How El Pollo Loco Uses AI To Help Personalize Rewards Program Offerings

Quick-service restaurants (QSRs) have leveraged rewards programs to engage and maintain their loyal followings for a long time, but such initiatives are receiving increased attention during the pandemic as QSRs more heavily rely on them to bolster sales and consumers more aggressively seek deals to help save money. Some restaurants are learning that the recipe for these programs’ success features customer input, however. Recent studies suggest that consumers are on the hunt for loyalty programs customized to their individual tastes, with research revealing that up to 84 percent of consumers spend their money on merchants that personalize their offerings.

El Pollo Loco, a Costa Mesa, California-based restaurant chain known for its LA Mexican-style fire-grilled chicken, found that the pandemic’s pressures demanded a rewards program revamp. The publicly traded chain took a customer-focused approach to revising its Loco Rewards last summer for its 480 locations in Arizona, California, Louisiana, Nevada, Texas and Utah.

“When we launched the loyalty program in 2017, it started out as an opportunity to engage our frequent customers. It was all about trying to get downloads [of our app] and just trying to get people to utilize the technology,” Andrew Rebhun, El Pollo Loco’s vice president of digital, told PYMNTS in a recent interview.

The original rewards program provided customers with one point for every dollar spent, and those who accrued 100 points received a $10 coupon toward a future purchase. The average customer ordered about once a month and spent between $12 and $15, meaning it could take as long as eight months for diners to see the benefit.

“That’s way too long,” Rebhun said. “It became clear very quickly that we needed to make an offer that was very consumer-centric and do something that … would actually allow our customers to want to take action, so we changed it.”

Made-To-Order Rewards

The program today has 2.5 million members and looks much different. Its initial revisions addressed customer responses to emails sent to the chain’s database, including both frequent and not-so-frequent patrons to understand every perspective. Diners spending $50 receive a $5 coupon in addition to the previous benefits of a birthday reward, rewards for inviting friends, bonus point days and other year-round exclusive offers. Now it takes only about two and a half months to earn a coupon.

The result is that the number of redemptions on Loco Rewards has increased by more than one-third, Rebhun said. The company’s amended rewards program also included investment in artificial intelligence (AI).

“We put a much greater focus on segmentation and artificial intelligence,” he said. “We’re really doing a much better job of understanding who our [customers] are and making sure we’re sending them offers and products that are most relevant to them.”

Evolving Rewards With AI

Rebhun explained that AI is helping El Pollo Loco evolve its rewards program based on what he called the “microsegmentation” of its loyal diners, analyzing everything from how much customers spend to their visitation frequency to the products they consume.

“AI allows us to make the best-informed decisions, and for us, it was a no-brainer,” he said. “The thing with AI is the more you use it, the better the software and the back-end system gets.”

Rebhun noted that the approach is far more effective than simply sending out the same offer to all members.

“With segmentation, we’re a lot better at how we discount and what we do with targeted personalized marketing,” he said. “Personalized marketing is going to continue to become the way more companies go to market.”

He added that since the pandemic began, the chain has seen online ordering and delivery triple. The company also launched curbside pickup during this time to meet the customer demand for contactless order retrieval. The QSR is not done innovating: It hired New York City-based digital advertising agency Organic in January to grow its digital presence and benefit the rewards program.

Customized rewards initiatives can be powerful tools, drawing consumers in and also increasing the amount they spend. Leveraging AI technology to craft unique offers also enables QSRs to stand out from the crowd and make a better play for patrons’ long-term loyalty. Personalizing rewards is thus proving to be a crucial way that restaurants can cater to their customers’ cravings and sustain their own bottom lines.