Increased customer loyalty is probably the one marketing goal with the most potential to improve profits. Although frequent guests typically only account for about 15% of a business’s customer base, they are usually providing at least 1/3 of the revenue. Furthermore, researchers at Harvard have found that if you increase repeat visits by 5%, you can raise your profits anywhere from 25 to 125%.2
Regular customers are the most desirable patrons because they already like your product. They like it so much that they keep coming, and they also tend to spend more than other customers. The more regular customers you have, the better you will be able to predict your sales. Never underestimate the power of word-of-mouth. Since they are likely to tell their friends about your restaurant, frequent customers are your best resource for marketing.
Choosing a Strategy
Frequency marketing is not just about encouraging customers to come back more often. It is also about changing repeat customers’ behavior to increase your profits. Therefore, the most successful frequency marketing strategy will do three things:
- Increase frequency of visits by current customers
- Increase check size from current customers
- Strengthen the customers’ emotional bonds to your restaurant
Two of the best strategies to achieve the above goals are the following:
Loyalty programs. The point of a loyalty program is to make regular patrons even better customers by offering them rewards for their repeat business. A loyalty program can include point systems and advanced software that analyzes customers’ purchasing patterns, or it can simply involve giving regular customers special treatment. As opposed to bouncebacks, whose main goal is to get customers to come back, loyalty programs focus on strengthening the bond with repeat customers in order to increase revenue and improve a restaurants’ reputation through word-of-mouth. » Learn More
Bouncebacks. You can take a first-time customer and encourage them to come back a second time by offering them an incentive, or a “bounceback.” Although first impressions are important, a customer does not form a commitment or develop brand loyalty after a single visit to a restaurant. To create regular customers, you need to get people to return at least once more. » Learn More
Frequency Marketing Techniques
You should pick your marketing techniques very carefully. The technique you choose will depend on what customers are buying and the type of restaurant you want to run. For example, an elegant, formal restaurant probably should not try a “Buy One Get One Free” promotion. On the other hand, offering free valet parking to frequent customers would probably not suit a casual quick-service establishment. No matter what kind of restaurant you run, to improve profits from customer frequency you should establish clear marketing goals and keep away from detrimental promotions. When choosing marketing techniques, you will want to offer customers added value while simultaneously encouraging more future spending. To achieve this, you could do the following for them:
Encourage them to bring their friends. If you have a casual establishment, try “Buy One Get One Free” or “Buy One Get One Half Off” offers. If you use a promotion like this, make sure to track your number of visits. If guest frequency does not increase, this tactic is failing and you should retire it.
Entice them to try a new menu item. You might notice that few of your repeat customers are ordering dessert. You could use a promotion like “Buy an entrée, get $2 off dessert.” If they like the dessert, they may come back and pay full price for it later. If your dessert sales go up, your promotion is working. You could also offer a discount on a specific item, like the next order of cheesecake.
Make frequent customers feel special. This is especially important in formal restaurants. It can be as simple as remembering their name and greeting them personally each time they come. For second-time customers, it can be as easy as saying, “Thanks for coming back again!” It could also involve giving the most frequent customers free items, or creating a “Best Customer” reward for your 10 or 20 most frequent customers. This will strengthen the customers’ emotional bond to your restaurant and encourage them to spread the word about your great service.
Avoid General Discounts
Whether you are implementing bouncebacks or a loyalty program, discounting is probably the least effective promotional technique. Do not give repeat customers a coupon for 10% off or $1 off their next order. Offering a discount can actually hurt your profits, for the following reasons:
- Discounting makes customers perceive a lower value. Once they have received a discount, they are less likely to perceive full price as a good value.
- Frequent customers already like your restaurant, and they are likely to come back and pay full price anyway. By offering them discounts, you are practically throwing money away. You do not want to give freebies to customers who would otherwise pay full price for the product.
- Unless you are a value-oriented business, like Little Caesar’s or McDonald’s, loyal customers who have a true bond will usually return to your restaurant because of the food and service, not just because of the price. Therefore, it is better to give them incentives that involve extra food or better service.
- Discounts are just numbers that are only appreciated by customers on a cognitive level. Better incentives – like a free cocktail, attractive merchandise or a simple first-name greeting – appeal to customers on an emotional level, too.
No matter which frequency marketing tactics you choose, make sure that the reward will delight your customers. In general, the reward should be something they associate with pleasure. Emotionally stimulating rewards will create a stronger emotional commitment in your customers. Once customers feel an emotional bond with your restaurant, they will provide you with both increased sales and free word-of-mouth marketing.