Loyalty Innovation Has Evolved to Focus More on the Customer

Personalization is key to successful loyalty programs, according to the  2024 Paytronix Loyalty Trends Report.

"Top performers are personalizing and using data to segment their customer database," Kristin Lynch, Senior Director of Restaurant Strategy for Paytronix Systems. "They are differentiating, delivering an emotional connection and recognizing their most valuable customers." Lynch has more than 20 years’ experience managing large CPG and retail brands in marketing and brand strategy. Kristin was previously Vice President with Round Table Pizza and Director of Marketing for well-known brands such as Thorntons, Pyrex, and Craftsman Tools.

"Loyalty innovation is not always true innovation," Lynch added. "It’s not always a new method, idea, product, etc.   Loyalty innovation sometimes simply is…Restaurants see others driving success with an initiative and they jump on the bandwagon, while tweaking it slightly to make it unique for their brand."

For example, Lynch said, many restaurants jumped into “gamification” during 2023 by launching Badges.  Each restaurant put their own spin on Badges to make it fit their brand but doing Badges was not a unique innovation by each restaurant brand. 

Personalization engines that enable individualized loyalty experiences are key to creating and sustaining win–win experiences.

"Restaurants have a loyalty program but haven’t put in place many best practices (i.e. welcome reward, birthday reward, segmentation).  Therefore, they enhance their program with “innovation” to them but not necessarily industry innovation.  The above has been an evolution with loyalty innovation meaning “fast follower” not “new / unique”.  But loyalty innovation has also evolved to focus more on the customer.  Innovation that’s important to the customer is personalized and serves their individual needs"

As mentioned in the Paytronix Loyalty Trend Report 2024 – Most Brands Use Some Level of Campaign Segmentation.  Over 70 percent of brands’ campaigns are segmented vs. sent to their entire loyalty database. Less than 10 percent of campaigns leveraged predictive model scores.  This allows communication and rewards to be based on customers individual purchases / past behaviors and drive engagement through personalization. 

Lynch noted that among the things top performers are doing right to have a high share of transactions coming through loyalty program members include:

Differentiation – Rewards must fit the brand and match what each individual member craves. This could mean offering monthly subscriptions or meal passes, providing early access to new menu items, or celebrating milestones like birthdays with experiential rewards like a hands-on cooking class.

Emotional Connection – By analyzing purchase histories and contextual cues, such as location data, weather data, device data, and key dates like guest birthdays or loyalty program anniversaries, operators can develop personalized offers that drive positive feelings. Examples include wishing members a happy anniversary with a buy-one-get one (BOGO) deal, welcoming members back from vacation with a coupon for their favorite pick-me-up beverage, or thanking members who reach annual spend tiers by donating in their name to a local cause.

Brand Affinity – When guests feel recognized and appreciated, their brand affinity increases. Personalization engines that enable individualized loyalty experiences are key to creating and sustaining win–win experiences.

Lynch said brands can use subscription models in conjunction with loyalty programs. 

"A subscription usually involves paying upfront for services or meals that are redeemed later — such as getting “meal passes” at a rate that’s lower than buying them individually each time — or asking customers to pay one rate for unlimited options, Many restaurants find subscriptions to be the next level of loyalty, but they are not for all brands, nor needed to be successful in the loyalty space. The flexibility of subscriptions means you can mix and match based on your store or restaurant’s needs, and change subscriptions that don’t seem to be working.  Brands should start by choosing a subscription model that works for their business."

Consider these four main subscription types:

Item – Based on a specific product or item, like RaceTrac fuel or Panera coffee, this type often relies on utilizing a brand’s most popular item to draw in the largest number of subscribers.

Free Delivery – This type makes free delivery its biggest perk, such as Amazon Prime. This model works best when delivery costs feel prohibitive in some way.

Online Discount – Encouraging members to shop online for deeper discounts can be part of a valuable subscription model.

Insider Perks – This model can be a hybrid that brings together several aspects of member benefits, such as free delivery plus online discounts, while especially emphasizing time-limited deals. That helps members feel part of an exclusive club.

"Pricing can also help define a program type," Lynch said. "And any of these models can be further enhanced to make them more meaningful to customers and drive loyalty even more, with features such as:  Member perks, referral bonuses, free intro period, etc."

Harnessing the power of data and supporting a personalized loyalty program is critical for eliminating churn.  

What should brands take away from this report?

"Brands are always losing customers, so to maintain share, they must retain an equal number of new customers to keep the bucket full," Lynch said. "To grow share, you must acquire new customers to slow the leaky bucket. One best practice that Paytronix’s Strategy & Analytics team recommends is for brands to have a compelling registration/welcome reward.  Equally as important as acquiring new customers is nurturing them and driving new customers to their third lifetime visit.  Data shows that customers become “sticker” to the brand after their third visit.  As mentioned in the Paytronix Loyalty Report, companies that excel at personalization generate 40 percent more revenue from their personalization efforts than average players; according to McKinsey & Co.  Harnessing the power of data and supporting a personalized loyalty program is critical for eliminating churn.  Customers prefer going to places that give them special, personalized treatment."

Other findings from the report include:

Loyalty Member Acquisition: The best QSRs sign up an average of 110 new loyalty members per store each month. Their FSR counterparts acquire 70 new members per location monthly, and leading c-stores add an average of 36 new members per location each month.

Email Reigns Supreme: More than 80 percent of campaigns rely on email to engage guests. Although campaigns that include mobile app push messages represent over 20 percent of campaigns for QSR and c-stores.

Average Spend Per Visit: For QSRs, the average spend per visit is $19.05 for brands in the 50th percentile and $30.16 for those in the 90th percentile. For FSRs, it’s $39.35 and $77.49, respectively; and for c-stores, $13.03 and $24.30.