Customers have more options than ever before when they’re deciding on where to get a meal these days. That abundance of decisions means that it’s harder than ever for restaurants to remain top-of-mind when their customers are hungry and making decisions. It can also be especially costly to cut through the competition to acquire new customers. A recent Bain study found that it was impossible for all non-luxury services to break even on just one-time shoppers’ purchases.
To elevate themselves above the competition, focusing on strong customer relationships is critical and one of the best ways to drive retention and repeat purchases is through restaurant loyalty apps.
What Are Restaurant Loyalty Apps?
Restaurant loyalty apps refer to digital platforms or mobile applications specifically designed to drive customer loyalty and engagement. They serve as a convenient bridge between restaurants and their patrons, and create a distribution channel through which restaurants can offer a range of enticing features and incentives hyper-personalized to different segments of loyal customers. Unlike advertising channels, they’re hubs of first-party data and a direct link between the customer and restaurant that doesn’t have to be paid for with each communication, making them extremely cost-effective. Restaurants can choose to build their software or apps, or build on top of an existing customer engagement ecosystem, which streamlines data and customer experience all in one place.
6 Ways Restaurant Apps Drive Customer Loyalty
Building out, promoting, and managing this software is a huge investment for your business – but there’s also a huge upside to that investment. Below are just six ways a customer loyalty app provides ROI:
1. Increased customer purchase frequency
Let’s start with the big one: restaurant loyalty programs are highly effective at getting your customers to order from you more frequently. Just how effective? A recent Deloitte survey found that 47% of customers who used customer loyalty apps used them several times a month, and nearly a third used them several times a week.
2. Word of mouth and brand awareness
Word of mouth is the most cost-effective way to reach new customers, and referrals by customers increase linearly with the frequency and number of times they visit your business. Research has found that after one positive order experience, a customer will refer three more. After 10 visits, they’ll refer seven more people. Restaurant loyalty apps not only incentivize repeat transactions, they often include social sharing functionality that drives even further sharing and buzz with new customers.
3. Increased average check size
Engaged and loyal customers don’t just drive ROI through frequency and referrals – they also spend more per transaction than first-time customers, and are more likely to try out and sample new menu items. One study found that repeat customers spent between 23-67% more in months 31-36 of their relationship with a brand than in months 0 to six.
4. Frictionless customer experience for loyal customers
One of the biggest challenges restaurant operators have faced in the past decade is dwindling profit margins due to high service charges incurred on third party delivery apps. It’s nearly impossible to compete with the array of options and that slick, frictionless experience they provide customers. But restaurant loyalty apps offer a way to provide a superior, easy experience for loyal customers that they prefer – a recent study of consumers found twice as many used loyalty apps over third party delivery apps.
5. Cost-effective and personalized marketing channel
Customers expect more than the one-size fits all messages and offers delivered via traditional marketing channels. Restaurant loyalty apps not only create a channel owned by your business (versus one you have to pay another business for), but they allow businesses to offer tailored recommendations, personalized discounts, and special promotions in real time, dramatically improving the customer experience and the uptake of these promotional offers.
6. Data-driven insights
Customer data is power. Restaurant loyalty apps collect valuable data on customer behavior and preferences that produce actionable insights on customer demographics, purchasing patterns, and popular menu items. In turn, restaurant operators can use these insights to refine their menu offerings, tailor their promotions and marketing efforts, and even identify new market opportunities for future locations.
Restaurant Loyalty Program Successes: Chipotle’s Story
Chipotle is one of the biggest names in quick service restaurants – and their best-in-class restaurant loyalty app is a huge part of how Chipotles competes today.
Partnering with Sparkfly, Chipotle’s app has driven over $4.5 billion in digital sales across over 33 million loyalty accounts by designing a customer loyalty program that ties together loyalty rewards and dynamic offers in real time. They’ve prioritized building an infrastructure that allows them to nimbly iterate, test, and personalize different offers and rewards all the while also protecting them from fraud. That technical sophistication on the backend creates a seamless, easy experience for their customers.
To Build or to Buy Your Restaurant Loyalty App
Restaurant loyalty apps have emerged as a game-changer in our industry, creating platforms for restaurants to increase customer loyalty, drive revenue growth, and gain invaluable insights on customer behavior. While they were previously considered a nice-to-have benefit for customers, the fierce competition from other restaurant brands, diminishing returns from third party delivery apps, and increasing expectations from customers have made them an invaluable investment.
They’re also huge investments of time and resources to build, deploy, and manage. Many restaurants will opt for building their own using a piecemeal of different tools, both custom and out-of-the-box, to try to cut down on costs and create an app that’s more personalized to their needs. We find that in practice, however, this tends to create data silos and a more fragmented, one-size-fits-all customer experience that undermines the potential value from these apps.
Investing in a customer engagement ecosystem upfront tends to save hours in staffing resources, ensures you’re able to create the truly personalized and hyper-targeted communications that drive customer loyalty app success, and creates that ever-valuable first-party data source.
Are you considering whether you should build your own restaurant loyalty app or invest in an integrated customer engagement ecosystem? Learn more about how your restaurant can get the most of your customer data with an integrated tech stack.