The Struggle Is Real for Restaurant Loyalty Apps

Restaurant operators must design loyalty efforts around second and third visits, as well as the early habit-building period rather than celebrating enrollment alone, according to data from Upside’s  Escaping the Loyalty Plateau report. 

“I think the most important shift is to stop rewarding the inevitable and start focusing on the influenceable middle,” said Dr. Thomas Weinandy, Principal Research Economist, Upside. “Between 55 percent and 60 percent of consumers across categories are preference-first, meaning they are quick to join loyalty programs, but only if it’s with a place they like. It also means making offers personal to the consumer rather than merely convenient for the business.”

Based on survey data from more than 12,000 U.S. consumers and retailers, key restaurant-specific findings include:

45 out of 100: Upside's loyalty influence score for restaurant programs, the highest of the three retail categories studied. 

48-point gap: between the share of consumers who say loyalty matters and those who use their restaurant program regularly

4.2 programs: the average restaurant loyalty member belongs to. 

Enrollment and Commitment Are Two Different Things

"The restaurants with the most loyalty members aren't always the ones with the most loyal customers,” he noted. “Enrollment and commitment are two different things — and a crowded market has made it easier to collect one without earning the other."

The biggest takeaway for operators is that loyalty can't just live inside your own app, email list, and text alerts anymore, Dr. Weinandy advised, noting that consumers are already juggling a crowded field of programs, and in restaurants, the average loyalty member belongs to over three other restaurant programs. 

“If you want to engage that customer, the goal is not simply to get them to download your app. The goal is to influence behavior in the moments when they are still deciding where to eat. That means more differentiated offers, better timing, and in many cases, reaching consumers through broader marketplaces or channels they already use in their daily routines. The data shows that combining loyalty with a marketplace can reduce month-one churn by more than 30 percentage points versus consumers using neither.”

Fighting Loyalty Plateau

The first strategy for fighting loyalty plateau is to stop assuming another app feature will solve a relevance problem. Most programs are stuck in the loyalty plateau because they look structurally similar, offer comparable benefits, and treat too many users the same, the report found. The programs that break through tend to do three things better: they personalize more meaningfully, they create differentiated digital engagement, and they give members access to a function that solves a real-world problem.

“That is what we describe as moving from the loyalty plateau to differentiated value,” said Dr. Weinandy. “In practice, that means fewer generic pushes, more relevance, and less dependence on asking customers to engage with yet another lookalike app.”

In restaurants, only 38 percent of consumers say they use loyalty regularly, which leaves a 48-point opportunity gap, the report found.

“They are still gravitating toward loyalty in one sense because enrollment is still high, and 86 percent of shoppers say loyalty rewards matter to them. The issue is that sign-up is not the same thing as sustained behavioral influence. The deeper reasons are saturation and static offers.”

Consumers join programs because the barriers are low, but once they are enrolled in multiple similar programs, no single one has the influence it once did, the data suggested. At the same time, static offers that treat all customers the same need to offer steep discounts to shift behavior. 

“High saturation combined with static offers means restaurants don’t see returns when investing in promotions, so they lower offers, creating the self-fulfilling prophecy, said Dr. Weinandy.
“The other scenario is that a restaurant leverages personalization and differentiated value which profitably changes behavior while meaningfully rewarding the customer, creating a virtuous cycle with high loyalty usage.”

Learning from Others

Restaurant operators can learn from retail, grocery, airline, or hotel loyalty programs in that loyalty almost always begins as a differentiator and then becomes table stakes, Dr. Weinandy said. 

The airline industry saw that early with American Airlines’ AAdvantage: it drove major adoption at first, but the space saturated quickly and the original advantage faded. The winners later on were the brands that evolved beyond a basic points model.’

In Upside’s framework, Stage Three (differentiated value) and Stage Four (everyday value) programs stand out because they create differentiated value, whether through personalization, premium experiences, cross-category partnerships, or everyday utility. 

“Starbucks Rewards, Marriott Bonvoy, and Amazon Prime all reflect that broader idea. For restaurants, the lesson is that loyalty has to become more useful, more personalized, or more embedded in everyday behavior to remain influential.”

The report noted that when deciding where to eat, taste and palate play an outsized role so when a restaurant already has some affinity with a consumer, loyalty can do a better job of tilting visit frequency than it can in a category where the experience is more transactional, Dr. Weinandy said.

“People love restaurants and want to have reasons to love them more. In our research, restaurant loyalty programs had the highest net influence score at 45.0, compared with 42.8 in fuel and 39.2 in grocery. They were especially effective at increasing purchase frequency and prompting recommendations. This means that restaurants sit at an interesting intersection of habit, emotion, and value. Dining decisions are frequent enough to be influenced, but they are also shaped by taste and preference in a way that makes the right offer especially powerful.”