In the past, I have talked about how loyalty programs cannot replace the power of a customer developing an emotional bond with your restaurant. Still, loyalty programs are by no means hopeless under the right circumstances. Before you order punch cards, you should realize loyalty programs don’t work indiscriminately and it has to match who your customers are and want.
Loyalty programs generally succeed with restaurants that aren’t on the extremes. For example, punch cards devalue expensive restaurants. People who can afford to eat there frequently take little notice of the prices, and at such a restaurant, the possibility of a discount doesn’t seem high on a diner’s list of why to choose a restaurant. In general, the more luxurious or fashionable establishments would undermine their brand, especially as it means servers must mention the program to all customers (thus risking that you encounter customers who get the wrong idea about your loyalty program). Similarly, restaurants that cater to tourists and novelty seekers probably will only get minimal benefit from loyalty program.
On the other hand, two restaurants thrive with loyalty programs, places with brisk lunch traffic and neighborhood restaurants. Restaurants who do well at lunch normally are situated near customer’s work, and lunch is more prone to routine than dinner (as ease is prized and you tend to have a restricted amount of time to journey from work). I don’t think you are going to influence customers if they come back after their first time. But loyalty programs might up visit frequency and sense of goodwill the customer feels towards your restaurant.
Neighborhood restaurants benefit the most from loyalty programs. Sure, in some rural communities or small towns, it may not go over so well as customers identify themselves with restaurants as there are few options and they often know the staff. Those are the places that slipping a customer a free piece of pie ever so often will do much more. But take more urban and suburban areas. Customers confront choices on every block. So a little encouragement may help. The perception of how the restaurant treats the customer is central to the success of neighborhood restaurants, so the appreciation that comes with receiving a discount for staying true can strengthen the relationship even more.
However, most restaurants make the mistake that when customers finish their punch card they have to go back to scratch. Unless you have some other special motivator other than a straight discount, having to start over is discouraging and can make the punch cards lose their appeal very fast. A restaurant would be better to give customers different punch cards when they finish one. For example, a customer can move from a bronze to silver to gold to platinum punch card with increasing discounts. It will also signal to your staff the customers’ feelings toward the restaurant (are they regulars?) along with if the punch cards are really working in the long term.
I want to stress creativity in coming up with your loyalty program. I like telling a story to prove this point that shows how a loyalty program can drive business. When I was a kid, my family used to go to a neighborhood Chinese restaurant. They had punch cards and once you came back about 8 times, you received your reward. No 50% off. Instead they gave you a free duck, cooked right at your table. For me and my siblings, it captivated us. To this day, we talk about it. It was that brilliant.
Also, do not be seduced by any fancy mechanism for your loyalty program. Punch cards do fine, at least until you can keep of that through POS systems. Customers do not need a new piece of plastic in their wallets and these can be a source of irritation. My folks could never stop complaining at the annoyance of carrying around several unnecessary credit cards, one for Macy’s, one for Sears and another for J.C. Penny. Anyway it’s not worth the expense.
This article has some good ideas that you may help you in conceiving your loyalty program.