Analyst says restaurant loyalty programs are a ‘leverage’ amid uncertainty

Amid rampant inflation, more restaurants are relying on loyalty and rewards programs.

“Without a doubt, restaurant organizations that invest in loyalty are seeing greater sales and higher customer retention, and we believe higher margins in the long run,” Savneet Singh, CEO of restaurant management platform PAR Technology, told Yahoo Finance.

According to Singh, rewards programs increase customer loyalty, which in turn increases frequency, spending, checking averages, and engagement—especially in tough economic times.

PAR, the parent company of the Punchh loyalty app, whose customer list includes top brands such as Taco Bell, Pizza Hut, KFC and Arby’s, among others, helps brands optimize operations to better benefit from the customer’s long-term value.

“When you build a loyal following, that one goes back to your restaurant. You don’t need to remarket to them, but more importantly, you have more data on them,” Singh said.

“Loyalty programs are a great way to build a relationship with this customer so they stay with you for the long term,” he added.

Taco Bell’s Taco Lover’s Pass boosts brand loyalty amid inflation (CTSY: Taco Bell)

Recent data proves the benefits of these types of offers with Chipotle (CMG) only announcing last week that it has expanded its loyalty program to Canada.

“The most attractive thing for us is that we can have a more individual relationship with him. [these customers]Chipotle Chief Financial Officer Jack Hartung told Yahoo Finance in a new interview, revealing that the Mexican chain’s loyalty program has 28 million members and the number is still growing.

“Those who join the Loyalty come to Chipotle more often, and spend more when they come in,” the CEO continued.

Similarly, Taco Bell (YUM) revealed earlier this year that members of subscription service Taco Lover’s Pass were three times more likely to visit a Taco Bell restaurant per month.

The company added that the program boosted new rewards members by 20% and led to a 35% increase in overall spending from active members.

In the United States alone, nearly one in three restaurant customers use loyalty programs each month, according to the latest edition of the digital divide chain PYMNTS.

A separate study found that 43% of diners said they would be more likely to buy from restaurants that offer loyalty rewards.

Rewards and digital go hand in hand…Peter Saleh, BTIG Analyst

“Almost everyone has a rewards program,” Peter Saleh, managing director and restaurant analyst at BTIG, told Yahoo Finance.

He called it a “leverage” necessary to drive growth, stressing that most companies will eventually need to use their first digital software as they mature.

But the analyst noted that the most powerful factor in the rewards program is “you learn a lot about your customer.”

“Restaurants with loyalty programs know when a customer placed an order, what they ordered, how much they spent, what location they visited, their ages — all kinds of data that allows these restaurants to [to make better decisions],” It is to explain.

Singh added that the technology has also created a more sophisticated way to track loyalty programs by using that data in real time to drive better customer value in the long run.

“Rewards and digital go hand in hand,” Saleh agreed. “The most powerful thing is all the data that these companies capture over time.”

Brand needs

As brands grow and mature, their reward programs may change as well, as more companies offer perks beyond just promotions and discounts.

“Better [companies] They adjust their loyalty programs to fit their brand’s needs, rather than just adopting a one-size-fits-all approach,” Singh revealed.

He explained that loyalty programs can serve a variety of purposes, with some brands choosing to drive business during peak hours while others prefer to focus on collecting customer data.

Then there are loyalty programs that focus on growing exactly that — loyalty — by providing members early access to special products.

Fast-food giants like Papa John’s and Taco Bell have recently taken advantage of the upside, providing early access to menu items like Epic Pepperoni-Stuffed Crust Pizza and Mexican Pizza, respectively.

“It’s a way to reward customers for loyalty, and to prove why they should keep this app on their phones,” Singh said, adding that the new offering is “a great way for restaurants to build connection.”

“I think as we go into potential economic uncertainty, you’re going to see more and more of these things because the value of approaching your customer is much higher,” he predicted.

Alexandra is the Senior Entertainment and Food Correspondent at Yahoo Finance. Follow her on Twitter aliecanal8193 And email it to alexandra.canal@yahoofinance.com

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