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Restaurant Loyalty Programs

Loyalty programs or rewards programs work best on customers who already enjoy your product and service. The purpose is to take a good customer and turn them into a great customer. Every restaurant should have some kind of loyalty program in place. It can be as simple as greeting regular customers with their first name and offering them their favorite drink or appetizer when they arrive. Or, it can be as complicated as a card scanning system where customers collect points to get closer to earning a reward.

Tools for a Loyalty Program

The most successful loyalty programs will follow the general guidelines for increasing customer frequency and involve one or more of the following tools:

Punch cards.

A punch card frequency program is easy to implement. You could punch the card for every item purchased over $3, or you could punch it for every $5 spent or for each visit. Once a customers’ punch card is full, you should offer them a reward, like a free appetizer, dessert, beverage or merchandise. Some of the best rewards programs give the most frequent customers free t-shirts, hats or coffee mugs, turning these customers into walking advertisements.

Loyalty cards.

You can scan cards with barcodes to keep track of customers’ purchases and offer them appropriate rewards. Most standard POS systems can do this, or you could purchase loyalty program software. The software will track the frequency of customers’ visits, their birthdays and what they like to buy from you. You can use this information to find ways to encourage the most profitable behavior changes. For example, maybe the customer never orders an appetizer with their meal. The software could prompt you to offer them a free appetizer.  If they enjoy it, they will be more likely to purchase an appetizer in the future.

Top customer rewards.

Instead of a points system, you could create a customer competition where the top 10 or 20 customers receive a special reward, like a free party room reservation, free valet parking, etc. You can use software to determine who your best customers are, or you can simply keep track of regular customers’ names and count the frequency of their visits and how much they spend.

Automatic rewards systems.

The nice thing about an automatic rewards system is that customers do not have to sign up or carry a card around with them. With the right software, customers that give you their names or pay with credit cards can be automatically entered into your loyalty program. You can then surprise them with a free gift once they have achieved a certain number of points. Tell your customers that you are rewarding them for their repeat business, and you hope you will see them again soon.

Full database.

As you choose loyalty program strategies, you should try to build up your database. Having access to frequent customers’ emails and addresses will allow you to send the rewards or special offers in case there is a lull in their patronage.

Card filing system.

It is good if a customer wants to carry around their card, since seeing the card in their wallet will remind them of your restaurant. However, many customers have full wallets, and would appreciate it if you kept their card at your establishment. With a good filing system, finding the cards can be fast and easy; ask customers their name and find their card alphabetically. Or if you have computer software, you can simply keep track of their purchases electronically.

Reward Options for Customer Loyalty

Unfortunately, the market is flooded with loyalty programs, and for many, joining just means another card to keep in the overflowing wallet. The average consumer already belongs to 7 to 10 frequency programs,1 so you need to make sure yours is desirable. Other restaurants have had success with the following rewards:

Partnership rewards.

You could be creative with your rewards. Consider partnering with another local business and offering gift certificates. You can approach other businesses and try to get a discount on their gift certificates by buying them in bulk. For instance, TGI Friday's Gold Points program rewards some of its best customers with a stay at Radisson's Country Inns and Suites.2 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.

Randomly given extras.

By adding a little element of surprise to your rewards program, you can increase a customers’ emotional bond to your restaurant. You can 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, and also make sure that they do not feel embarrassed or singled out by the reward.

Special occasion gifts.

Consider sending your best customers, or all of the customers in your database, a free birthday gift certificate or a special holiday offer. This will encourage them to patronize your restaurant for their special occasion, and thus they will associate your restaurant with a special experience.

Reward Guidelines

You can be creative in the types of rewards you give, but follow these tips to make sure you are offering a good incentive:

Make the reward attainable.

A reward that is attainable is good for profits, since the closer customers are to getting a reward, the more likely they are to patronize your restaurant.

Stop offering general discounts.

These discounts are not exciting. They also hurt your revenue and make customers feel that your product is not really worth the full price.

Create customer-specific rewards.

You could reward different frequent customers with different gifts. Customers’ purchasing habits will show you what they enjoy. If one customer always orders a piña colada, offer him or her a free piña colada as a reward for repeat business. If another customer always pays for valet parking, offer him or her the service for free.

Match the reward to your concept.

A formal, expensive restaurant should offer formal rewards, like a bottle of wine or the best table in the house. A Mexican restaurant could offer a free jar of their house salsa, while a casual quick-service sandwich shop might provide frequent customers with a free t-shirt.

Go by points, not dollars.

In general, points are a better motivator than dollars spent.3 You can base your point system on dollars spent at the restaurant, but it should appear to the customer that they are earning points toward a reward, not a percentage back on their dollar.

Offer extra points during slow times.

If your business is usually empty during a certain time or day, like before 6:00pm or on Mondays, you can offer double points during this time.

A loyalty program can work for just about any restaurant, but only if the tools and rewards system are carefully selected and implemented. If you follow the guidelines above, your loyalty program is bound to be successful. However, it is still important that you assess each marketing technique to verify its success.
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1 David C. Grinnell, “Loyalty programs are subject to success if they are well crafted and properly executed,” Nation’s Restaurant News (Dec 1, 2003) http://findarticles.com/p/articles/mi_m3190/is_/ai_110963647 (accessed November 5, 2008).
2 Anna S. Mattila, “Emotional bonding and restaurant loyalty,” Cornell Hotel & Restaurant Administration Quarterly, (1 Dec 2001) http://www.allbusiness.com/marketing/market-research/837846-1.html (accessed November 5, 2008).
3 “The Lowdown on Customer Loyalty Programs: Which Are the Most Effective and Why,” India Knowledge@Wharton (6 Sep 2006) http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4070 (accessed September 6, 2006).