Loyalty schemes in hospitality: What top CEOs think
Loyalty is currently a hot topic in the hospitality industry but there remains a lot of confusion. What do consumers mean when they say they are loyal to on-trade brands? Is it the same as for other retail brands? How can the sector create and maintain customer loyalty? Does it genuinely add value to the bottom line – or does it really just boil down to discounting?
To answer these – and more – questions, we gathered eight of the industry’s top operators for a chat about all things loyalty. The foundations of the discussion were key takeaways from Zonal’s recent GO Technology: The New Loyalty Landscape report, including:
- Consumers are loyal to 2.1 hospitality brands on average
- The top reason that would make consumers loyal to a brand is if they feel it is value for money (47%)
- Other top reasons are that it serves their favourite food and drink (30%); that the service is top quality (28%), and that their family and friends go there (28%)
- When consumers talk about value for money, they don’t necessarily mean cheap. For 41% of consumers it means ‘worth its cost’
- Three-quarters of consumers said that their loyalty was unchanged since the cost-of-living crisis began in 2021
- More than half (52%) of consumers agree they have higher expectations of the brands they are loyal to now compared to before the cost-of-living crisis
- Younger consumers are more likely to join loyalty schemes to save money since the cost-of-living crisis began than other age groups, with two thirds (65%) of those aged 25 to 34 saying they have done so, compared with 47% of consumers across the board
The research was used as the basis for a wider discussion around the topic, which began with a debate around the positives and perils of discounting.
Discounting discounts
Certainly, pre-Covid there was a lot of discounting in the market, particularly via schemes such as Groupon but by and large these were not used strategically, and attendees questioned if they actually built loyalty or delivered any value. One operator admitted since removing discounts entirely as part of their marketing strategy, the brand’s NPS score had risen “significantly” and the number of no-shows had dropped.
Not all operators thought discounts should disappear, though.
“Not all discounts are a bad thing. If you have evenings when your venue isn’t full and you offer a discount that gets loyal customers through the door and feeling special then, as a mechanic that delivers on business requirements, that works.”
Mark Derry, Chairman, The Heartwood Collection
Focus on quality, not quantity
For those operators utilising their customer data to drive loyalty, the opportunity is around focussing rewards on those who are already engaged and enthusiastic about your brand. Creating offers that target this group is the most effective way to create advocates for your business and driving footfall.
“Our recommendation is to ‘work’ your CRM, targeting a smaller number of contacts who are more likely to respond, rather than the ‘spray and pray’ approach. For example, 500 of your loyal customers, not the entire 5,000-strong database. It then becomes more of a reward rather than an offer, which perhaps poses the danger of more widely cheapening your brand.”
Dan Brookman, CEO, Airship and Toggle
Cash-loaded loyalty
Some operators in the room advocated for different styles of loyalty schemes, a step beyond being part of a database that offers rewards (and perhaps discounts) to those that sign up. Some advocated giving teams on the floor the budget and permission to reward customers as they saw fit – aping Pret A Manger’s “random acts of kindness” scheme of old, where each store had a budget which they could use to reward customers with a free coffee or a treat.
Others looked to create more of a “members club” look and feel to loyalty schemes.
“Our loyalty scheme is a little different, in that we offer a card that can be pre-loaded with cash, acting a bit like a membership scheme I guess, which can be used across all our pubs. It’s not run on a points-based system like a Nectar card but more about rewards such as ‘buy 5 coffees, get the 6th free’. This works well for us, not least because it means we have the cash up front – some of which does not get redeemed. People don’t talk about that but it is a benefit for us.”
James Nye, Managing Director, Anglian Country Inns
Personalisation is a must
Another hot topic was personalising offers by using data. For example, for groups of customers that always order a burger when they eat with you, sending bespoke offers created around this that tempt them in on quieter days of the week or if they haven’t been in for a while.
“When it comes to communicating with loyal customers it has to be bespoke. If you are emailing them to highlight a promotion then it has to be personalised – an offer on their favourite wine or send out a prompt to your biggest Guinness drinkers highlighting a new Guinness-related dish in the menu, for example.”
Anthony Pender, Founder, Yummy Collection
It’s always been about consistency
As our research clearly pointed out, customer experiences are absolutely key when it comes to building a base of loyal customers – 49% said one or more bad experiences while visiting a hospitality brand would case them to reduce their loyalty. This puts pressure on operators and their teams to deliver excellent customer experiences every single time – but hasn’t it always been this way?
“What is the definition of loyalty when it comes to hospitality brands – is it as simple as people who would recommend you to others? This idea highlighted by the report, of it being around consistency of good service is also key, and that is something that’s always been true.”
Ann Elliott, portfolio NED and Board Advisor
For more on loyalty and digital loyalty schemes, check out the resources section of our website, including this piece on All You Need to Know About Digital Loyalty Schemes.
