The Rise of Exclusivity: VIP vs Traditional Discounting
3 Min Read By Zach Goldstein
Offering discounts to incentivize customers to enroll and engage with loyalty programs has been a common practice in the restaurant industry for years. But rapidly rising labor and food costs over recent months has heightened pressure on already tight restaurant margins. With the continued uncertainty of the current macroeconomic climate, brands must find ways to reduce marketing spend while driving more value from their customer base.
Ultimately, restaurant businesses cannot afford to haphazardly discount their products nor should they rely on discounts as the primary weapon to drive traffic. Targeted loyalty benefits focused on access and exclusivity are essential tools to drive cost-effective guest engagement. Loyalty programs have been the key to restaurants’ resilience throughout the COVID-19 era. Programs that enable data capture, incentivize direct ordering in the wake of third party delivery (saving countless dollars in commission fees), and drive engagement have the ability to create compelling enticements without relying heavily on expensive discounts.
Exclusivity can offer as much or more traction as a traditional coupon or discount, with far less impact to a brand’s P&L.
Restaurants can encourage customers to spend more and visit more frequently by utilizing their loyalty program to create exclusive perks, unique to their brand. Exclusivity can offer as much or more traction as a traditional coupon or discount, with far less impact to a brand’s P&L.
Recently, Thanx customer Velvet Taco, the Dallas-based fast-casual restaurant serving globally inspired tacos, has done just that with the launch of their Hidden Backdoor Menu. The Backdoor “Secret” Menu features six secret menu items currently, and they are exclusively available for dine-in to The Velvet Room (Velvet Taco’s loyalty program) mobile app users only. Their loyalty app, coupled with their “Secret” Menu, offers a program that rewards guests with unique offerings and VIP experiences without leaning into traditional discounts. Velvet Taco’s differentiated loyalty program coupled with the launch of their hidden menu available only to top status members resulted in 13 percent of base tier members reaching a new spend threshold. Additionally, the Backdoor “Secret.”Menu allows Velvet Taco’s fans to earn rewards in a way that both engages and incentivizes them to order directly, instead of using bottom line-disrupting third party services.
In another case, instead of offering discounts to drive engagement, Taco Bell gave loyalty members exclusive early access to their fan-favorite Mexican Pizza. The fast-food giant brought back the Mexican Pizza in May 2022 as a Limited Time Offer. Loyalty members were given access two days before the full release, and in that two-day window, loyalty registrations grew 15x. For the quarter, the number of rewards members increased 10 percent. Taco Bell sold more than 20 million pizzas nationwide—which was 7x previous levels.
In addition to special-access menu items, loyalty programs can offer events, merchandise, or experiences like cooking classes or cookbook signings as exclusive perks.
Exclusivity can apply to more than just menu items. In addition to special-access menu items, loyalty programs can offer events, merchandise, or experiences like cooking classes or cookbook signings as exclusive perks. Many restaurant brands are expanding marketing efforts to the Metaverse to attract customers. NFTs, for example, are receiving increased buzz as restaurants look to leverage the scarcity of NFT accessibility to create both a sense of urgency and exclusivity.
Another example of an NFT campaign in the restaurant world comes from Starbucks. The launch of their NFT-based campaign, focused on “coffee art and storytelling,” aims to initiate community membership and access to exclusive experiences through branded NFT collections. The success of Starbucks’ loyalty program can be attributed to their rewards systems. Starbucks Rewards members made up 53 percent of U.S. company-operated revenue while mobile order and pay, drive-thru and delivery drove 72 percent. Active Starbucks Rewards membership grew by 3.2 million members to 27.4 million, up 13 percent year-over-year during the company’s fiscal Q3 2022, interim CEO Howard Schultz said during the company’s earnings call this August 2022.
It’s important to note that these are perks that Velvet Taco, Taco Bell, and Starbucks customers simply cannot earn ordering through third party marketplaces. Customers recognize that they must order directly from the business to earn and redeem these exclusive perks. This allows the restaurant to avoid two obstacles – paying third party delivery commission fees and losing customer data from third party transactions – all without sacrificing revenue to expensive discounts.
Exclusive perks allow restaurant rewards to be distinctive and on brand, and offer the flexibility to create tailored and on-brand perks that respond to what's trending now – whether cultural or economic.