Restaurants Resort to Loyalty Programs

In the past, restaurants relied on their loyal customers to come in a couple times a year for certain occassions. This could be either birthday, holidays, family reunions, etc. Restaurants would reward customers with a slice of cake and a happy birthday song for their birthday. We have all had this done to us. However, with the recession, it is not as easy for restaurants to reward people with a free piece of cake for their birthday.

Instead, with a 3% decrease in restaurant traffic, restaurants must and are finding other ways to reward their customers and draw their attention and loyalty. This includes free trips, coupons, CDs, cologne, autographed objects, and many more. T.G.I Fridays is offering people the chance to try menu items before they come out by signing up for their rewards program. They will also recieve a free appetizer or dessert and an $8 coupon everytime they spend over $100.

Burt Flickinger, a manager at a consumer consulting firm, says that grocery stores and drug stores have always offered consumer loyalty programs, and therefore, they have not been hit by the recession as drastically as restaurants have. If restaurants had offered more rewards earlier, then they would not have to act so drastic right now. Red Lobster would not have to be offering the chance to win a trip to the Florida Keys and Starbucks wouldn't have to offer trips to the Galapagos Islands.

It is estimated that it costs a company 1% of sales to start a rewards program. The return on investment is approximated at 2%. Therefore, it pays off for these companies to start these programs. Starbucks has created an awards program that has three levels. The first offers a free drink on their birthday for signing up, the second (customer with 5 stars) offers free syrup for coffee and free refills, and the third (30 stars) offers chances to win VIP tickets and other huge rewards. Stars are earned with each transaction. This Starbucks rewards program is a perfect example of the success a restaurant can gain from this. The use of a Starbucks cars is used with almost 20% of transactions at Starbucks. These programs prove to be rewarding to the customer along with the restaurant.

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