QSR & Casual Dining Loyalty Program Trends
Key consumer trends around loyalty programs for quick service and casual dining restaurants in the United States include the growing preference for mobile app-based loyalty programs and the shift toward tiered loyalty programs. Though restaurants still use email to welcome customers, inform them of discounts or offers, or greet them on holidays or other special days, there are no indications that restaurants are focusing solely on email to improve customer loyalty. Loyalty programs are a great tool for driving traffic, as there are accounts of some loyalty programs accounting for at most half of restaurant sales.
As we were unable to find an article or report that readily provides all the requested information, we decided to look at what leading quick service and casual dining restaurants in the United States have been doing recently in regard to loyalty programs, and to check what customers are currently looking for in these programs. We looked for customer surveys and examined restaurant-specific publications as well. The insights that we were able to gather from these searches enabled us to prepare a list of trends, as can be seen below. In the few instances where we could not find information specific to the quick service and casual dining restaurants in the United States, we broadened our search to restaurants in general.
INTERACTION WITH EMAILS ABOUT LOYALTY PROGRAMS AND REWARDS
While information on how customers interact with email messages about loyalty programs and rewards could not be located in the public domain and the information that is available focuses on restaurant email marketing in general, there are indications that the average open rate and the average click rate in the restaurant industry are 15.2% and 1.3%, respectively. The best month to email customers is December, the best day to email customers is Friday, the best time to email customers is between 1pm and 5pm, and the best months for mobile email marketing are March and April. Customers are more receptive to email messages whose length of subject line is 20 to 50 characters only. Compared to mass email messages whose average open and click rates are 15.2% and 1%, personalized email messages have higher average open and click rates at 18.7% and 2%. Restaurants communicate with customers via email for various reasons, such as welcoming new customers, informing customers about loyalty programs, discounts, or coupons, notifying customers about new menu items, sending surveys, and greeting customers on holidays or other special days.
MOST PREFERRED LOYALTY PROGRAM CHANNELS
When it comes loyalty program channels, restaurant customers in the United States are likely finding plastic swipe cards, paper stamp cards, and mobile phone apps more preferable than registered phone numbers and mobile wallets. Oracle's survey of 6,500 restaurant customers in eight countries, including the United States, indicates that 62% of restaurant customers prefer plastic swipe cards, 45% prefer paper stamp cards, 40% prefer mobile phone apps, 26% prefer registered phone numbers, and 14% prefer mobile wallets. The preference for mobile phone apps is more pronounced among millennials and Gen Xers, with 56% of millennials preferring mobile apps and 50% of Gen Xers preferring mobile apps. There are indications that quick service and casual dining restaurant customers in the United States are finding app-based loyalty programs more preferable than email-based loyalty programs. For example, according to an article published by Restaurant Dive, "loyalty programs will continue to drive traffic to QSR, and apps lead the charge in attracting customers." This same article also states that "not only have mobile apps been proven to build brand loyalty," they bolster profits as well. After it was launched, Chick-fil-A's loyalty app quickly rose to the top of iTunes's list of most downloaded apps. Based on an article released by The Manifest, "50% of smartphone owners use a restaurant loyalty app regularly," and the most popular restaurant loyalty apps are those of Starbucks, Domino's, Pizza Hut, McDonald's, Panera Bread, and Dunkin' Donuts. We note, however, that according to an article published by Epsilon, "millennials aren’t sold on engaging with QSRs solely via mobile apps," and 31% of millennials prefer communications to be delivered via email.
MOST EFFECTIVE LOYALTY PROGRAMS
The type of loyalty program that drives the most traffic in the United States are revolving around mobile app-based loyalty programs. The quick service restaurants that lead in terms of customer loyalty include Starbucks, Dunkin' Donuts, Chick-fil-A, Panera Bread, Chipotle, and Subway, and a look at the loyalty programs of these leading restaurants reveals that all of them have loyalty apps. To illustrate just how effective these loyalty programs are in driving traffic, 36% of Starbucks's sales in the United States in the second quarter of 2017 were accounted for by transactions processed through its loyalty program, My Starbucks Rewards Loyalty Program. Also, the average ticket size of Starbucks's loyalty members is three times larger than the average ticket size of the average customer. Panera Bread's loyalty program, MyPanera, has over 25 million members, almost 8% of the population of the United States, while Dunkin' Donuts's DD Perks Rewards Program has over 6 million members. Half of Panera's transactions take place on MyPanera cards. The most effective restaurant loyalty programs are the ones that allow restaurants to "quickly organize their data into a singular view to begin to track customer behavior and make informed decisions."
MOST ATTRACTIVE LOYALTY PROGRAM FEATURES
Restaurant customers in the United States are finding free products and discounts the most attractive loyalty program rewards, according to a survey commissioned by Oracle in 2018. The most attractive type of reward for 67% of restaurant customers in the country is free products (e.g. 10th coffee is free), while for 64% of restaurant owners, it is a discount on each purchase (e.g., 5% discount). Restaurant customers in the country are also finding preferential treatment (e.g., birthday offers) far more attractive than priority access to new products, invitations to special events such as menu tastings and store openings, ability to pay through loyalty app, third party offers, and charity-related rewards. Whereas 47% of restaurant guests in the country want preferential treatment from a loyalty program, only 29% want priority access to new products, only 26% want invitations to special events, only 24% want the ability to pay through loyalty app, only 20% want third-party offers, and only 19% want charity-related rewards. Globally, 73% of restaurant guests say relevant rewards will prompt them to join a loyalty program. Sixty-eight percent say "rewards must be easy to redeem," while 55% say "the program must be simple to use and understand." We assume more or less the same can be said about the United States, as these findings were based on a sample of 6,500 consumers from eight countries, including the United States, the United Kingdom, France, Japan, and Australia. The survey's finding that the restaurants in the United States with the strongest loyalty programs are Panera Bread, TGI Friday's, Starbucks, AppleBees, and KFC suggest that quick service and casual dining restaurants were considered.
MOST COMMON REASONS BEHIND DISINTEREST IN LOYALTY PROGRAMS
In the United States, restaurant customers who have not joined a loyalty program are revealing that they do not visit the same restaurants enough, sign ups require a lot of personal information, and the rewards do not interest them. When asked about the things that deter them from joining a loyalty program, 46% of restaurant customers in the country replied they do not visit the same restaurants enough, 40% replied sign ups require a lot of personal information, 35% replied they do not find the rewards interesting, 32% replied sign ups take a lot of time or are difficult to understand, 13% replied they never join loyalty programs, and 6% cited other reasons.
MOST COMMON REASONS FOR LEAVING A LOYALTY PROGRAM
In the United States, restaurant customers who have left a loyalty program are revealing that the rewards expire more quickly than desired, rewards are too hard to earn, and rewards are too hard to claim or redeem. When asked about the reasons they have left a loyalty program, 50% of restaurant customers in the country replied rewards expire more quickly than desired, 48% replied rewards are too hard to earn, 45% replied rewards are too hard to claim or redeem, 39% replied rewards are irrelevant to them, 29% replied the program requires a lot of personal information, and 25% replied they have stopped eating at the restaurant.
MOST IMPORTANT EXPERIENTIAL ELEMENTS
Quick service, fast casual, and casual restaurant customers in the United States are seeking different types of experiences across dining formats, according to Deloitte. Based on Deloitte's survey of over 2,000 quick service, fast casual, and casual restaurant customers in the country, sit-down customers want experiences that engage them, while carry-out and delivery customers want experiences that empower them. Sit-down customers gave engagement a score of 67, while carry-out and delivery customers gave empowerment scores of 71 and 70, respectively.