The restaurant industry is in a slump these days, losing customer traffic and sales. One way it’s fighting back? Loyalty programs.
The stakes are high: Recent data from market research firms NPD Group and TDn2K show restaurant visits have been on the decline. As of July 2017, monthly comparable sales hadn't registered a gain since February 2016, TDn2K data showed.
“It’s been tough from an industry standpoint,” said Dominic Losacco, who heads marketing at Mexican-food chain Moe’s Southwest Grill, in an interview. “There are hundreds of new fast-casual restaurants opening each year. It’s become overly saturated. That’s made it a share game: Everybody is fighting for the same pie.”
In response, Moe’s—part of privately owned Focus Brands, which also owns other food chains including Auntie Anne’s and Cinnabon—in June 2016 introduced mobile loyalty app Rockin' Rewards, replacing its original online-ordering app. The new app allows Moe's to study when customers visit stores and what they buy, and then tailor promotions accordingly. Since the app's launch, 1.2 million users have signed up—and up to 35% of them are considered “highly active,” Losacco said. The company wants to reach 2 million users by the end of the year.
The app is driving results. When Moe’s sent a “We miss you” message without an offer via Rockin’ Rewards to users who hadn’t visited in 60 days, it resulted in almost 7% of the users returning for a full-price visit. When a $5 coupon was sent to users who hadn’t visited in 120 days, more than 60% of those who redeemed that coupon returned a second time and paid full price, the company said.
“The beauty of the loyalty program is if you give people the right offer, they can become full paying customers,” Losacco told eMarketer Retail, adding that the average amount a loyalty member spends is higher than a regular customer. “Our main objective is to drive profitable traffic. We don’t want to discount just for the sake of discounting.”
Pizza Hut, a unit of Yum! Brands, in August introduced its first US loyalty program, Hut Rewards, which the company expects to "pay big dividends” over the long term, said Yum! Brands CEO Greg Creed in an August earnings call. (Yum! Brands also owns fast-food chains KFC and Taco Bell.)
While the program is new, the company has already tested waters abroad. Yum! Brands president and CFO David Gibbs said on the same call that the company’s loyalty programs in parts of Asia are a “big part of driving the business.”
Gibbs also isn’t shy about admitting that Pizza Hut is late to the game in the US.