Retail

Loyalty Begets Loyalty, But Only If QSRs Give Customers The Rewards They Want

Loyalty is a two-way street — both in life and in rewards programs. Every quick-service restaurant (QSR) seems to offer its own loyalty benefits in increase its customer service, whether by app or by card tracking or, simply, via old-fashioned punch card. Yet the ones finding the most success have one thing in common, and that is treating loyalty as a give and take.

“It’s nuanced,” said Patrick Reynolds, CMO for the engagement platform SessionM. “They have to have a program to make customers loyal, and to do that, they’re going to have to demonstrate loyalty to customers. A punch card that lets you buy four and get one free is not working anymore.”

That’s at least partly because consumers got smart and realized that “buy four, get five” was just code for an across-the-board 20 percent discount. That didn’t make people feel special. Someone with a $10,000 lifetime value expects a higher value back from the restaurant or retailer. If they’re getting the same rewards as someone with a $2,000 lifetime value, that’s no reward; that’s just a “mark up to mark down” ploy.

Starbucks is a prime example of a QSR that saw this shift in consumer expectations and ran with it. The coffee shop giant once had a simple “buy x, get one free” structure: After 11 transactions, the customer could get any one item for free — no matter how large or absurd the drink, which prompted some to order as many as 50 shots of espresso or flavor syrup in their complimentary beverage, just because they could.

Now, Starbucks has switched to a proportional program that rewards consumers based on how much they buy rather than simply how often. So a customer buying four boxes of K-cups for $60 earns more points than one buying a venti soy latté for $6. The rewards are commensurate with the customer’s buying power.

“If your lifetime value is bigger, you should get a bigger offer,” Reynolds said. It’s that simple.

Another example is Huggies, the diaper and baby products company. If anyone needs a seamless rewards experience, it’s new moms, and a traditional loyalty program implemented several years ago didn’t serve that population effectively.

So, with an assist from SessionM, Huggies changed tactics and applied consumer data to create tips for new parents based on what they’d bought. When their kid grows into a certain size diaper, Huggies sends tips on babyproofing the house. As summer rolls around, it sends water safety tips. Watching these educational videos earns customers even more points to put toward their next purchase, on top of whatever they collected after their previous shopping trip.

Chicken Salad Chick, a Southern U.S. fast casual restaurant with 100 different kinds of chicken salad and a client of SessionM’s, sends promotions based on performance in regions and markets to drive more business where it’s needed the most, while also accounting for customers’ favorites — “Love this salad? Buy a sandwich, and we’ll give you some extra to take home.”

As time and technology roll forward, Reynolds projects that loyalty programs will become more predictive and data-driven. Algorithms will look at past activity across all channels — in-store, mobile app, web, email, push notifications — and match that up against trends to offer ever more personalized offers based on what they think customers will want to do next. No two offers will be the same.

It will become the norm for restaurants to initiate special offers on the spot based on real-time data. For instance, if morning sales were down due to bad weather, customers who already stopped by once may receive a special offer for a $1 iced tea, any size, if they return in the afternoon. That offer is likely to net more than just $1 per customer, as many will opt to buy a snack to accompany the drink.

That’s the new wave of loyalty programs that SessionM hopes to help set in motion. The company recently announced news that it had acquired LoyalTree, a provider of integrated point-of-sale marketing software for retail brands, to support easier integration of its engagement platforms in retail settings. SessionM also garnered $35 million in strategic funding last fall.

SessionM’s new product, “Total Offer Management,” creates and delivers custom offers across channels and then automatically processes the deduction when the customer scans their phone at the point of sale. Its goal is not just to save customers money, but to reduce friction and create a rewarding customer experience on top of the physical reward.

“Total Offer Management” sounds great, but with so many different loyalty programs out there, is it possible that the market could get over-saturated before SessionM’s vision comes to fruition? Reynolds doesn’t think so.

“Loyalty is a behavior; it’s an outcome,” Reynolds said. “I want my customers to have greater frequency or spend more each time. Nowhere in that equation are they required to participate in a loyalty program; they don’t have to earn stars or points.”

If every program required customers to have a punch card or an app, then it would be easy for wallets and phones to get cluttered, and the loyalty ecosystem would fall apart. But that’s not what’s happening. Programs like the one at Starbucks, or Amazon Prime, don’t feel like loyalty programs because they’re delivering specific benefits to their members, seamlessly.

“It’s getting more elegant and invisible,” Reynolds said. “It’s just a way of doing true personalized one-to-one marketing that gets you to take the next best action for both you and the retailer.”

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