant industry is in the middle of some pretty rough waters right now. Heightened socio-political tensions, a severely impacted global supply chain, and of course the aftershock of the COVID-19 pandemic have made the last two years contentious to say the least.
As we emerge into a post-COVID world, however, competition for market share between brands, larger franchises, and more modest SMBs have left owners and managers asking how to increase customer loyalty in your restaurant, cafe, or other food and beverage establishment?
We're going to talk about how venues, from the smallest independent sandwich shops to the biggest multi-vendor stadiums, can maintain an edge against the competition using a high-quality customer loyalty program built at the intersection between your CRM and the customer experience.
We'll talk about the range of complex challenges facing the industry, as well as the ways in which a loyalty and rewards program can help you maintain parity in such an aggressive climate.
How to Increase Customer Loyalty in Your Restaurant: the Current State of the Industry
What do we mean when we say "Rough water?" Various business journals and major media outlets have written prolifically about the current state of the world, vis-á-vis the effects of the COVID-19 pandemic, the supply chain, and a host of other issues, but what do these things have to do with the restaurant and hospitality industry?
A lot, as it turns out.
The food and beverage industry is currently faced with a huge range of challenges making it difficult to stand out from the competition, and even more difficult to figure out how to increase customer loyalty in your own restaurant. Listed below in greater detail are the leading challenges currently facing food and beverage venue owners.
Inflation is on everyone's mind. It's almost impossible to escape from it. It pervades our politics and our daily lives. And it certainly has had an onerous effect on restaurants and other foodservice venues.
As inflation increases, so do the costs of basic raw materials. In the foodservice industry, that means an increase in the cost of ingredients. As those ingredients move through the supply chain —from raw, unfinished resources to final product— their price increases exponentially with each link.
By the time those goods reach the restaurant, the restaurant owner is forced to absorb those added costs despite the fact that they are often the supply chain link least able to shoulder those kinds of burdens. The result? Price increases across the menu, which is never a good answer to the question, "How to increase customer loyalty in your restaurant?"
Supply Chain Disruptions
According to the National Restaurant Association, a staggering 96% of all restaurants in the U.S. experienced some form of supply chain failure during 2021. Nearly every analyst on the face of the earth expects that trend to continue well into the current year. It's no surprise that there's not a lot of optimism in the industry right now. More than half of all restaurant owners don't foresee change anytime soon. And these stats aren’t limited to the U.S.
So what does that mean for the customer? Menu price increases for starters, but even worse, a shortage of customer favorites.
The supply chain isn't the only point of concern for the restaurant, cafe, and pub industry. Venues all over are currently in the midst of a staffing crunch. When the COVID-19 pandemic first began, the industry was forced to lay off frontline staff en masse. According to the above referenced article from the National Restaurant Association, 70% of all restaurant owners in the U.S. say their venue is understaffed. 50% believe that restaffing will be their biggest challenge in 2022.
How do you increase customer loyalty in your restaurant? Staff appropriately, or leverage technology more efficiently in order to preserve the customer experience and protect your bottom line.
Changing customer preferences
"The customer is king!" as the old marketing mantra goes. That's why your venue cannot afford to remain static, especially in today's challenging climate. A younger, more tech-savvy demographic is now the largest customer base in the country, and they have different expectations from previous generations, including:
- Technological integration
- Outdoor seating
- Healthier menu items
- Sustainable business practices
- Takeout alcohol orders
- Contactless ordering methods
How to increase customer loyalty in your restaurant? Implement policies and programs that speak to these needs.
The Rise of Third Party Delivery Options
During any given week during the pandemic, 66% of families ordered delivery. In fact, online delivery services received a 25% boost during the pandemic's first year. Unfortunately, third party delivery services are expensive to both the customer and the business itself.
With delivery being such an integral part of the modern restaurant experience, restaurant owners are faced with the sudden challenge of attenuating their costs while providing quick and reliable ordering and delivery options.
Customer Safety Expectations
Let's not forget that although COVID measures have relaxed and medical science has developed effective ways to fight the virus, the pandemic has nonetheless left an indelible mark on our consciousness.
Customers who choose on-premise dining demand strict adherence to safety regulations with a focus on updated hygiene practices. In order to provide a superior dining experience, restaurants are tasked with implementing safety measures such as HEPA filters and contactless menus.
The Loyalty Program
Now that we've explored the reason behind the current level of adversity that restaurants and large-scale venues face, it's time to answer the question "How to increase customer loyalty in your restaurant."
Customer loyalty programs are nothing new, however. Businesses from corner coffee shops to globe-spanning franchises have utilized small-scale rewards programs for years. Take the punch card model, for example. Here, you buy nine products and get the tenth one for free. The problem with methods like this is that they are resource intensive.
These more basic loyalty programs are time-consuming to implement. Not only do they require ongoing physical resources, but they all demand added time and attention from the waitstaff. Add to that a dedicated staff member whose duty it is to champion any in-house programs that your restaurant chooses to offer. There's got to be a better way, one positioned between your CRM and the customer experience.
Building Better Customer Loyalty
There's a business concept called the Pareto Principle, otherwise known as the 80-20 rule. The rule states that 80% of your business is driven by 20% of all possible precipitating factors. In the restaurant and hospitality industry, that means that 80% of your sales volume comes from only 20% of your total customer base —the most loyal patrons. How to increase customer loyalty in your restaurant? Target the 20%.
Today's most effective loyalty programs are all digitally based and often coordinate directly with your CRM. That means they cut through the time and resource spend of more traditional punch card programs by streamlining the setup process. Little has changed from the core principle, however.
A well-designed loyalty program should offer appreciable discounts to your repeat customers; the more they spend, the more they get back. Whether it's a points-based system, free products, coupons featuring deep discounts, or even a cash back incentive, the key to building customer loyalty is to make it easy for your customers to participate, and beneficial for your enterprise to offer.
Regardless of the method that you choose to implement, the point is to make your customers feel special for giving you their repeat business. The secret to a great loyalty program, however, is incubating customer loyalty from the very start of your relationship.
Email marketing campaigns are a great way to engage new customers by sending them welcome emails after their first dining experience. That way you can elicit repeat business by showing daily specials, offering one-time coupons, and educating them about the advantages of enrolling in your loyalty program. When coupled together with a superb in-house customer experience, you foster customer engagement, driving a more profitable bottom line.
Loyalty programs aren't just great for the customer; they also help you build a more solid foundation for your business. Loyalty programs help increase your level of customer retention while providing your restaurant with key customer data that can be fed into your CRM. In turn, you can use that data to identify trends and customer behaviors, tailoring specific offers to different demographic subsets.
We live in an economic climate marked by extreme competition. From inflation to supply chain disruptions, COVID to changing customer expectations, the food and hospitality industry finds itself wrestling with the question, "How do we improve customer loyalty in our restaurants?" The answer? Rewarding customers who are loyal to your business.
In the end, a well-built loyalty program is about creating a dialogue with your customers. Our best advice? Start that dialogue early and engage your customers often. Use email marketing to communicate your brand ideals. Offer incentives to drive business in your doorway, and extend meaningful loyalty rewards to build repeat business.
Looking to set up your own CRM and customer loyalty program but not sure where to begin? Mr Yum can help take the setup off your hands. Contact us today to learn more about our loyalty program and all our other great services.