US restaurant loyalty scheme claims 860% ROI
The US-based restaurant loyalty programme operator, Clever Ideas, has released figures that show an 862.5% return on investment (ROI) during 2002 for clients participating in its 'ValuedMember' loyalty programme.
With all of the firm's clients combined, from a total investment of US$800,000, the total revenue generated for the year was US$6.9 million, representing an 8.6:1 return on the restaurants' marketing investment.
"The key to creating this kind of return is loyalty," explained Clever Ideas' CEO, Lee Suckow. "We help our clients build and nurture loyalty by giving them a way of rewarding their most loyal patrons, while incentivising them to become more loyal and more frequent patrons."
New growth During 2002, the ValuedMember programme added 45 new high-end restaurant partners, and claimed an additional 43,514 enrolled members, bringing the total to 70,162 members at the start of 2003. Of those, some 58,993 are known to be active members.
Some of the programme's restaurant partners charge new members an initiation fee while others offer the membership without charge.
Psychology The programme's focus is on bringing diners back to the same restaurant for a second and third visit which, according to Clever Ideas, is psychologically important in creating the kind of loyalty and momentum that will keep a customer coming back repeatedly.
"In 2002, second visits made by new members - to redeem their reward for becoming a ValuedMember - accounted for nearly US$1.6 in restaurant revenue," said Suckow.
Frequency The results of Clever Ideas' customer tracking and analysis show that individual ValuedMember customers come back to a restaurant twice as often as other patrons, on average.
Programme members also make their first return visit four times sooner after joining the programme, and spend an average of 45% more on their second visit.
Longer-term programme members are spending an average of 17% more on subsequent visits than non-members.
Analysis One of the key benefits to the programme's restaurant partners is that Clever Ideas tracks and measures specific results throughout the programme's lifetime.
"While individual restaurants' performance figures are confidential, we can deliver some very specific and useful data to our partners on the performance of ValuedMember at their restaurants," explained Clever Ideas' president, John Usedom.
For example, Usedom says that programme members tend to return more often than non-members - on average every 42 days. In contrast, non-members are returning after an average of 97.1 days.
And, during the members' more frequent visits, they currently spend an average of US$93.92 per visit, compared with the non-member average spend of only US$80.13.
According to an analysis of the restaurant partners' 1.1 million transactions during 2002, less than 15% of customers at a typical restaurant are repeat visitors, despite the fact that many restauranteurs assume the repeat business ratio is between 50% and 75%.
This phenomenon is perhaps due to Clever Ideas' discovery that as much as 35% of an average restaurant's revenue is due to the small number of repeat visitors.
Marketing management The programme provides its restaurant partners with management-oriented data, including reports about which days and meals are the strongest ones, and advice on how to focus promotions that are likely to generate the most beneficial return.
"In this economy, restaurants know that they need to do more than provide good food, service and value," concluded Suckow. "They need to build and reinforce customer loyalty."