Optimizing the digital strategy for customer loyalty
With spending on all digital mediums on the rise, businesses in many industries are racing to learn how to optimize their digital strategies to meet consumers where they are most active.
Research from the US Census Bureau indicates that the most useful medium for attracting customers is digital. Consumers spent $211.5 billion online in the second quarter of 2021, an increase of nearly 32% from the first quarter of 2020.
As a result, restaurant industry innovators are adopting and deploying strategic digital transformation measures to generate revenue and increase existing customer loyalty. As part of digital transformation, restaurants are looking beyond basic mobile app capabilities to see which features could have the greatest impact. Adherence in the restaurant space – or where a first-time customer becomes a loyal customer – is a critical outcome of digital transformation due to its cost advantages in this particularly competitive industry. Research shows that the most stable restaurants derive between 25% and 40% of their total revenue from repeat businessfor example.
Repeat customers are also much cheaper for restaurants, as research shows that acquiring new customers can cost up to 30 times more than maintaining positive relationships with existing customers. Additionally, satisfied customers who retain restaurants spend approximately 67% more than new customers. As the pandemic has shifted customer shopping habits to digital ordering and delivery, and more restaurants have embraced these changes, customers not only have more options for spending their money, but they also have higher expectations for variety and convenience. The following in-depth analysis examines why customer retention is more important than ever, as opportunities have opened up to improve retention and wallet share.
Increase customer loyalty through digital means
A strategy specifically dedicated to the surprise and delight stage of the customer journey, during which repeat business is often won, is customer loyalty programs. More than half of restaurant customers said loyalty programs are a major contributor to a restaurant’s long-term success. There is, however, a disconnect between consumer demands and restaurateur actions, with only 36% of restaurant managers saying they include these programs in their long-term growth strategies.
However, recent examples of successful loyalty programs can be a driving factor that changes restaurateurs’ perceptions and strategies. Fast food giant McDonald’s has launched its first mobile app in 2015, for example, and added mobile ordering capabilities in 2017. Amid the pandemic, however, McDonald’s realized its digital offers had fractures in the end-to-end holistic customer experience, and its app needed to evolve to better retain customers as competition for mobile ordering and delivery increased. McDonald’s launched MyMcDonald’s Rewards in July. The loyalty program was 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 campaigns have resulted in the McDonald’s app landing as the number 1 most app downloaded throughout the summer in the US, gaining awareness through trending hashtags on Twitter, a measurable increase in customer retention, and increased usage of its mobile app.
McDonald’s isn’t the only QSR to find success with loyalty programs at the heart of its digital strategy. Taco Bell, Chipotle Mexican Grill, and Starbucks all saw digital sales growth from the loyalty program. Chipotle is a prime example of measurable growth, as QSR saw an over 177% year-over-year increase in digital sales after its loyalty program grew by 10 million users in 2020.
Invest in digital transformation
QSRs that have been successful in digital strategies have taken a cross-departmental approach to updating existing processes and technical infrastructure to adapt to changing consumer habits. Research shows that concerted efforts to reallocate budget to digital spending and connect marketing efforts to propel adoption are key components of a successful digital strategy.
Digital spending must also increase. Dominos Pizza has been at the forefront of technology since 2008, when it first developed its computing capabilities that enabled real-time order tracking – a technology unheard of 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 wake of the pandemic. Domino’s agility would be impossible without a centralized focus on improving digital capabilities, and the company’s future-proofing has paid off. Research shows that $7,000 investment in Domino’s stock in 2008 was currently worth over $130,000.
As QSR technology stacks continue to evolve and become smarter, marketing efforts must capitalize on the new source of intelligence and align with new business goals. The coordination between service and marketing is best exemplified by the launch of the McDonald’s loyalty program in conjunction with its Famous Orders campaign and the app download success the burger giant has found as a result. Other tactics include leveraging consumer data collected through loyalty programs to localize and personalize content to improve the customer experience. Additionally, understanding where to meet consumers increases the chances that messages will resonate. Forty-five percent of consumers said E-mail is the most relevant source for QSR content and news, for example.
Change is afoot, and QSRs that continue to monitor consumer spending habits and are nimble in adopting new technologies and launching rewards programs to increase loyalty and retention will continue to lead the pack in terms of share of wallet in this hyper-competitive industry.