November 2, 2018
Blog Post

How is Customer Loyalty Important to a Restaurant’s Profitability?

You’ve worked hard to ensure your restaurant’s food and service is stellar, but are you investing enough energy into cultivating customer loyalty to keep regulars returning? Building solid relationships with your customers helps them feel more a part of a community, makes them think of your establishment as their “go-to” neighborhood spot, and contributes to your restaurant’s profitability.

Let’s start off by dispelling the myth that creating a loyalty program eats into profits. The investment to create repeat guests will turn out to be less expensive than the cost of acquiring new patrons, which can run up to seven times more, reports Upserve. They also find that loyal customers spend on average 67% more at restaurants than new customers

The Harvard Business Review says that a 5% increase in customer retention can lead to a 95% increase in revenue because retained customers = higher lifetime value and higher profitability without new customer acquisition costs. Keeping those core customers satisfied also turns them into your best no-cost, word-of-mouth advertising.

Here are 7 ways to create a personalized experience and make strong connections with guests so you are the first place that pops into their mind when they decide where to dine.

1. Love your neighbors

recent survey found that the average American is willing to drive only 17 minutes to visit a restaurant, so it’s important to focus on building repeat business among the locals in your area. You and your servers should get to know these regulars and their favorite menu items then nurture that connection with VIP treatment. Upgrade their table to a better location; comp them with appetizers, drinks or desserts; remember their birthdays.

2. Connect with your community

Find ways to build a bond with your customers by supporting your neighborhood or broader community. For instance, help local area nonprofits with benefit dinners that give a percentage to the organization. Thinking broader, tap into customers’ desire to support local farmers and ranchers by offering more local items from local, wholesale food suppliers. Try FoodMaven’s online food marketplace to get true farm-to-table on your menu (with a chance to help your bottom line, too). Plus, by buying from FoodMaven, you support local hunger-relief organizations. 

3. A loyalty program is a must-have

The 2017 Bond Brand Loyalty Report finds that 81% of consumers say that loyalty programs make them more likely to continue patronizing a business. About 66% adjust their spend to get the most out of their loyalty benefits, and 73% are more likely to recommend a business that offers a loyalty program. Even better: When customers are close to reaching their loyalty reward, they spend 39% more on average, and when they redeem their rewards, they usually spend 19% more than average, finds LevelUp, an ordering app for restaurants. They find that customer visits increase by 75% between the first reward and the tenth reward.

4. Don’t just create a “me-too loyalty program”

The average household has as many as 30 loyalty cards or apps on their phones, according to loyalty marketing agency rDialogue. You need to stand out from your competitors by meeting and then exceeding your customers’ needs. Do this by asking what kind of rewards they’d like to receive on your social media channels or with a comment card left with the check. Discover if they prefer discounts and comp items, which is what most loyalty programs offer. Or maybe they might better respond to rewards that make an emotional connection, like a referral program, supporting a community nonprofit or recognizing them as a VIP customer?

5. Make is easy for your customers

Whatever program you decide on, make it simple for guests to use. Unnecessary hurdles will only frustrate customers, which is the opposite of what you want to do. Don’t limit how rewards can be redeemed or earned. If they forget their card or phone, you should be able to look up their information in your system.

6. There’s an app for that

The right technology can make your loyalty program even more simple to use. When customers log into your Wi-Fi, give them the option to join your program or just capture their info so you can follow up with an offer to join and a reward for doing so. Explore working with digital loyalty platforms such as Belly and Punchh since 57% of consumers say they would interact with a loyalty program on their device (2017 Bond Brand Loyalty Report).

You can also build customer loyalty by making delivery easier with an app like ChowNow that allows customers to order directly from your restaurant’s website, Facebook, and Google pages. Then you’ll receive customer insights with every order to help you understand their behavior and better meet their needs.

7. Listen to your customers’ feedback

Once you launch your loyalty program, the work is not done. Keep communicating with customers through your app or on social media to find out what they like and what they don’t. Incentivize them to take a quick survey, asking questions about whether it takes too long or too much effort to accrue rewards, for example.

Find more ways to raise revenue in 12 Innovative Ways to Increase Your Restaurant’s Profit Margin,” including how FoodMaven, a new way to source quality ingredients, can help you cut food costs average of 35% off.