The Importance of Customer Loyalty Programs During Economic Uncertainty

By: Will Hanrahan


Top Restaurant Loyalty Program Takeaways

  • Effective loyalty programs can help brands keep their customers close in uncertain economic environments, offering ‘inflation-proof’ solutions to rising prices and providing unique opportunities to incentivize brand loyalty.
  • Loyalty programs are not one-size-fits-all and should be constantly analyzed and adapted to meet ever-changing consumer needs.
  • The benefits of consumer loyalty programs go beyond inflation resistance and guest experience. They can also help companies build loyalty internally by providing avenues for franchisees and their employees to further align with company values and changes and become integrated into the overall experience.

Keeping your customers close in an uncertain economic landscape is no easy feat. And when prices rise across the entire supply chain due to inflation, it can be tempting for businesses to take a laissez-faire approach to the pressure, hoping customers will adjust their expectations given that prices are rising across the board.

But customers do still have choices, especially within non-essential industries like fast food. As customers continue to ride out the inflationary storm, they’ll quickly seek businesses offering a buffer against rising costs. One of the most effective buffers available is a strong customer loyalty program.

Three pillars of a resilient restaurant loyalty program

Loyalty programs can take many forms, but they all encourage customers to return repeatedly by offering discounts and other incentives. They can be an excellent way to keep customers happy and spending during economic uncertainty and inflation.

Inflation can erode the value of customers’ reward points, but a well-designed program can help offset the effects of inflation and keep people frequenting places they might otherwise cut from their monthly budget.

How do you make sure your loyalty program is inflation-proof? Here are three pillars I stick to at Fazoli’s through boom-and-bust economies:

 1. Offer more than discounts. Since the end goal of a loyalty program is to increase customer spending overall, offering incentives other than discounts is crucial to a successful program. Since Fazoli’s system is point-based, for example, they can incentivize customers to act and be rewarded with points that can be redeemed at a later time. A point system also allows businesses to go above and beyond for their most loyal customers — in one instance, Fazoli’s sent branded socks to their biggest fans as an unexpected prize.

 2. Keep it fresh. On the customer front, regular updates to rewards programs ensure the guest experience stays exciting. This could mean adding new perks, changing up rewards, or even offering a loyalty offer program that’s tailored to specific seasons or holidays.

Keeping it fresh can also be beneficial internally, as demonstrated by Fazoli’s recent approach to its loyalty program updates. We refreshed our mobile app experience and rewards program and collaborated with operations and training teams to encourage employees to communicate updates to customers. Allowing everyone a piece of the pie can incentivize employees to run internal contests to promote the loyalty program, encourage guest participation and enhance the experience for everyone.

 3. Be responsive to feedback. Businesses must pay attention to what customers say about their loyalty program and switch things up when they get too much negative feedback. Fazoli’s app is designed to make leaving feedback easy, providing a gold mine of information for future app improvements. Between May and August of 2022, guests provided over 60,000 individual feedback cases, each presenting a unique opportunity for Fazoli’s franchises to build customer rapport by quickly resolving issues and rewarding points or credit towards future purchases.

Mini Restaurant Loyalty Case Study: Fazoli’s Rewards

Fazoli’s Rewards is one such example of a robust loyalty program. A recent survey indicated that Fazoli’s Rewards Members were less apt to restrict future visits to the restaurant due to price increases. In fact, from May to August of 2022, Fazoli’s saw a nearly 4% increase in average spend total for loyalty-based transactions compared to non-loyalty transactions.

This makes sense, given the way Fazoli’s structures its Rewards program. Guests earn 1 point for every $1 spent, making the model inherently “inflation-resistant” since guests earn more points as prices go up. It’s a great way to ensure that customers always feel like they’re getting a deal.

The same study saw nearly $1.8 million worth of savings across 176,724 unique guests (about $10 per guest). And overall, Fazoli’s Rewards Members associated Fazoli’s with a generous loyalty program, more so than competitors like McDonald’s, Burger King, or Wendy’s.

What’s more, Fazoli’s loyalty program is flexible. Guests can redeem their points for a free entree or save them up for a more significant discount down the road. This allows guests to tailor their rewards to match their current needs and budgets.

Why restaurant customer loyalty matters

Because loyalty programs keep customers returning, they can help offset any downturn in business due to economic conditions. A study by the White House Office of Consumer Affairs showed that, on average, loyal customers are worth up to 10 times as much as their first purchase. 

Loyalty programs help businesses build goodwill among customers during frustrating economic times, offering them relief from inflationary pressures and keeping them brand loyal.

These programs also easily track customer behavior and preferences and optimize the guest experience. For example, Fazoli’s uses its loyalty program technology to send personalized messages based on customers’ preferred order style (online or in-store) or most frequently ordered items. This alleviates unnecessary promotions.

Looking ahead — AI-powered restaurant loyalty programs

The ever-changing landscape will keep food chains like Fazoli’s on their toes moving forward, providing new challenges for loyalty engagement, particularly within the AI space. Initiatives like Campaign Send Time Optimization, which helps marketers increase customer engagement through email and push notifications by sending time-personalized messages based on automated analysis of past interaction data, will be heavily explored by Fazoli’s shortly.

Sentiment analysis through AI is also on our radar. Using natural language processing (NLP), we can analyze reviews and measure sentiment around different facets of customer experience, like service, food quality, ambiance, wait time, and app experience.

Inflation may be out of our control, but by combining a solid customer loyalty program with the most advanced technology available, companies can empower customers to save and deepen brand loyalty even during economic uncertainty.

Punchh is pleased to share this guest blog from Fazoli’s Senior Marketing Manager – Loyalty & CRM, Will Hanrahan. Ready to learn more about Fazoli’s successful loyalty program? Read the case study now. Interested in joining the Fazoli’s team? Learn more about this top-rated Italian QSR.

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