Loyalty Program in Hospitality

How you, as a local restaurant or hotel, can fully exploit your strengths and shine with personality and customer proximity.

Introduction

• It costs 7-10 times more to acquire a new customer than to reactivate an existing one. (*Q4 - 2018)
• 84% of consumers claim to buy more frequently through loyalty programs (*Nielsen Report 2013)
• 66% of consumers claim to adjust their buying habits based on rewards (*Bain & Company 2001)

With rising costs for customer acquisition and ever-tougher competition, more and more companies are looking for opportunities to create their own rewards program.

Thanks to their easy-to-understand rules and structures for earning and redeeming rewards, point-based programs are by far the most popular with customers.

The following article will provide you with a guide to the successful introduction of a point-based loyalty program for your business in a few steps.

Step 1: A clear goal

Defining our goal is simple. Our program is designed to increase revenue per customer through more frequent visits and larger orders.

However, this can only happen if our customers accept it well, meaning that customers can clearly recognize a value in their participation.

If loyalty programs fail, this is almost exclusively due to the factor "lack of participation". Customers must directly, preferably at the moment of registration, gain an attractive advantage out of their participation, otherwise the program is almost doomed to fail.

Of course we do not want to give away the farm, and therefore we need to make sure our program is attractive on the one hand but still profitable on the other

Therefore at the very beginning, we have to ask ourselves the question:

How much must a customer have spent with us to receive a premium.

Nobody wants to spend thousands of Euros just to drink a f free soda.

Ideally, your rewards therefore have a high perceived value for the customer, but a low monetary value for you.

With this knowledge in mind, we can now start building our program.

In the next step, we first determine how customers can earn points.

Step 2: Defining how to earn points

The simplest form of the rewards program, but effective and successful for many years, is the allocation of points by order size.

Basically, this means:

1,-€ Order Value

+1 to the customer card

Quickly explained for customers, but also for staff.

With a simple trick, you can even use this system to increase the order value per customer by setting thresholds that a customer must at least reach to earn points. That could look like this.

ab 25,-€ Order Value	+25 to the customer card
ab 50,-€ Order Value	+50 to the customer card
ab 75,-€ Order Value	+75 to the customer card
...	...

The second slightly more complex option would be to award points only for the purchase of certain products. In this way, you can specifically promote the sale of individual products with a good profit margin and even better reward certain actions.

(Attention: There is a lot to go wrong, so it should only be used by professionals.)

Here are some examples:

1 Soft Drink 0.5l	+5 to the customer card
1 Bottle of Wine	+15 to the customer card
1 GoogleMaps rating	+2 to the customer card
You can even give extra points for days or hours when there is little going on. Happy Hour (Tuesday 09:00-12:00)	+5 to the customer card

This may seem a bit confusing at first, but do not worry, in the end we will give you a beginner-friendly compilation for a sample program that you can easily give a try.

Step 3: Determine how your customers can be rewarded

Important: Your customers have absolutely no interest in points, they only want your premiums. So if you want your customers to earn a lot of points (and you want that, because then you're making sales), your rewards must be attractive.

As mentioned in the beginning, you should make sure that your rewards therefore have a high perceived value to the customer, but a low monetary value for you.

You reach this goal in two ways.

The first possibility (complicated) would be that you can clearly define each individual product in which points can be redeemed. So you could only "give away" products that have a low purchase price.

Here is an example:

-100	1 Cup of Ice Cream
-200	1 Bottle of Wine 0.7l
-400	25, - € Discount Voucher

The second and simpler option is to give a fixed conversion factor of your points as discount points for all your products. This version is also more popular with customers, as everyone here can pursue their own "savings target".

The important thing is that you choose a conversion factor that is not so high that it does not pay to collect your points, but not too low that it could even hurt you. A good guideline is a factor between 15-20.

As an example here with the factor 15:

-75	5,-€ Discount
-150	10,-€ Discount
-300	20,-€ Discount
-450	30,-€ Discount

So you grant each customer for 15,-€ they spend with you a future discount of 1,-€, while making sure that you only discount if you earned at least 75,-€ per participant.
Converted in percent, this customer receives 6.67% discount on this purchase, which he can assert only on the next visit or the next, and only if he has fulfilled the minimum order quantity.
Do not forget: Discounts from the rewards program of course should not be applicable to other discount promotions.

Step 4: Get creative

Choose a good name.

This does not mean that you should think of something as fancy as possible, but rather a short, clear name that directly describes what it is.

You can become creative when naming your currency (points). Of course, your points can also be called points, but if your name is good you can use it for promotional purposes.

"Costa Coins", "Luigis Lira" or the "Acropolis Stars", are a few examples that were extremely well received by customers.

Not everyone likes such creative tasks, so talking to a marketing professional can be extremely helpful, especially before the launch of your program.

Step 5: Promote your program

Once again because it is so important:

If loyalty programs fail, this is almost entirely due to the factor "lack of participation". If customers do not know your program, how do they know how great it is?

Use every free surface you can. Checkout, front door, walls, flyers, windows, place cards, table flyers, etc.

School your staff to ask if customers want to secure their points after each and every order. Most customers will be eager to register on site.

But also use promotions. If you use a cloud-based system (like N-Centive), your customers can register themselves on a dedicated website. You can share the link to this website on Facebook, Instagram & Co, or even, as shortlink, on your print advertising, such as flyers.

Of course you make participation more attractive if you give away a small premium directly as the entry gift on this page. That does not have to be a discount. 5 starting points on the loyalty account should be enough.

The best way to promote your program for free is through a referral feature (friends advertise friends feature). This allows existing participants to invite their friends into the program with just a few clicks.

Of course you can also award rewards for these recommendations, but you should not use too expensive premiums or too high discounts here. The scope and effectiveness of such viral marketing is easy to underestimate.

Step 6: Start Now

You know that the cost of advertising per customer is constantly increasing, so now it is even more important than ever to focus on retaining existing customers and, above all, increasing your revenue per customer over time. This will not only help you to increase the annual balance, but also prevent migration of your customers to competition.

Nobody starts out with a perfect program, so just start, present your prototype to a few customers and work with their feedback. If you want, feel free start with the example on the next page.

By the way: At N-Centive, the free creation of your prototype takes just a few minutes.

Create your free account right here: Free Trial

Sample Program for a small local Restaurant

Feel free to copy this table. Of course it applies to nearly any business in the hospitality industry.

Rewards for Referrals (Refer a friend)

Advocate	+5
New Participant	+5

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