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As noted in Get Customers to Come Back: Seek Customer Feedback, surveying customers or inviting them to small focus groups where you can hear and evaluate their feedback is an important part of engaging their interest in your business. In this business tip, Get Customers to Come Back: Loyalty Counts, look to create a sustainable loyalty program to reward your most valuable Customers.

In a recent survey conducted by the National Restaurant Association more than three-quarters of participants said guest loyalty programs helped them grow their business during the economic downturn. In fact, 90 percent said loyalty programs give them a competitive edge, and the vast majority is planning to invest more in their programs because of their proven ability to drive business growth.

Because loyalty programs are designed keep your most important demographic - the repeat customer - engaged in supporting your restaurant, it's safe to say all restaurants should develop some form of reward system that is easy to implement and maintain - and a snap to communicate. This last is critical because it's your staff that will be “selling” the program and your customers who will be using it. Your restaurant will benefit by repeat customers who serve as ambassadors by referring your place to their friends, family and business associates.

Of the many types of loyalty programs, there are some that work better for restaurants. For example, fee-based programs of the sort used by airlines and large corporations and credit cards will likely not work for the independent or franchise owner. In this Business Tip, we will focus on free programs that can be customized to suit your business' style and circumstances.

Frequency, either by number of visits or number of purchases of a specific item, is one way to organize a reward program. For this type of program, customers can use a simple punch card of the kind used by coffee shops in chains like Borders Books and many neighborhood cafes. While punch cards are easy to implement, unless you have customers fill out demographic information on the card and then take care to collect the information when redeeming its reward, the program's potential as a marketing tool is undermined. Also, because so many restaurants and stores use cards, customers are becoming less willing to carry them. Consider keeping your customer's cards in a file box in the restaurant, or go virtual with a POS application.

Tip: While customers may enjoy a free beverage with their completed card, consider other gifts as well. Free T-shirts, hats or mugs do double duty as advertisements.

By using your POS software, you could develop a more sophisticated points-based program in which points earned convert to a cash value, which customers use for additional purchases or discounts. Once a determined amount is reached or action taken, the gift is automatically redeemed. For example, T.G.I. Friday's “Give me more stripes” program rewards one stripe for every dollar spent with 100 points equaling 8 points, or an 8% discount. The chain also gives a free appetizer upon sign up and a free dessert with purchase on an entré for member birthdays. That initial sign-up is critical and should be rewarded!

It's no secret that the benefit of rewarding customers for signing up is to help you add to your database, providing you with an invaluable cache of interested buyers for other marketing projects. Jersey Mike's Subs continues to reward registered members with e-mailed promotions, including coupons for sandwiches and drinks. An alternate point system is one where customers bank their points (much like airline frequent flier programs) in personal accounts, which they redeem for desired rewards.

Another type of reward system that independent restaurateurs looking to share marketing efforts with neighboring businesses should consider is a partnership program. In this idea, businesses market to another company's database and allow loyal customers a choice in redeeming rewards from either spot. Be sure to choose partners based on the kind of market they serve. You want to compliment and augment your own list. The many members of city-based Independent Restaurant Associations also partner with each other through their association to provide customers, tourists and newcomers with a focused choice of eateries. Most associations, like the Nashville Originals manage gift certificate purchases (redeemable at all member restaurants) on their websites. The best aspect of this kind of rewards system, as opposed to discounts or coupons, is that customers receive an extra gift without perceiving a lower value at your restaurant.

Finally, affinity programs, which build on a lifetime value relationship with customers based on mutual interests, are something to consider. Here, a restaurant donates a portion of a customer's bill to a particular charity. (Miami-based Denny's Restaurants offers its affinity members a 15% discount off their checks plus donates 5% to a scholarship fund benefitting the Broward County school district. Smaller, independent restaurants have long provided in-kind service (e.g., softball team sponsorships) to select neighborhoods, volunteer fire departments and emergency response teams, as well as area school and recreational team programs. A formal affinity program links individuals to charities and causes. This can include specific events related to emergencies within your restaurant's geographical region or, depending on your market, natural disasters of global impact.

Whichever program you use, remember that loyalty is an emotion. By adding a little element of surprise to your rewards program, you can increase a customers' emotional bond to your restaurant. Simply keep track of your most frequent customers and surprise them with a free dessert or a free drink randomly, or after they have visited x number of times or spent x dollars at your restaurant. To get the best emotional bond, make sure it is a surprise to the customer. Consider sending your best customers, or all of the customers in your database, a free birthday gift certificate or a special holiday offer.

Loyalty programs, even simple punch cards, are long-term endeavors that should reflect the culture of your restaurant. Once you start a loyalty program, it is absolutely critical that you maintain it and be able (and willing) to measure its results. Most important, however, is how well you train your employees to understand and communicate the program to customers. Ideally, you have culled insights and observations from your staff before setting up the program. Indeed, engage your core staff in the design process rather than present them with a finished product.

Because employees are your first “sell” and because they know your customers, they are your best focus group and can be used as such. How easy is it to communicate the purpose and policies of your loyalty program to them? What are their reactions to the program? Do they see the value? At Babette's Café in Atlanta, one manager with teaching and acting skills leads staffers in role-playing exercises. This lets servers and hosts practice new procedures before “going live” and primes the pump for the kinds of resistance they can expect on the floor. Staffers can also pinpoint immediate and long-term problems and potential loopholes in program policies. Following the program launch, employees can offer their collected feedback from customers regarding a willingness to participate.

Before committing to any loyalty or rewards programs, create a scorecard that captures the various types of programs, their potential benefits (include cost and how easy or difficult they are to administer, communicate and use), and their profitability. Be sure you can capture customer demographical data and purchasing patterns. The latter will help in targeting appropriate (and rewarding) promotions and rewards, which in turn, will prompt more frequent visits turning the occasional guest to a regular.

Links

http://www.restaurant.org/pressroom/pressrelease/?ID=1988

http://www.nashvilleoriginals.com/gcs.php

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To Conclude: After researching types of loyalty and reward programs, create one that fits your restaurant's size and personality. Incorporate it into your business culture and keep it there.

Next Tip: Get Customers to Come Back: Developing long-term relationships with your customers.

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