In part one of this series on loyalty, we set the baseline for what’s happening within the segment and why stakes are rising. But let’s now explore what the next generation looks like and how some brands are finding paths to engagement amid rising inflation and parity in the marketplace.
Today, according to Paytronix’s Loyalty Trend Report, 57 percent of restaurants offer loyalty programs, making differentiation a vital cog in any implementation strategy.
Per the National Restaurant Association’s 2024 State of the Industry feature, 85 percent of adults said they were willing to take advantage of dining discounts during off-peak days.
Sixty percent of consumers in a survey from Deloitte rated rewards like early access to products and brand experiences as important or very important. An offbeat, recent example was Taco Bell’s “The Cantinas” early retirement community. Rewards users were able to gain access to weekend memberships and overnight accommodations, as well as day passes, for the in-person experience that offered activities from aerobics to pickleball. It was intended, as the company said, “for Taco Bell superfans” 21 years old and above. So in other terms, Taco Bell presented value through VIP programming.
This isn’t a new concept for the chain. It’s allowed rewards members in the past to sign up for a Nacho Fries Lover’s Pass subscription, gain early and exclusive looks at offerings, and even vote on which items should make a comeback. Taco Bell loyalty customers spend 40 percent more per year than other guests.
Before deciding if retirement perks are right for your brand, however, Paytronix suggested evaluating the current platform. Assess metrics like penetration, growth rate, discount levels, and whether members’ behaviors align with corporate goals, the company said.
Some questions to ask:
- What percentage of total revenue comes from loyalty program members?
- What’s our program’s net membership growth (new members minus attrition)?
- Are we over-discounting or being too generous with rewards?
- Do our members’ visit patterns and spending meet our engagement objectives?
A widely deployed tactic to boost loyalty relevance among restaurants is to offer guests choice among their redemption. Also, incentives to qualify for higher membership tiers, like free merchandise or exclusive menus. Operators, Paytronix said, benefit from flexibility, too, as it generates engagement while supporting a mix of redemption opportunities.
This includes efforts such as targeted offers and gamification—something Chipotle leaned into in recent years as its base swelled—to tiered program structures and daily perks.
Paytronix believes loyalty members should be segmented into four groups based on lifecycle stages.
- 1. New members
- 2. Potential loyalists
- 3. Core/pro loyalists
- 4. Lapsing members
From there, operators can get deeper, tailoring offers and campaigns to reach each of those with targeted messaging.
The company said the most effective programs are built from the ground up to gather insights into guest behavior, preferences, and why they dine when they dine. Knowing that brand relationship in real time leads to stronger loyalty, frequency, and the ability to drive check through relevant offers.
In turn, there are four more questions worth addressing, Paytronix said.
- Which reward layers and promotions will best motivate our guests?
- What tactics align with our brand identity and service experience?
- Which program elements can be realistically executed by our staff?
- What strategies will drive the highest return toward our financial goals?
Features like what Taco Bell presented (subscriptions, social impact, experiences), in addition to gamification, tap into psychological drivers beyond deal chasing. Gamification, in particular, is something Paytronix feels is gaining momentum. As shared by PYMNTS, Denny’s last summer released a program with “challenges” for different guest segments based on dining habits. For instance, customers who visited four times before July 4th earned a free Grand Slam Breakfast.
Developing a branded mobile app can unlock some of the integrations mentioned. The Association’s 2024 report said 60 percent of current loyalty program members prefer to access platforms through their mobile device. Apps give users a chance to track and redeem points, manage cards, and receive location-based push notifications.
An app streamlines loyalty experiences. It also opens a direct line of communication between restaurants and core guests, enabling targeted outreach, location check-ins, personalized deals, and engagement on the go.
New customer acquisition costs a company five times more than keeping one, according to Invesp. A 5 percent increase in retention, Paytronix added, can boost profits 25–95 percent. Regular guests create 80 percent of future revenue, according to McKinsey & Co.
So working customers through the loyalty lifecycle is naturally critical. If they sign up on the incentive and fall off, there’s not a ton of ROI to glean.
For new members, Paytronix said, educational nurture campaigns (emails or texts that explain what’s happening) create stickiness. A nurture campaign that sends four reminder messages based on real-time activity, the company said, helped one restaurant brand achieve a 15 percent lift in new members getting to the three-visit mark.
Three one-to-one win-back strategies are:
- Tailored incentives based on the reason for lapsing
- Reminders of loyalty program tenure and accumulated benefits
- Limited time offers for re-activation
Like so much of the industry’s traffic efforts, loyalty has become an omnichannel universe as well.
More than 80 percent of campaigns use email, while campaigns that include mobile app push notifications represent more than 20 percent of quick-service and C-store ones.
There are generational changes.
How loyalty program members say they would prefer to participate in the program
All adults
- Smartphone app: 22 percent
- Physical card they present when ordering: 18 percent
- No preference: 60 percent
Gen Z
- Smartphone app: 9 percent
- Physical card they present when ordering: 21 percent
- No preference: 70 percent
Millennials
- Smartphone app: 20 percent
- Physical card they present when ordering: 12 percent
- No preference: 68 percent
Gen X
- Smartphone app: 19 percent
- Physical card they present when ordering: 13 percent
- No preference: 68 percent
Baby Boomers
- Smartphone app: 35 percent
- Physical card they present when ordering: 26 percent
- No preference: 39 percent
Messaging strategies are uniformly important. As soon as a guest signs up, what comes next makes a sizable difference in early engagement as well as future interactions. Paytronix offered seven examples:
- 1. Welcome messages
- 2. Registration reward reminders
- 3. Almost-there messages
- 4. Reward expiration reminders
- 5. You earned it messages
- 6. Post-visit thank-you notes (with surveys)
- 7. Surprise and delight campaigns
Some other chances to reach out include milestones, victory dances (gamification wins), social sharing, rapid response (the timing of messages), and risk mitigation (like we-miss-you comments or bounce-back campaigns).
“By leveraging advanced tools to understand customers at a granular level, high-performing operators are delivering hyper-relevant experiences that drive visit frequency, spend, and lifetime value,” Paytronix said. “They’re reimagining loyalty itself with flexible models like subscriptions and tiers. And they’re forging deep emotional connections through meaningful and often unexpected brand interactions.”
The common thread going forward? “A commitment to using data-driven insights to create personalized, value-added experiences for each guest,” the company added. “That’s the key to standing out in a world where the average consumer belongs to nearly 17 different loyalty programs across industries.
