Loyalty schemes to keep guests coming back

Saxon Moseley, a partner in accounting and consulting firm RSM UK's leisure and hospitality team, says: "It's a really tough environment, people have less money and they're picky about what they do with it, so the competition for that precious going-out budget has gone through the roof. Loyalty schemes are a smart response to that increase in competition."

Moseley explains that loyalty schemes have evolved from a simple card and stamp into a communication platform that can entice custom while gathering valuable data. He adds: "These schemes are clever and what they do well is use technology to drive the customer experience. In recent years these schemes all have free apps that sit on people's phones looking back at them and they allow operators to collect data to target and personalise offers to individuals. It's a lot smarter and can be far more compelling than the traditional stamp card.

"You can gamify the experience, personalise communications and reach people through notifications, but the underlying psychological principal is the same: we're building something together, so you get a reward at the end of it."

The elusive prize

Loyalty may be more crucial than ever, but on the face of it, it's also more elusive, particularly when measured by traditional metrics. Research by Zonal, CGA and NIQ recently revealed that consumers feel loyal to an average of just 2.1 eating and drinking brands when dining out of home. Combine this with the continual plethora of new entrants to the hospitality market, as well as a consumer drive towards new experiences, and securing repeat bookings has become something of an art form.

Loyalty isn't just about repeat business, it's about creating ambassadors for your brand

Petra Clayton, creator and chief executive of Custard Communications and former chair of the Hotel Marketing Association, says operators need to recognise the shift of the market and appreciate that the rewards of nurturing loyalty are multi-faceted. She explains: "Loyalty isn't just about repeat business, it's about creating ambassadors for your brand.

"They promote your brand on social media, give you a great review on Tripadvisor, recommend you to friends and family and they will visit again, whether that's a special occasion, every two or three years, or a regular repeat visit. It might not be as frequent as it used to be, but there's still loyalty value there." For many businesses, the answer to building loyalty has been to launch formalised schemes and it's apparent that consumers are taking notice with Zonal, CGA and NIQ's research showing that 47% of people have joined more loyalty schemes since the start of the cost-of-living crisis.

But when should you launch a loyalty scheme and what do you need to consider? At the end of 2023 modern kebab group Le Bab, which has eight London sites, launched le Bab Loyalty. Co-founder Stephen Tozer says: "We wanted something that enabled us to communicate with our customers in a more personal way and build relationships with people that are coming regularly.

"We have some people who come transiently, but some are much more regular – almost stakeholders in the brand – and we wanted a situation where we knew more about them and could give them more of what they want, so they're getting rewarded for the fact they come back regularly."

Gail's Bakery launched its loyalty programme in April 2023 with the aim of making its customers feel valued, while also embedding technology to make ordering more convenient. The resulting app allows customers to order ahead with a click and collect function, while also earning stamps that can be exchanged for barista-made drinks or loaves of bread.

Marta Pogroszewska, managing director of Gail's Bakery, says: "We took our time to develop something that felt right for us and considered all the different ways we could meet our customers' expectations through technology."

What's your reward?

Loyalty schemes reward customers in different ways. Some use a points system that can be cashed in against future purchases, others offer set rewards such as a free drink or dessert, or ask guests to subscribe in return for benefits such as a flat discount. There's no set approach and many businesses combine these models. For example, offering a points system with one-off rewards on occasions such as a customer's birthday or their 10th visit.

Le Bab Loyalty uses a points system, so if a customer spends £10 in a restaurant they will receive 100 points to use against a future purchase. Tozer explains: "It's a very simple accrual system and it gives members flexibility. You can be consuming anything to earn points and redeem them on anything you want. It also gives us our own currency to play with. So on your birthday we can send you some points as a gift, or if you hit a milestone, we can do something to surprise and delight you."

When PizzaExpress launched the Pizza-Express Club two years ago it decided to guarantee a reward on every visit. Arslan Sharif, digital and loyalty director at the casual dining chain, explains: "There's always a consumer need around instant gratification and getting something every time you either interact with a brand or go to a restaurant, so we made it one of our key unique selling points that every single time you dine at PizzaExpress you'll be able to get something free from our menu."

When members join the PizzaExpress Club, using the free app, they receive an immediate reward of free dough balls. Members then collect pizza stamps every time they make a purchase in a restaurant, via delivery or from the company's retail offering, progressing through bronze, silver and gold tiers to receive more free items of incrementally greater value.

Sharif adds: "There's an element of exclusivity and as you progress through bronze you want to get to silver, and as you've got to silver you want to get to gold. It's consciously designed so customers get more as they progress. That exclusivity is a really nice feeling for customers and we see that coming through in our satisfaction scores."

This model also adds an element of gamification to the scheme as members chase those higher rewards. This is something PizzaExpress built on further through the 2023 addition of a Spin.Play.Win? element to the app, which offers different games with thousands of rewards on offer.

In contrast, there is no element of surprise to Pret a Manger's subscription service Club Pret, which launched in 2020, as the business looked to entice customers back following the first Covid-19 lockdown. For a monthly fee of £30 (as of April 2023) members get up to five barista-made drinks a day as well as 20% off all menu items. In April 2023 Pret reported that the subscription was being used some 1.25 million times a week in the UK, with subscribers transacting with the chain an average of 28 times a month. This is compared to an average interaction rate of twice a month for non-subscribers.

Harnessing data

One of the key benefits of a loyalty scheme is that it allows operators to learn more about their customers. A member's previous orders or bookings will reveal their preferences and can allow businesses to be much cleverer in their marketing. Rewards can then be personalised to ensure they will genuinely add value, for example a favourite spa treatment, drink or meal can grab attention and secure that elusive booking.

Clayton says: "Once you understand your customer, that's where the creativity kicks in, because you can see what their emotional driver is and why they would make a booking. That's what you're looking for – that unexpected booking – and you can only entice that if you understand what your customer likes. That can be as simple as a cocktail masterclass, foraging, forest bathing or a dog-friendly stay. But you can be really creative if you know exactly who your customer is and what they're likely to respond to."

Yes, there has to be a financial incentive, but it's more about tailoring what you're giving them to suit their requirements

For Pogroszewska, technology gives the opportunity to extend the hospitality delivered in store to digital interactions. She says: "Our in-bakery teams pride themselves on building relationships with customers in their neighbourhood, greeting their regulars by name and surprising them with their favourite treats on occasion. Through the loyalty programme we have created a more customised experience through offering birthday rewards as well as personalised offers throughout the year based on their past interactions in our bakeries and the app."

Darren Sweetland, managing director of Mollie's, the motel and diner business launched by the Soho House Group in 2019, plans to launch a loyalty scheme as the brand expands. Ahead of the launch of its third site in Manchester later this year, he is clear that personalisation of any scheme launched is not just a savvy business decision but an expectation of guests.

He explains: "The market has changed massively. If you take the traditional British Airways model, it was always a case of giving points for spend and I think people are now looking for more than that. Yes, there has to be a financial incentive, but it's more about tailoring what you're giving them to suit their requirements.

"One of the big frustrations with those traditional schemes is you can give someone 1,000 points but if they can't use them or there's nothing they want to spend them on, what have you actually given them? Loyalty now has got to a point where you must provide enough of a draw for someone to come back and realise the benefit of continued loyalty. If you can't give that, you run into a lot of trouble."

Sweetland says Mollie's focus is on ensuring its in-house technology will optimise the intelligence gained through the scheme when it is ready to be launched. He adds: "What we're spending our time on at the moment is building the infrastructure to be ready to launch something once we're at a critical size. We're investing and just finishing the next big phase of our CRM system and that system is the genius that remembers all of the guest data and information and pulls it together into one place."

For Tozer, getting to know Le Bab's most loyal customers is a two-way street, with the business also planning to seek their feedback as it grows and evolves. He says: "If we put a new dish on we can go to those fans who are most interested and familiar and invite them to come and try it on us and give their feedback.

"Loyalty is this prism to channel special communications, special invitations and opportunities to interact on a more personal level. We really want their input into soft launches, new dishes, surveys and ideas to how we keep moving the brand forward, so we can engage them in that process."

Brand synergy

When developing a loyalty scheme or communications strategy, it's crucial to ensure the feel and messaging is aligned with your existing brand. Moseley stresses that the best apps are nuanced to their customers, understanding how they interact with the brand and building upon that.

For PizzaExpress it was crucial that customers could be rewarded whether they were making purchases in store, via delivery or through its retail arm, so however they chose to interact with the brand they felt appreciated.

The casual dining chain also worked to ensure that the app would enhance a visit to a PizzaExpress restaurant by ensuring all platforms worked together. Sharif explains: "When you walk into a PizzaExpress, you're seated, you have a great welcome and it's an at-table experience. Within that you can use the app to check into your table and then you can view your bill, apply your rewards and pay by the app, so it's a seamless experience."

He says increased customer satisfaction among those dining in restaurant has been one of the key positive impacts of the scheme, with PizzaExpress Club members reporting a satisfaction rating 9% higher than non-members.

Similarly, when Gail's Bakery was developing the structure of the scheme, it was keen to ensure its customers felt valued whether they bought a coffee or a full meal. Pogroszewska says: "The loyalty programme is a response to how people now are looking to interact with the bakery, our baked goods and specialty drinks.

"When considering the structure of the programme it was important to us for it to be open to as many customers as possible, and that the focus was on rewarding frequency rather than spend. This enables us to make craft food and coffee accessible to a wide audience, and to show our gratitude for choosing to visit us."

What's clear is that loyalty programmes are continuing to evolve and their value to operators is multi-faceted, not just driving increased footfall but giving insight into consumer trends and behaviour, while driving meaningful discourse with those invested in a brand.