Hey Hot Potatoes,

Welcome to the latest edition of the Hot Potato Newsletter. This week, we look at customer loyalty and the pivotal role it plays in driving growth for your business. It’s no coincidence that major brands in the hospitality space have their own loyalty programmes - Pizza Express Club, Pret Perks and Wagamama’s Soul Club (Source: MCA) to name a few. In this article, find out why you should be spending more time on customer loyalty and the benefits that come with it.

In today’s email: Customer Loyalty - Here’s why you need to get serious about it.

Read Time: Approx 5 mins

What is customer loyalty and what are the trends?

Source: Piggy / BBP Media

A customer loyalty programme is a marketing tool aimed at enticing customers to spend more on your brand by offering points and rewards for their purchases.

Key Points:

1. Two main types of strategies: Firstly you have the gamification strategy - This involves the use of points, badges and levels to keep customers engaged with your loyalty programme. The second strategy is around personalisation - This involves the use of personalised messaging and rewards tailored to a customer based on their order history.

2. Physical and digital cards: In the world of customer loyalty, brands can offer both physical and digital loyalty cards. Customers can then either swipe a card in store or scan a QR code to earn and redeem their rewards.

3. A growing trend: In the UK, cafes and coffee shops are the second biggest group to use loyalty schemes, with 35% of customers regularly enjoying rewards with their purchases (unsurprisingly supermarkets are top of the list). Brands are increasingly understanding the importance of using customer loyalty as a tool to grow revenue for their businesses.

As consumers, we want to be rewarded for our spending. Many brands out there now offer customer loyalty programmes as a point of differentiation against competitors. If you have been unsure on how to grow your sales, especially with your existing customers, then a customer loyalty programme is something you need to implement.

The Benefits

Source: Embargo / For-Sight / The Drum

Customer loyalty is vital for hospitality businesses, it drives repeat visits, increases your revenue, gives your customers a personalised experience and is an opportunity to understand your customers better through data.

Key Points:

1. Margins and revenue: It is a well known fact that the cost of acquiring a new customer significantly outweighs the cost of keeping an existing one. On top of this, loyal customers on average spend 67% more than new customers, making it very evident that customer loyalty strategies are crucial for sustainable business growth and profitability.

2. Feeling part of your brand: Research shows 78% of consumers are likely to buy from brands that offer personalised experiences. We also know that implementing a loyalty programme gives you a large amount of data on your customers; who they are, how much they spend, how often they visit, their favourite products and so on... Using this data can equip you to deliver a far better customer experience, helping to drive much stronger connections between you and your customers.

3. Increased customer retention: On average, repeat customers account for 65% of your revenue, which means they need to be well looked after! Losing a big chunk of customers in a short space of time can be detrimental to your business and even more challenging to recover from. Customer loyalty programs help keep your customers committed to your brand longer term, delivering a higher customer lifetime value too.

It’s clear that using a customer loyalty scheme can bring a wide range of benefits to your hospitality business. There are some really great platforms out there like Embargo and Piggy specifically that can help you launch a customer loyalty programme quickly and seamlessly. With their plug and play platforms, it’s never been easier to get your customer loyalty programme started.

How to Implement a Successful Programme

Source: Mastercard

There are 4 simple steps you can take to set up and implement a successful loyalty programme.

1. Create a strong value proposition: Decide what type of rewards and incentives you want to give your customers. Will your customer be able to earn points or win prizes? It could be as simple as getting a free product or menu item once you’ve visited a certain number of times, or even getting a special treat on your birthday. Make sure you create a compelling proposition.

2. Make it super user friendly: Whether that’s a simple paper loyalty card or digital mobile app, make it as simple as possible for people to engage with the programme. This will help you build a loyal customer base and keep return visits high.

3. Incentivise customers to sign up: You’ve done the hard part by creating your value proposition and loyalty programme, now you need to clearly communicate the programme’s value. This could be on your socials, your website or you could even have a message by the shop till for when customers are paying to increase awareness of the loyalty rewards you offer.

4. Use data to inform decisions: Once you’ve got customers onboard, you can unlock more information about them. You should then look to use this data to create a more personalised experience, creating targeted messaging and providing exclusive offers aimed at different customers segments.

By following the steps above, you should be on your way to starting your own successful loyalty programme. There is no perfect one size fits all approach, so do some testing, see what works best with your customers and learn as you go.

Case Study: McDonald’s

Source: Marketing Week / Marketing Week

Fancy a free Big Mac? Well for those that don’t know, back in 2022 McDonald’s launched their app based loyalty programme called ‘My Rewards’. The scheme proved to be a big hit, driving high growth through their digital channel. We take a deep dive into the programme they created and the results they saw.

Key Points:

1. What is the scheme? McDonald’s went down the ‘gamification route’ where customers could start earning points for every £1 they spent. The accumulation of these points lead to different rewards… the more the points they earned, the larger the rewards!

2. What has the impact been? The scheme has amassed a whopping 150 million active users. What’s incredibly impressive however is that sales from ‘My Rewards’ members rose by 45% between 2022 and 2023, generating over £15.96BN. This emphasises the point that I mentioned earlier, your existing customers play an important role in driving new and additional revenue for the business.

3. The future of the scheme: The business has set an ambitious target, by 2027 they are aiming to have 250 million active users and generate £36BN in yearly sales from loyalty users. They are planning on taking personalisation one step further by creating digital offers which are even more tailored and specific to their customer base. According to Chris Kempczinski, the Managing Director of McDonald’s, they see their loyalty scheme as the “biggest opportunity” to acquire new customers and build more frequent interaction.

The fact that McDonald's, a global leader in the restaurant industry, identifies it’s digital channel as their most important avenue for customer acquisition speaks volumes about the shifting landscape of consumer spending. To leverage this changing landscape, why not start small with a simple digital loyalty card?

Today we’ve explored how important customer loyalty can be for a hospitality business; how it is a powerful tool to grow your existing customers, whilst gaining new ones too. Thanks for reading and don’t forget to subscribe to stay updated weekly on all things hospitality!

Next week we explore the ways in which you can punch above your weight as a small brand and take on the big guns.

Bon appétit,

Max Shipman, Editor-in-Chief, Hot Potato

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