Restaurant Loyalty Program Structures: Which is Right for Your Brand?

If you’re a marketer in the competitive restaurant landscape, chances are you are constantly thinking about how your brand can offer your customers a more personalized and meaningful experience. Restaurant loyalty programs have quickly become the secret ingredient to creating these lasting connections and building long-term brand advocates.  

In this blog, we will discuss popular types of loyalty programs for restaurant brands, walk through what stands out about them and lastly, help you figure out which type of loyalty program is best for your brand to achieve tangible results.  

What is a Customer Loyalty Program?  

From a high level, a customer loyalty program is a marketing initiative aimed at cultivating repeat business by rewarding customers for their continued engagement with a brand. Customers typically earn points or rewards with each purchase or visit, which can later be redeemed for discounts, free menu items, or exclusive perks. These programs often feature things like personalized discounts or redeemable offers, encouraging customers to increase their spending to unlock additional benefits. By fostering a sense of loyalty and providing ongoing incentives, restaurant loyalty programs not only enhance the customer experience but also contribute to increased retention and lifetime value for businesses.  

Let’s explore the various types of restaurant loyalty programs and how your business can determine which solutions to leverage for maximum results.  

Types of Loyalty Programs 

Points Programs: A Tried-and-Tested Approach

Points programs are the bread and butter of loyalty initiatives for many restaurants. Customers accrue points with each purchase, which can later be redeemed for rewards or discounts. Here’s why this structure remains a staple choice for brands:  

1. Earn, Redeem, Repeat: One of the key attractions of points programs is their simplicity. Customers understand the concept intuitively – spend money, earn points, enjoy rewards. However, the devil lies in the details: how points are earned, whether they expire, and the rate of earning can greatly influence customer engagement and satisfaction.  
2. Data Goldmine: Beneath the surface of point accrual lies a treasure trove of customer data. By tracking spending habits and preferences, restaurants can glean valuable insights into their clientele, enabling targeted marketing efforts and personalized experiences. 
3. Branding Challenges: Despite their widespread popularity, points programs can present challenges in terms of branding and differentiation. With many restaurants adopting a similar format, standing out from the crowd becomes increasingly difficult. However, innovative approaches to rewards and engagement can help carve out a unique identity.  

Points-based programs tend to provide an essence of familiarity for customers. Since they are free and relatively easy to join, there is little barrier to entry when it comes to new member sign-ups.  

When done right, points programs are a great way to acquire new customers, and increase engagement.   

Tiered Loyalty Programs: Scaling Heights with Milestones

Tiered loyalty programs add an extra layer of gamification to the traditional points model by introducing different membership tiers, each offering progressively greater rewards. Here’s why this structure is gaining traction: 

1. Ascending the Ranks: Tiered programs motivate customers to ascend through various membership levels by reaching predefined milestones, such as spending thresholds or frequency of visits. This sense of progression instills a sense of accomplishment and encourages continued patronage.  
2. Measuring Success: Unlike standard points programs, tiered structures provide clear metrics for measuring customer loyalty and engagement. Restaurants can track the progression of members through different tiers, allowing for targeted offers and rewards.   
3. Challenges and Opportunities: While tiered programs offer compelling incentives for existing customers to deepen their engagement, they can present challenges in attracting new clientele. The perceived barrier to entry posed by higher tiers may deter potential customers, necessitating creative strategies to bridge the gap.  

With a tiered loyalty program structure, it becomes a status thing. When the addictive element of “climbing to the top” becomes incorporated into purchasing decisions, customers will visit in order to continue to progress forward.  

Also, since the higher levels provide more exclusive and desirable rewards, these programs tend to make your most valuable customers feel like they are your most valuable customers – they know they have access to rewards that not everyone else does.  

Subscription Loyalty Programs: Unlocking Perks with Membership

Subscription-based loyalty programs operate on a recurring payment model, where customers pay a monthly or annual fee in exchange for exclusive benefits and perks. They work for a few reasons:  

1. Continuous Revenue Stream: By offering subscription-based loyalty programs, restaurants can secure a steady stream of revenue while simultaneously fostering customer loyalty. 
2. VIP Treatment: Subscribers enjoy a range of VIP perks, such as free rewards, discounts, or even waived delivery fees. This sense of exclusivity enhances the perceived value of membership and strengthens the bond between customers and the establishment.  
3. Retention and Referrals: Subscribers are more likely to remain loyal to the restaurant, thanks to the ongoing benefits they receive. Additionally, satisfied members can become powerful brand advocates, driving referrals, and expanding your customer base.  

Subscriptions provide customers with more opportunities to interact with a brand, which gives brands more opportunities to get to know their customers and grow relationships that generate more loyalty.  

Hybrid Programs: Maximizing Engagement with Versatility

Why not have it all? Innovation often thrives at the intersection of traditional models, and a hybrid loyalty program exemplifies this principle. By combining elements from multiple structures, these programs offer a versatile approach to customer engagement and retention. Here’s why this is a great option for brands:  

1. Customization and Flexibility: Hybrid programs allow restaurants to tailor loyalty initiatives to their specific objectives and customer demographics. By blending features from points, tiered, and other formats, brands can create a loyalty experience that resonates with their audience.  
2. Layered Rewards: One key advantage of hybrid programs is their ability to offer layered rewards. Customers can earn points for transactions while also progressing through membership tiers or gaining access to exclusive experiences. This multi-dimensional approach enhances engagement and incentivizes diverse behaviors.  
3. Dynamic Incentives: Hybrid programs enable restaurants to experiment with a wide range of incentives, from traditional discounts and freebies to experiential rewards and community-driven perks. This versatility allows for continuous iteration and optimization based on customer feedback and market trends.   

With a hybrid approach to your loyalty program, you really can create a unique experience for your brand to offer your loyalty members. Coming up with an all-in-one structure for your loyalty program can appeal to customers at all levels and encourage new members to join.  

How to Choose the Best Loyalty Program for Your Restaurant Brand 

With a handful of options at your disposal, it is crucial to choose the right one to best deliver results for your brand. It’s a pivotal decision that requires careful consideration of various factors, including your business objectives, target audience, competitive landscape, and available resources. To help with this decision, consider the following approach: 

1. Define Your Objectives: What do you want to achieve? This needs to be clearly hashed out early on in this process. If you are going to be implementing a loyalty program, you need to know why. Are you aiming to increase customer retention, drive repeat purchased, attract new customers, or gather customer data? Understanding these goals early on will guide the selection of a loyalty structure that makes the most sense.  
2. Know Your Audience: Regardless of your structure, your customers need to be at the center of it. Gain insights into their preferences, behaviors, and demographics. What motivates them to engage with your brand? Are they more responsive to tangible rewards, exclusive experiences, or social engagement? Tailor your loyalty structure to resonate with the needs and preferences of your customer base.  
3. Evaluate Program Structures: Walk through the pros and cons of different loyalty structures. Consider factors such as simplicity, scalability, differentiation, and alignment with your brand’s identity.  
4. Research Successful Examples: Study successful loyalty program examples in your market. We are surrounded by massive brands who have taken the time to craft their loyalty program. So, who stands out to you the most and how can you replicate and implement that for your brand?  
5. Consider Your Resources: Creating a loyalty program is an investment; one that shouldn’t be overlooked. Evaluate the resources required to implement and manage each loyalty structure, including technology infrastructure, personnel, marketing budgets, and ongoing maintenance.  
6. Develop Mobile App: Having a mobile app is essential for restaurant brands to remain competitive in today’s market. Your app needs to be easily updatable and must be user-friendly in order to drive loyalty purchases through the app 
7. Additional Integrations: Integration with your POS and online ordering systems is foundational for a comprehensive understanding of your customers and the success of your loyalty program. Seamless integration streamlines operations, optimizes efficiency, and enables real-time tracking of program performance, empowering your brand to deliver tailored experiences.  
8. Outcome-Driven Metrics: Identify your key performance indicators (KPIs) that align with your objective and track them rigorously to assess the effectiveness of your loyalty program. These may include things such as customer retention rates, average order value, frequency of visits, lifetime customer value, and ROI.  
9. Iterate and Optimize: Continuously monitor the performance of your loyalty program and make changes based on data-driven insights. It likely won’t be perfect right out of the gate. Be prepared to adjust your structure, rewards, communication strategies, and user experience to maximize your programs effectiveness and guest satisfaction.  

How Punchh Helps Brand Achieve Loyalty Program ROI

At Punchh, we understand that navigating the complexities of loyalty program design and implementation can be daunting. This is not a process that you have to navigate alone. That’s why we are here to empower your brand to drive loyalty, increase customer engagement, and deliver results.  

As a leading loyalty solution provider for some of the world’s favorite restaurant brands, we build meaningful relationships and drive continued value. Interested in learning more about customer loyalty programs? Request a Personalized Demo for details related to your industry.