Traditional brick-and-mortar businesses, whether in the restaurant or retail industry, built their success on the fundamental belief that repeat customers are truly the lifeblood of their business. They’ve all heard the statistic that acquiring a new customer is 5 to 25 times more expensive than retaining an existing one—which is why savvy business owners invest much more in customer retention than acquisition.
As early as the 18th century, American businesses began to offer copper tokens with each purchase to be redeemed for complimentary items with future purchases—essentially the beginnings of a modern-day rewards program. These copper tokens were later replaced by stamps, punch cards, and plastic cards, each used to incentivize customer loyalty.
While incentives helped drive sales, customer retention was largely based on the personal connection between the restaurant and their clients. The owner didn’t only know each customer’s name, but had a deep understanding of each customer’s wants and needs and was able to make personalized product recommendations accordingly.
When e-commerce entered the scene at the beginning of the 21st century, most brick-and-mortar businesses were afraid of their new models of customer acquisition. These online competitors had better distribution, more advanced promotional tools, and a more effective cost structure, enabling them to reduce prices.
But what brick-and-mortar businesses failed to realize was what would become the cornerstone of the online giants’ success: their strategic use of data to personalize the customer experience and make giant leaps in repeat sales as a result.
The Key to the Online Giants’ Success
The simple concept of requiring customers to log in before making a purchase uncovers a wealth of knowledge that online retailers use to their advantage. Once customers are logged in, these retailers can collect data about each specific customer and build comprehensive profiles. This enables them to accurately understand each customer’s preferences and send them targeted offers that bring them back. Today, 35 percent of purchases at Amazon come from personalized product recommendations. The leading e-commerce platforms realize how critical it is to attribute data to specific customers, and have thus made it mandatory to log in or create an account before making a purchase.
What restaurant owners may not realize is that they can “log in” their customers, too, in order to collect customer data, learn their preferences, and personalize their experience.
Traditionally, a loyalty program was referred to as a “Loyalty Club,” made up of a select group of highly engaged customers (sometimes called VIPs) that were identified and rewarded. But why limit your customer engagement to a select group of club members? Why not identify all your customers?
The loyalty club is dead. Long live the logged-in customer
This doesn’t mean you shouldn’t have a premium service for a select group of customers (like Amazon does with its Amazon Prime service), rather you should want to get to know all of your customers and encourage them to identify or “log-in.”
But how do you bring the logged-in concept to the restaurant?
There are various resources that businesses can utilize to gather customer data—the main one being the POS. If the customer is logged in at the POS, all of their data is collected, and a profile can automatically be built. In today’s modern hospitality and retail environments, additional data can be collected from platforms such as mobile payments, mobile ordering, location-based systems, and more.
What do you need to do to start logging in your customers and leveraging their data?
Not much, since customer engagement platforms have already taken care of handling the hard and technical work of integrating with the necessary systems. These platforms are already connected to both POS systems and payment and ordering solutions to effectively collect customer data and display it in user-friendly and accessible ways.
Furthermore, these customer engagement platforms can not only gather all the data, but also generate valuable insights, provide business recommendations, and make predictions based on machine learning technology.
So who will win the customer retention race, the online giants or the traditional brick-and-mortar business?
If brick-and-mortar businesses, including restaurants, successfully apply the logged-in concept, they will be in a very good position to compete with the online giants. Beyond leveraging their data, they have the human touch to their advantage. And when that personal touch is based on accurate data, businesses can recreate the warm environment that drove customer retention many years ago.