Case study: Four considerations for designing a great franchise loyalty program.
By Leslie Wilson-Lopez
Traditionally, we look at loyalty programs from our company’s perspective. By providing offers and incentives in a structured format, we hope to increase visits, spending and daily engagement among customers. We thank our biggest fans for their business, knowing that they could take their money elsewhere.
I would argue that the most successful loyalty programs start from the perspective of the customers instead.
Your fans want to be heard and believe that your brand understands them. When a loyalty program offers valuable deals – ones that the members will actually redeem – good customers want in. If your loyalty program is effective, they feel grateful for the rewards and want to give you more business.
A loyalty program of that quality is built on four pillars: understanding program basics, knowing your customer, implementing technology and being useful.
1. The Program Basics
Start with these questions: Why do people choose your business over others? What would encourage them to choose it more often?
At Togo’s, the sandwich franchise where I manage loyalty, we thought about how our guests behave when we were setting up the program. Whereas many people buy their coffee at the same place every morning, most people don’t eat lunch at the same place every day. Thus, we had to design a loyalty program that rewards dollars spent, not total visits.
That realization led us to create a points-based system for Togo’s Tribe, our loyalty program. For each dollar spent, a Tribe member earns one point, and 50 points equate to a $5 reward. That’s aggressive considering that our average receipt is $10. In other words, an average customer could earn a reward in five visits.
That system works for us. While average customers visit twice per month, Tribe members visit closer to three times per month. A reward has to feel valuable relative to the cost of your product and the frequency at which people demand it. If customers had to visit us, say, 10 times for $2, they wouldn’t have a true incentive to pick us over the competition.
2. Know Your Customer
The most effective loyalty programs segment customers based on past behaviors, location and time. Segmentation is about giving people what they are most likely to want. At Togo’s, the guest who comes three times per month is very likely to come one additional time that month with a little incentive.
Targeting by location and timing are rare but commonsense, too. A typical formula for a lunch restaurant might be to target loyalty members with a special lunch deal around 10 am or 11 am in their time zone, when lunch is top of mind. A bar might use the same strategy on Thursday or Friday afternoon before happy hour. Timing can also be more individualized. For example, Togo’s sends a notification to guests when they come within a half-mile of a restaurant letting them know they have a reward to redeem.
Another great tactic is to align special deals with local or national events to take advantage of the buzz. For instance, on National Sandwich Day in January, we offered double points to all Tribe members. On average double points bring a 50 percent lift over the day prior or following.
3. The Technology
The cornerstone of an effective loyalty program is technology. The customer relationship management (CRM) system is especially important. To execute the ideas I’ve described above, a CRM must:
* Integrate with your in-store and online point-of-sale (POS) system to record points and purchasing patterns;
* Link each purchase with a guest account via mobile phone number, check-in code or physical card;
* Send mobile push notifications and emails on an individual and mass basis; and
* Geo-locate customers (permission-based).
The individual and mass communication aspect is underrated. Loyalty programs that only deliver mass offers fail to cover some basics, like reminding customers when their points will expire. When customers receive those reminders, they see that you actually want them to redeem rewards. Those types of personal emails separate loyalty programs from simple marketing messages.
4. Be Useful
People have become hesitant to give out personal information in exchange for loyalty benefits – and justifiably so. Unsubscribing from email lists and loyalty programs has become a commonplace act, not unlike cleaning a messy room. Most programs take more than they give.
Recognize that people are bombarded and hesitant. Invest in the program design, customer knowledge and technology required to deliver relevant, valuable deals. If customers feel grateful for your loyalty program, the business results will come naturally.
Leslie Wilson-Lopez is senior brand manager at Togo’s Eateries.