With spending up across all digital mediums, businesses from many sectors are rushing to learn how they can optimize their digital strategies to meet consumers where they are most active.
Research from the U.S. Census Bureau indicates that the medium most useful for attracting customers is digital. Consumers spent $211.5 billion online during the second quarter of 2021 — a nearly 32% increase from Q1 2020.
As a result, restaurant industry innovators are adopting and deploying strategic digital transformation measures to drive revenue and increase retention of existing clientele. As part of the digital transformation, restaurants are looking beyond basic capabilities in mobile apps to see which features could have the stickiest impact. Stickiness in the restaurant space — or when a first-time customer becomes a repeat patron — is an essential outcome of digital transformation because of its cost benefits in this particularly competitive industry. Research shows that the most stable restaurants earn between 25% and 40% of their total revenue from repeat business, for example.
Repeat customers are far less expensive for restaurants, too, as research shows that acquiring new patrons can cost as much as 30 times more than maintaining positive relationships with existing customers. Furthermore, satisfied customers who give restaurants repeat business spend approximately 67% more than new customers. As the pandemic shifted customer shopping patterns toward digital ordering and delivery, and as more restaurants embraced these changes, customers not only have more options for spending their money, but they also have greater expectations for variety and convenience. The following Deep Dive examines why securing customer loyalty matters now more than ever as opportunities have opened to improve retention and wallet share.
Increasing Customer Loyalty Through Digital Means
One strategy specifically devoted to the surprise and delight stage of the customer journey, at which repeat business often is won, is customer loyalty programs. More than half of restaurant patrons said loyalty programs are a major factor in a restaurant’s long-term success. A disconnect exists between consumer demands and restaurant operators’ actions, however, with only 36% of restaurant managers saying they include these programs in their long-term growth strategies.
Recent examples of loyalty program successes may be a driving factor that changes the perceptions and strategies of restaurateurs, though. Fast-food giant McDonald’s first launched its mobile app in 2015, for example, and added mobile ordering capabilities in 2017. Amidst the pandemic, however, McDonald’s realized its digital offerings had fractures in the holistic end-to-end customer experience, and its app needed to evolve to better retain customers as competition for mobile ordering and delivery grew. McDonald’s thus launched MyMcDonald’s Rewards in July. The loyalty program launched alongside other marketing efforts such as “Famous Orders,” a special menu featuring favorite orders from celebrities, including Travis Scott, Saweetie and BTS. The coordinated efforts of the loyalty program and promotional pushes resulted in the McDonald’s app landing as the No. 1 most downloaded app throughout the summer in the U.S., gaining increased awareness from trending hashtags on Twitter, a measurable uptick in repeat business and increased use of its mobile app.
McDonald’s is not the only QSR to find success with loyalty programs as a central part of its digital strategy. Taco Bell, Chipotle Mexican Grill and Starbucks all have reported loyalty program-driven digital sales growth. Chipotle is a prime example of measurable growth, as the QSR saw a more than 177% year-over-year increase in digital sales after its loyalty program grew by 10 million users in 2020.
Investing in the Digital Transformation
QSRs that have found success in digital strategies have taken a cross-department approach to updating existing processes and technical infrastructure to accommodate shifting consumer patterns. Research shows that concerted efforts to reallocate budget toward digital spending and connecting marketing efforts to propel adoption are key components to a successful digital strategy.
Digital spending also must increase. Domino’s Pizza has been technologically advanced since 2008, when it first built its IT capabilities that allowed for real-time order tracking — an unheard of technology at the time. The pizza chain has continued to invest heavily in its digital presence over the years, such as its loyalty program, curbside pickup and increased online ordering capabilities, all introduced in the pandemic’s wake. Domino’s agility would be impossible without a centralized focus on improved digital capabilities, and the company’s future-proofing has paid off. Research shows that a $7,000 investment in Domino’s stock in 2008 currently would be worth more than $130,000.
As technology stacks at QSRs continue to evolve and become more intelligent, marketing efforts should capitalize on the new source of intelligence and align with new business objectives. The coordination between service and marketing is best shown through the launch of McDonald’s loyalty program in conjunction with its Famous Orders campaign and the success in app downloads the burger giant found as a result. Other tactics include leveraging consumer data collected via loyalty programs to localize and personalize content for improved customer experience. Additionally, understanding where to meet consumers increases the odds of messages resonating. Forty-five percent of consumers said email is the most relevant source for content and news from QSRs, for example.
Change is afoot, and QSRs that continue monitoring consumers’ spending habits and are agile in adopting new technology and initiating rewards programs to increase loyalty and retention will continue to lead the pack in wallet share in this hypercompetitive industry.