The question is, and has always been, will it work? How much do customers truly value be- ing treated like a “regular,” compared to oth- er forms of recognition? According to Technomic data on restau- rant loyalty programs, not all that much. When asked which type of loyalty perks they prefer, 30% of consumers said free items or meals (obviously) after a certain number of purchases, while 18% said points- based rewards. Just 3% said personalized of- fers based on past purchases. Of course, customers will always value free food over pretty much anything else. And what customers say is not always what they do. Data from other industries makes a strong case for a personalized approach. Ac- cording to a 2021 McKinsey study, compa- nies that invested in personalized marketing saw faster revenue growth and were more likely to have new customers return and ex- isting customers spend more. At Starbucks, there’s a concerted effort underway to shift its loyalty marketing from broad-based freebies to a more tailored ex- perience. Rather than make customers more loyal, the previous “one-size-fits-all” program became a “discounting mechanism,” which hurt sales, CEO Brian Niccol told analysts last month. The new program will give away fewer freebies, and will instead focus on growing “loyalty, brand love and engagement,” he said. This will be a change worth watching, as Starbucks Rewards is one of the largest restaurant loyalty programs in the world. Elsewhere in the field, there are other signs that this sort of approach is working. Yum Brands, the owner of Taco Bell, KFC and Pizza Hut, has been using AI to power personalized marketing for customers who order online in some markets. Executives said last week that Yum is seeing “signifi - cantly higher return on targeted communi- cations,” and noted that its total digital sales mix rose 7 points year over year, to 57%. The Cheesecake Factory has been slowly rolling out its first loyalty program with one- to-one marketing in mind. This year, it tran- sitioned from a broad-based approach where every member received the same offers to a more targeted strategy based on customers’ ordering patterns. It has seen redemptions increase 3 points, to 4%, since making the change. There is less evidence available when it comes to using data to improve service for customers dining in the restaurant, as Toast and others are setting out to do. For now, this part of the equation may continue to be a combination of art and science.
PHOTO: ENVATO
At First Watch, data-driven personal- ization is one part of a multi-pronged mar- keting strategy. But the breakfast chain has also encouraged a more intuitive form of cus- tomer loyalty, empowering its employees to brighten customers’ days by giving away the occasional free item; a special mug for first responders; or onesies for customers with newborn babies. CEO Chris Tomasso acknowledged that the impact of some of those efforts is difficult to measure. But First Watch is OK with that. “If it’s the right thing to do, and we’re able to do it, then we lean into it,” he said. “I can tell you anecdotally, or qualitatively, the feedback has been tremendous, both from our team and from our customers.” The lesson there is that data is not always needed to provide great hospitality. And ultimately, the impact of all of these
personalization efforts is probably going to be marginal for a while. While restaurants have come a long way in terms of digitiza- tion, the vast majority (around 80%) of trans- actions are still non-digital, and therefore largely invisible to operators from a data perspective. As Yum CEO Chris Turner pointed out, the best way to grow that pie is to make on- line ordering easier. “The bigger driver of top line growth through digital is just making an easier ex- perience for consumers, allowing them more easily to customize their orders and more easily to expand check sizes,” he said during an earnings call last week. “Everywhere we increase digital mix, we see higher check siz- es and higher frequency from our consum- ers. Of course, consumer insights and loyalty will be a big part of that as well.”
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