2010 May: Reward Your Customer

Frequent diner programs abound and there’s good reason for this, says Arjun Sen, president of Zen Mango, a Centennial, Colorado-based consulting company.

“A frequent diner program gives you a share of the customer’s wallet space,” he says. “It also helps build a habit. Those who experience a brand three or four times have a revisit intent that is up to 15 percent higher compared to that of one-time visitors.”

These programs enable restaurants to add value without discounting, Sen continues. They also offer an effective tool for shifting buying behavior, for example, encouraging greater frequency of use or visits during off-peak times.

But the programs can fall short. For one thing, Sen explains, today’s society prefers its gratification instant. Consequently, the delayed rewards that characterize many programs appeals to a smaller group of consumers. The remedy? Bump up the rewards frequency and set a low threshold to get them started, he says.

This is what they did, says Nancy Reineking, director of operations at Willow Street Wood Fired Pizza in Los Gatos and San Jose, California. When they first launched their program, customers had to spend $200 to get $20 off (they use a stamp card with each stamp worth $10). Five years ago, they decided to lower the rewards level. Now, after spending $100 customers can get a free appetizer; after 25 stamps a free entrée; and after 30 stamps a free dessert. Customers can redeem as earned or all at once.

Reineking says the program is popular, adding that in one week at their Los Gatos location, 45 stamp cards were turned in.

Steve Rubino, founder/president of Rubino’s Pizzeria, with a location in Herndon and in Ashburn, Virginia, keeps rewards obtainable as well. Customers in his program receive a $10 gift card for every $100 they spend.

“Our customers who use this religiously are a great value to me,” he says. “It’s hard for me to put a finger on how much this has bumped up sales; just say that the card users are a significant part of sales.”

Sen believes in creating levels of usage/rewards. He suggests owners evaluate their traffic and break the thresholds into light, medium, heavy and super-heavy users, based on frequency.

“Then the idea becomes moving people from one threshold to another and keeping them at the heavy end of the spectrum,” he explains. “At the lower ends, the rewards should be frequent and small, becoming more personal and privileged as you move towards the heavy end.”

This strategy also helps restaurants differentiate their program, making it less “me too,” a real issue thanks to the proliferation of these programs, says Sen.

“To make the program really stand out you need to offer something more than ‘buy six get one free’,” he says. “Start by looking at the non-financial rewards, things that will really wow the customer.”

This could include perks like immediate seating, or moving to the top of the wait list, or personal attention from the manager. Other possibilities might be special gifts, such as a free birthday pizza or an invitation to be the first to try a new menu item or to attend a special in-restaurant, invitation-only event. The point is to make the program member feel well-treated and valued (he suggests looking to other industries that really connect with their customers for additional ideas).

But restaurant owners also must think of these programs differently, says James Sinclair, principal of Onsite Consulting, a Los Angeles based restaurant consulting firm. Rather than simply rewarding repeat business, the primary objective should be the collecting and retention of data, not appealing to bargain hunters.

“If you have a customer that always comes in Thursdays, don’t offer him a deal that gives him a discount on Thursday, because he was already coming in at that time. Now, you’ve lost revenue on that customer,” says Sinclair. “Don’t turn a dollar into fifty cents.”

You must outreach to customers and drive traffic and promotions without taking away from the existing traffic you’re getting, he emphasizes. The entire value of these programs lies in their marketing ability, getting the customer’s attention in order to push them towards what you want to accomplish.

“The point of the rewards program isn’t for the customer,” says Sinclair. “It’s for the restauran — disguised.”

This is the strategy behind her program, says Candace Roseo, co-owner of Bella Vista Trattoria & Pizzeria in Wilmington, Delaware. She collects names, addresses, phone numbers, email addresses, anniversaries and birth dates via the POS system, creating a database of 1,000 customers so far that she regularly markets to.

Reward levels range from $100 to $500, with a free appetizer or dessert at the first level and 15 percent off the total bill at the highest. The program generates good word of mouth; about 25 names are added each week, an indication she’s bringing in new business. But that’s not the biggest value.

“Information is power,” she says. “If you’re not in control of how you touch your customers and how frequently you touch them, well, let’s just say that’s not a position I’d want to be in.” 

Increasing Effectiveness

The following tips will help you wring the most from your program: 

  • Make signup easy and convenient. Offer both in-restaurant and Web site signup. 
  • Educate staff, says consultant Arjun Sen. When these programs fail, it’s often because the staff doesn’t support it. Train them on program details. Reward them for signing up customers.  Promote it through staff, with in-store signage, on menus and your Web site. 
  • Keep it active. Regularly market it to members, for example, via email blasts announcing a new menu item (mentioning that program members heard this first), reminding them of program benefits
  • Make changes so the program doesn’t get stale. (Example: restaurant owner Steve Rubino is offering double points nights to promote certain categories.) 
  • Keep it consistent with your brand in terms of name and the materials used in the program (such as swipe/stamp cards). All should enhance your image.

Pamela Mills-Senn is a freelancer specializing in writing on topics of interest to all manner of businesses. She is based in Long Beach, California