Chipotle is the latest restaurant brand to launch a new loyalty program with more personalized offers.Credit: Chipotle
Investors reacted favorably to Chipotle's new loyalty program launch Tuesday. The new Chipotle Rewards program allows the company to hyper-target promotions to its customers through a personalized CRM program.
If it seems like a lot of restaurant brands are revamping their loyalty programs as of late, it’s because they are. Within the past two years, Subway, Pizza Hut, Chick-fil-A, Pollo Tropical, Taco Cabana, Chipotle and Papa John’s have either introduced new rewards programs or have restructured the programs they already had in place.
Starbucks, long an industry standard bearer for its loyalty program success, is even planning on rolling out a new iteration this year. As the company explained in a press release, the redesigned Starbucks Rewards program will provide customers more choice around redemptions and payment, as well as expanded personalization capabilities for those who are digitally connected to the company.
What gives? Basically, consumers have been inundated with generalized marketing offers from every corner of the digital vortex for years and now they’re craving a little one-on-one time with their favorite brands.
During Papa John’s earnings call last month, for example, CEO Steve Ritchie talked about the company’s Papa Rewards relaunch and its significance in creating a more personalized marketing approach.
“We now have the data that allows us to engage in one-to-one marketing with our customers and by segment, which enables us to drive traffic without relying on blanket discounts across all channels,” he said.
In an intensifying battle over traffic, one-on-one communication has become a key differentiator, yielding successful conversion rates and customers that are more faithful.
Chick-fil-A overhauled its email marketing approach about two years ago to focus on personalized emails through a partnership with MessageGears. Digital Marketing News reports that the shift has led to a five-times increase in membership to the Chick-fil-A One loyalty program and a 20% increase in conversions.
Subway recently shifted to one-to-one mobile marketing messages using Google’s Rich Communications Services. During the 2018 Mobile Marketing Association’s CEO and CMO Summit, Subway’s chief digital officer Carissa Ganelli said the integration has “blown the doors off of response rates within the text messaging platform.”
In a world saturated with content, such personalization has become somewhat of a necessity for survival in the restaurant space according to Zach Goldstein, CEO of Thanx, a startup that focuses on customer engagement, loyalty and retention for restaurants such as Oath Pizza and Tommy Bahamas.
“Customers have checked out. Email open rates have plummeted over the last five years. That’s because every brand has been using the same strategy—send blanket promotions with no relevance to the consumer. It’s a bit lazy,” Goldstein said. “Personalized and more meaningful messages increase frequency and spend over time. A lot of marketing budgets are spent on acquisition, but the real magic comes from identifying the best customers and encouraging them to come back.”
There’s a good case for that: The top 25% of restaurant customers typically drive 70%-plus of revenue.
“As soon as you realize a huge portion of your revenue is coming from a small number of customers, it makes it easier to focus. Why would you talk to someone who comes in every day the same as you would someone who comes in maybe once a year?” Goldstein said.
Goldstein said brands that he’s worked with have shifted their strategy to hit the right customers with the right message at the right time on the right platform—from email to texts to mobile apps—yielding a 3 to 5% sales lift on average.
Since implementing its Hut Rewards program through marketing automation platform Punchh in Q1 2018, Pizza Hut has experienced a 7% same-store sales lift. In 2017, Fazoli’s also added Punchh and has since yielded a 38% jump in visit frequency.
Punchh CEO Shyam Rao said competitive dynamics and added pressures in the marketplace have forced brands to rethink how they engage with customers.
“All of these pressures are competing for the same consumer. Brands are at risk now if they don’t create and own a direct line to their consumers,” Rao said.
Rao said most restaurant brands understand this, but the tide is turning slowly. Such a shift is critical; Rao believes the current “retail apocalypse” was created in part because brands lost a connection with their customers.
“Once that happened, the customers went away,” he said.
Regaining that relationship is like coming full circle—marketing started with one-on-one connections in which the shopkeeper knew everyone who lived on the block. Then it shifted to mass media—radio, TV, etc.—and now, we’re heading back into an era of (digitally-enabled) one-on-one connection. As the industry continues to be disrupted by startups, many of which already have technology-driven personalization in their DNA, this return to the shopkeeper era is coming not a moment too soon.
“Restaurants need an impetus for change and they’re getting it with third-party delivery aggregates that are taking control of their customers’ information. That is a catalyst to be urgent,” Goldstein said. “It’s a now-or-never moment for restaurants to start building those personal relationships or they’ll lose control.”
https://www.forbes.com/sites/aliciakelso/2019/03/13/restaurant-industry-gets-personal-to-avoid-its-own-retail-apocalypse/ 2019-03-13 15:58:00Z
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