While there is no magic pill for this bitter affliction, it turns out that loyalty programs are surprisingly effective insulators against the unrelenting gnaw of inflation in the QSR space.
Loyalty Strategy

A Taste of Inflation: How Loyalty Programs Offer Hope for Restaurants

Photo by Pablo Merchán Montes on Unsplash

QSRs and customers may hurt during inflation, but loyalty programs can help.

You don’t need a degree in economics to understand the basic tenets of inflation. Prices go up, demand goes down. And for industries with price-sensitive supply chains, such as the restaurant and QSR sector, inflation magnifies cost burdens, ultimately forcing both brand and customer to make difficult choices. For these industries, the problem is far more than a domestic nuisance. Inflation in the US hit a 40-year high in May when consumer prices rose 8.6%. But with food supplies decentralized across the globe, the bigger picture resolves an even grimmer scenario: inflation spiked all across Europe in May too, reaching a record high of 8.1%, up from 7.4% the previous month, with one of the main factors being (you guessed it) food costs.

While there is no magic pill for this bitter affliction, it turns out that loyalty programs are surprisingly effective insulators against the unrelenting gnaw of inflation in the QSR space.

“Without question, restaurant organizations that invest in loyalty see greater sales, higher retention of customers, and, we believe, higher margins long-term,” explains Savneet Singh, CEO of restaurant management platform PAR Technology.

The theory is that in difficult economic circumstances, reward programs lead to greater customer loyalty, which, in turn, drives frequency, spend, check averages, and engagement.

Singh continued, “When you build a loyal following, that following comes back to your restaurant…loyalty programs are an incredible way to build a bond with that customer so they stay with you for the long run.”

Nuanced, emotional brand building tactics will always be important for loyalty. Using data to speak the language of customers is a strategy that will never go out of style. There are countless tomes of sophisticated theory written as technology, innovation, and research have inseparably collided over the past decade. But in times of economic distress, you can’t beat the basics: high value discounts, offers, and rewards that attract and retain customers go a long way.

“The most successful loyalty programs for big chains — McDonald’s, Starbucks, Papa Johns, Dominos, Chipotle — focus on financial rewards for repeat customers. They also immediately state the rewards for joining right up front,” claims Jacob Borgeson, director of product marketing at digital marketing firm Wyng.

Just take a look at how Panera Bread leverages these laws of attraction to grow membership volumes and ignite hype for its platform. During the pandemic, the chain debuted its Coffee Club, which allowed subscribers unlimited coffee or tea for $8.99 a month, attracting 600,000 participants by the end of last year. Now, the company is expanding the concept to cover soft drinks, with its Unlimited Sip Club, for $10.99 a month; existing Coffee Club members are grandfathered in at the lower rate.

Does unlimited coffee and tea for a very palatable monthly fee sound appetizing? Panera Bread is using its own high-turnover product lineup as currency, the value of which is instantly digestible in customers’ minds. Not only that, but the simplified subscription format is intently conducive to economic savings and efficiencies:

“A subscription model streamlines workflows and saves companies time and money,” Guy Marion, founder of subscription management platform Brightback, a Chargebee company, theorizes.

Who knows exactly when inflation will subside, or when the shadow of a looming recession will dissolve into brighter times. Fortunately, there’s a ray of light in the meantime: if QSR brands insulate their loyalty programs with high value, instantly resonant rewards coated with a financially-oriented veneer, then they can help keep immediate effects of inflation off the menu.

A Taste of Inflation: How Loyalty Programs Offer Hope for Restaurants
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