QSRs spend an average of 10% of their company budget on their loyalty program, according to a recent PayiQ-commissioned independent research study. This is a significant spend, but it’s not unjustified as 65% of the average QSR’s business comes from existing customers1.
One of the most effective ways to convert one-time diners into lifetime customers is by enrolling them in a loyalty program. In fact, customers involved in loyalty spend an average of 6% more per check, while 47% of customers who do not use loyalty never make a second purchase2. Plus, loyalty programs are especially effective for QSRs as 70% of revenue comes from 25% of QSR loyalty users.
Most customers want to be involved in loyalty programs—84% of all Americans are currently enrolled in a loyalty program, with most being active in around five total programs at any one time. That said, customers are not afraid to ditch a program they don’t find valuable, with 69% reporting that they had left or become inactive in loyalty programs because they weren’t seen as valuable.
Bottom line: Customers want loyalty rewards and QSRs want the financial benefits of active loyalty users. But, when QSRs implement their loyalty program, they often struggle to get significant ROI due to a misalignment between their attempts to engage and reward customers and diner expectations.
Customers Expect Personalization
More and more, the trend in loyalty is toward personalization. With digital players like Amazon providing recommendations and experiences that are informed by detailed historic browsing and purchase data, brick-and-mortar stores have a huge gap in data they need to fill to start offering the personalization that diners have come to expect from online players.
Rewinding the clock back just a few years, we can see how customer expectations for personalization have evolved. According to 2016 research from Accenture Interactive, 56% of customers said they are more likely to frequent businesses that recognize them by name,2 while 58% said that they are more likely to make a purchase with a business that recommends options based on past purchase preferences. And almost two-thirds of customers will patronize a business that knows their purchase history versus one that doesn’t.
The above research from Accenture gives a snapshot of personalization expectations in 2016. PayiQ’s research, done earlier in 2023, indicates that consumer personalization expectations have only increased. The national study found that 91% of customers believe that a personalized experience is valuable to them. On top of that, a full 50% say personalization is an absolute necessity.
As you can see, one of the driving trends in loyalty is a growing expectation towards personalized experiences. But what does personalization look like in practice?
The Types of Rewards Customers Prefer
The trend towards personalization has displaced many scatter-shot, one-size-fits-all loyalty offers. Magazines full of random coupons are out. What customers want are offers that either give them the flexibility to get what they want or give them offers on menu items that they’re already interested in.
One of the top preferred offers is cashback on purchases (67%). This makes sense because money in the diner’s pocket gives them the freedom to make menu ordering decisions that match their preferences. Diners also prefer free menu items after a certain number of points or purchases (53%). Other popular offer types include rewards that can be applied across the entire menu (43%) and free meals after a certain amount of time (40%).
The trend in all of these preferences is that customers either want rewards that empower them to make personalized decisions or rewards based on purchase data that give them offers on menu items they’re already interested in buying.
So where does that leave QSRs interested in offering personalized loyalty offers to their customers?
The Executive View: Challenges of Personalized Loyalty
Many QSR executives (42%) say their current programs are limited by an inability to convey the value of rewards, with 9-in-10 worried their business will lose loyalty members if it doesn’t provide a personalized experience.
Clearly, executives are aware of the need for personalization, but they feel limited by their current loyalty technologies. Is this the fault of the loyalty program systems on the market today? Not exactly. Most loyalty software does its job quite well in terms of automating offers and giving businesses control over how their system offers rewards.
The problem is not so much the loyalty program itself—it’s the ability of QSRs to build enough data to offer personalized experiences to the majority of their patrons. In the current way of doing things, businesses must first convince the customer to join the program and then must encourage consistent participation to be able to collect enough data to make it actionable.
This requires a lot of effort and salesmanship from employees. And in a world where turnover is high and major labor shortages are predicted in the next ten years, that’s a big problem. It’s why so many QSR leaders are worried about being able to offer a truly omnichannel loyalty experience. In the current market, only online food sales or digital loyalty apps can capture the necessary data, but brick-and-mortar sales are lagging behind significantly.
Technologies that Bridge the Online-Offline Gap
PayiQ has been developing an innovative technology that fully bridges the divide between data gathering in online and offline spaces. Our Payments Intelligence® solution leverages our unique position as a full-stack payment processor with cloud-enabled access to the payments flow.
In layman’s terms, we have access to rich payment data that other businesses can’t capture, so we designed a secure system for tapping into the first-party data that is part of every card-based transaction. The way Payments Intelligence® works is that every time a diner swipes a card in any of your locations—either online or offline—we capture the data and tie it to the card number—securely tokenizing everything to avoid issues relating to PII. Over time, this creates a unique, detailed profile of every previously anonymous customer, whether or not they were enrolled in the chain’s loyalty program.
That means QSRs can have a consistent stream of first-party data on all card-paying diners. So you can start offering personalized loyalty rewards to diners who didn’t have to sign up for a loyalty program. Best of all, it requires no extra effort on the part of employees or customers and your data will be consistent across all channels. That’s why Payments Intelligence® is the first true omnichannel data engine.
With all the current trends in loyalty pushing businesses towards a personalized omnichannel future, PayiQ has carefully positioned itself to be ready for the data needs of QSRs, trying to offer personalization at scale. That way, QSRs can maximize loyalty ROI while minimizing the difficulties brought on by predicted economic uncertainties.
- Jack Flynn, 30+ invaluable Customer Loyalty Statistics, 2023.
- Bill Fultz, Kevin Sullivan, Mark Mitchell, Consumers Drive Merchant Technology. What does that mean for the channel? RSPA RetailNow Conference, 2023.
- Accenture, Consumers Welcome Personalized Offerings but Businesses Are Struggling to Deliver, Finds Accenture Interactive Personalization Research, 2016.