Loyalty

Restaurant customers who freely switch between online and in-store ordering channels buy more frequently and spend more than customers who stick to a single channel, according to PAR Punchh research released in August. The customer loyalty and engagement software company examined millions of customer data points from hundreds of brands using their platform.

The findings underscore the need for restaurants to offer easy-to-use, seamless experiences to maximize the potential of multi-channel shoppers, according to PAR Punchh. Loyalty apps can fill this role by enhancing in-store and digital experiences alike.

“A powerful loyalty platform isn’t just a nice-to-have; it’s an absolute game-changer for seamless customer experiences,” Savneet Singh, CEO of PAR Technology, told CX Dive in an email. “By integrating deeply into a brand’s ordering and delivery ecosystems, loyalty programs transform every interaction into an opportunity for convenience.”

Loyalty programs traditionally drive visits through simple incentives like discounts, but modern technology can help restaurants create great experiences and make dining out more convenient.

The key is to connect loyalty programs to the company’s wider tech ecosystem, including payment, order and delivery systems, according to Singh. This lets CX leaders access more data points while improving the services available for customers.

A strong loyalty app can pull customer data to make their ordering experience better, no matter where or when they choose to engage. The app can make it easy to access previous orders, offer personalized recommendations and bring up preferred payment options. 

Loyalty apps can improve in-restaurant experiences as well. Snooze A.M. Eatery, for example, lets customers use its mobile app to track wait times, join the waitlist for tables and earn priority seating as they climb the loyalty program’s tiers.

“A modern restaurant loyalty app must be more than just rewards — it should be a digital powerhouse that transforms customer interactions,” Singh said.

Digital ordering capabilities should still be supported by more traditional loyalty functions, like personalized messaging and exclusive offers, according to Singh. Modern additions like gamification through challenges, tiered benefits and social media integration that lets customers share their rewards can help round out a loyalty program.

Good loyalty programs can lead to word-of-mouth recommendations and increased spending, according to a study of more than 20,000 consumers and 360 loyalty programs by Bond and Visa released in July. Four in 5 consumers say they are more likely to recommend brands with good loyalty programs, and nearly three-quarters will modify their spending to maximize benefits.

But personalization is still lacking. Only 1 in 5 U.S. loyalty program members strongly agree that loyalty program representatives make them feel special and recognized, and less than a third strongly agree that they are receiving relevant communications.

Leaders can tap into data to maximize the impact of their loyalty programs, making members feel recognized while driving more business, according to Brad Jashinsky, director analyst at Gartner.

The most successful loyalty programs set concrete goals for the company and customers, then dig into customer profiles to achieve their ambitions, according to Jashinsky. However, many leaders are failing to fully support their loyalty efforts.

“Digital marketing leaders often develop loyalty programs before executing foundational customer experience practices that generate the customer insight for effective loyalty program design and execution,” Jashinsky told CX Dive in an email.

Voice of customer data is essential for ensuring that a loyalty program’s benefits target customers in the way they wish to be rewarded, according to Jashinsky. Making assumptions about the type of rewards customers want or copying competitor programs won’t be enough for long-term success.

Teams can use this data by dividing loyalty members into segments, which look at how customers provide value to the company, and personas, which look at how customers view the brand.

“Using the two strategies together can be extremely helpful for identifying the customers who have the highest potential value for your organization and understanding customer needs throughout their loyalty program experience,” Jashinsky said.

Loyalty program leaders can then begin to create journey maps for these customers to ensure loyalty programs deliver the right message at the right time. By partnering with sales, IT and other departments, CX leaders can get a full view of how target personas are thinking about and interacting with the brand.

The biggest mistake a loyalty program can make is assuming current insights are good forever, Jashinsky said. Monitoring VoC and continuous journey mapping will ensure customer expectations don’t outgrow what a loyalty membership offers.

“Great loyalty programs are never static and [are] always evolving based on voice-of-customer feedback and shifts of the business,” he said.

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By Medallia

Sure, gaining new customers is great. But, cultivating loyalty has the power to pay off for brands in a major way.

“It leads to long-term business outcomes, such as an enhanced brand reputation, more referrals and stronger profits,” says Mike Debnar, a Medallia executive advisor with a longstanding history in retail customer experience and digital innovation.

The challenge is that loyalty falls on a continuum — and it is a status that brands must continuously work to earn.

In fact, just 24% of consumers feel “very loyal” to a business while 10% report feeling only “slightly loyal” and 36% feel “moderately loyal,” according to a July 2024 Market Research study of 2,002 global participants.

What’s more: over half (59%) of consumers say there’s at least one brand they will never purchase from again due to a bad experience, according to the survey.

The good news is that by analyzing the results of this loyalty study, the Medallia Market Research team has uncovered the following factors that can help brands grow customer loyalty.

4 Essentials for Building Loyalty

1. The right brand attributes: quality and service

When Medallia Market Research asked self-proclaimed loyal and unloyal retail customers what they care about the most, loyal customers were 1.9 times more likely to cite the quality of a company’s products and 1.8 times more likely to select having the best service experience.

2. A winning customer experience

Most consumers (80%) say better experiences make them more loyal. That’s more than the share of consumers (70%) who feel more loyal to brands with lower prices than their competitors.

The study found that delivering a seamless and consistent experience is the most important element of a customer experience that fuels loyalty.

3. A winning employee experience

Consumers aren’t just looking out for themselves — most (69%) are more loyal when a company’s employees are treated well, and customers are 2.7 times more likely to feel loyal when they perceive that businesses care about their workers.

4. A rewards program that makes an impact

Nearly three in four retail, hotel and airline customers report that rewards programs influence their brand choice. Remember: loyalty is a two-way street.

Loyalty Doesn’t Equate to Forever Customers, But It Can

Just as better experiences can increase loyalty, poor experiences can turn loyal customers away. Medallia’s survey finds that 59% of consumers say there’s at least one company they’ll never purchase from again due to a bad experience.

To avoid losing loyal customers for good, here’s what Medallia’s experts recommend.

1. Set expectations from the start

Imagine this: a traveler eagerly anticipates their first getaway without children, reading online about luxurious amenities, a beautiful pool and impeccable service. However, upon arrival, they are greeted with a lackluster welcome, a pool closed due to a renovation and a room that's seen better days. The jarring contrast between expectation and reality leaves a bitter taste, eroding loyalty and potentially sparks a negative online review, influencing the next traveler.

Anticipation in a traveler's journey is a powerful opportunity that can create great benefit for companies — through upgrades, upsells or stay extensions — but may lead to a disconnect with reality, says Geoffrey Ryskamp, a Medallia executive advisor with over 20 years of experience in the hospitality industry. The solution lies in transparent communication — representing experiences authentically upfront, minimizing unpleasant surprises, fostering trust and paving the way for a satisfying, memorable stay that guests will rave about.

2. Proactively solve problems for customers

In the past, customer experience teams focused on solving problems after the fact. Leading brands, however, are raising the bar by getting ahead of issues before they arise through thoughtful experience design.

For example, some financial services innovators are automatically waiving late payment fees for customers with a history of paying on time “so customers don't have to go through a recovery process to get fees waived,” says Judy Bloch, a Medallia executive advisor with extensive experience driving corporate innovation in financial services

Similarly, select retailers have eliminated potential friction in the customer journey by automatically sending out replacement products before a customer’s return arrives, demonstrating trust during a critical make-or-break moment and planting a seed of customer loyalty, says Ryskamp.

3. Prioritize recovery

Churn doesn’t have to mean all hope is lost. Acquiring new customers costs anywhere from five to 25 times more than retaining existing ones, so it’s critical to have a strategy in place to recover customers. Teams can tap into customer feedback to learn how to prevent similar issues from happening in the future.

According to Medallia’s study, recovery efforts are among the most effective ways to get customers back after a poor experience. Ryskamp recommends brands also offer an exclusive VIP experience, such as a private tour, to lure customers back.

Success and Loyalty: Two Unique Metrics to Strive for

Too often, brands focus on satisfaction as an indicator of success. But customers can be satisfied in an individual moment without feeling true loyalty. “That’s why companies need a complete view of the customer lifecycle — across key journeys and individual moments of truth —  to understand what’s bringing customers back time and time again,” says Bloch.

Get more insight on what causes customers to become loyal and how to mitigate the risks of eroding loyalty in our report, The State of Brand Loyalty.

When Giant Food unveiled its Giant Flexible Rewards loyalty program in March 2020, the COVID-19 pandemic was just beginning, grocery inflation was hardly noticeable and the supermarket chain’s approach to thanking people for their business was still heavily reliant on tried-and-true discounts on gasoline.

Four years later, with shoppers hyper-focused on price, the points-based program has evolved into a central tenet of the mid-Atlantic retailer’s broad-based strategy for connecting with customers by emphasizing a commitment to offering value while also guiding people to foods that will help them feel good about their grocery purchases.

Since January 2022, the Ahold Delhaize-owned supermarket company has provided double points on products included in Guiding Stars, the nutrition-rating program it uses to flag good-for-you items for customers, in a bid to encourage people to load up on healthy foods.

“Rewarding healthy options is just an amazing way to provide that emotional connection to customers and really show them that we take their health seriously and we care about them,” said Emily Massi, a registered dietitian who serves as manager of healthy living and merchandising for Giant. 

In April, amid the continuing pressure discounters such as Aldi and Walmart are exerting on traditional supermarket operators, Giant retooled its loyalty program to encourage shoppers to buy more private label goods by providing double points on items carrying the grocer’s house brands, such as bread, milk, bottled water, frozen vegetables and cheese.

Giant said it has also lowered prices on many private label goods, and the company is using signage in its store to emphasize the price difference between items carrying its names and comparable national brand goods.

“We’re not just trying to sell [customers] things, but we’re actually trying to empower them … and reward them for what they’re doing to build that long-term relationship,” said Ryan Draude, the grocer’s director of omnichannel loyalty and CRM.

About half of Giant’s shoppers have a digital relationship with the chain, which runs just over 160 stores in Maryland, Virginia, Delaware and Washington, D.C., Draude noted.

Giant’s decision to incentivize private label purchases through its loyalty program follows its success in building digital relationships with shoppers by rewarding them for buying Guiding Stars-rated products, according to Draude.

The company has given out about 500 million points, which it values at $6 million, through the initiative, Draude said, noting that the retailer has covered that cost itself rather than with funding from suppliers.

About 115,000 households — representing a third of Giant Flexible Rewards’ membership base — take advantage of the nutrition-focused program every week, according to Draude. The promotion has also translated into stronger sales engagement, with households that opt in to the program boosting their weekly spending at Giant by an average of 6.5% while also making more trips to the company’s stores, he said.

Using rewards to connect with more shoppers

Giant is also reaping benefits by letting shoppers redeem a set number of points for goods like milk, eggs and rotisserie chickens, essentially making those goods available to shoppers without asking them to pay anything, Draude said. The majority of shoppers who take advantage of that program tend to visit Giant stores less frequently than other customers and spend less when they do come in, he said.

“The hypothesis that our team had was if the point levels are low enough that a casual shopper can build these balances and attain the value to redeem, then that type of casual shopper may be the primary user of the program,” said Draude, who led Choice Hotels International’s loyalty program before joining Giant Food. “The ones that are engaging in it the most are the ones that are most transient and have the most share of wallet available.”

Giant recently raised from 100 to 200 the number of points it requires people to turn in for milk and eggs, a change Draude said would help support the changes Giant has recently made to the rewards program’s structure. He added that the 300 points people need for rotisserie chickens translates into a discount because they would otherwise need more points to cover the $6.99 the grocer charges for the poultry.

Giant also allows shoppers to redeem small numbers of points for items that cost between about 75 cents and $1.25, like bagels and lemons, to make it easier for people who have accumulated relatively few points to derive value from the loyalty program.

“We keep looking to see where we might have opportunities to include items that are the highest-volume and the most needed by families,” said Natalia Duane, a loyalty strategy and CRM specialist for the company who helped launch the program.

Giant Food has also been making progress in an effort it began last year to encourage shoppers to provide their loyalty program information when picking up prescriptions at pharmacy counters — an area where people tend to be less likely to think about rewards tied to grocery purchases, Draude said. Through that initiative, the grocer provides people with 100 points for transactions such as filling prescriptions and receiving vaccines.

About 41% of Giant’s shoppers now present their loyalty program information when visiting Giant’s pharmacies, up from 35% when the program began, according to Draude. Giant is hoping to boost that figure to 50% by the end of the year, he added.

“The whole idea of being a one-stop shop was our mission with having that pharmacy relationship enacted. With grocery, with pharmacy and now with nutrition … we’re really rewarding across the store with any of the products and services that we offer to our customers.”

A majority of consumers — 7 in 10 — say that loyalty programs are a key factor in deciding which businesses to frequent, according to a Snappy survey of 1,500 Americans released in June. 

Customers’ main considerations for choosing a brand are product quality and price, Snappy found. But nearly half of customers say they choose the brands they do business with based on if the company has a loyalty program. 

Loyalty programs also impact customer spending. Seven in 10 consumers say they will join a loyalty program before making their first purchase, and three-quarters say they will spend more money as a loyalty member.

A well-crafted loyalty program can be a differentiator for brands looking to acquire — and keep — new customers.

The study found that the top feature customers want from a program is the ability to earn rewards points toward discounts, bonuses or exclusive merchandise. Customers also want exclusive treatment, whether that’s by earning discounts only available to members or gaining access to exclusive perks, such as free shipping.

Customers appreciate loyalty program gift giving, too, with three-quarters of customers who receive a gift or exclusive merchandise reporting that they see a brand more favorably. Nine in 10 customers say they are interested in programs that allow them to choose the gift, and the same ratio would like to receive them on their birthdays.

Sephora, for example, regularly finds that its birthday gift is its loyalty program’s No. 1 benefit to consumers, Emeline Berlind, senior vice president and general manager of loyalty at Sephora, told Retail Dive last year. 

Sephora’s BeautyInsider program offers members the choice of gifts on their birthday, which currently ranges from Moroccanoil hair products to Kosas lip and brow products. Its loyalty program boasts 31 million members in the United States, and a majority of its sales come from members, Berlind said. 

There are traps with rewards. Snappy found that the most common rewards program pitfalls include complicated redemption processes, unattractive rewards and invaluable incentives. That’s in line with other research; more than 3 in 5 consumers seek simple cash-back loyalty programs, according to a Deloitte survey from January.

Such findings have driven brands to simplify their loyalty programs and offer straightforward financial rewards. Most recently, Foot Locker revamped its FLX loyalty program to include cash back rewards after careful listening to customer feedback, an executive told CX Dive.

As companies revamp their loyalty programs, many are employing gamification, which can reward customers for actions beyond making purchases. 

Retail and CX leaders discussed their use of gamification to create new options for their customers to earn and redeem points at the National Retail Federation’s Big Show conference in New York City in January.

Digital badges are one way retail leaders can employ gamification, said Lin Dai, CEO and co-founder of Superlogic, a loyalty software vendor. 

The badges exist within a company’s app and can be earned through specific actions, like sharing a social media post or participating in an in-store event, with an equally broad number of redemption options.

“A digital badge can literally represent any type of redeemable physical product or benefit you have within your ecosystem or even outside,” Dai said during a panel. 

Badges can help gamified loyalty programs tie customer experiences and post-purchase journeys together. Dai provided the example of a customer earning a badge for a transaction, then upgrading the badge and the corresponding reward after they share their thoughts on social media.

This approach enables loyalty programs to enhance the shopping experience while also keeping customers engaged between purchases, according to Dawn Fichot, head of marketing for North America at Brompton Bicycle.

Brompton’s foldable bikes are designed to last for decades, so few customers will make purchases often, according to Fichot. Its loyalty program rewards actions like referrals to help keep these shoppers within the Brompton ecosystem and draws attention to cycling events.

“Loyalty isn't, ‘Are you buying the newest color and the newest model every year?’” she said during the session. “It's, ‘How are you engaging in these other activities?’”

Gamification will feel natural for consumers who grew up interacting on social media and playing interactive games, according to Dai. Embracing this new approach to loyalty will be particularly important as Generation Z’s purchasing power grows and Generation Alpha enters the workforce.