Restaurants lean on customer loyalty programs to drive traffic

Yahoo Finance’s Alexandra Canal joins the Live show to discuss how companies are using loyalty programs to drive traffic and create customer retention.

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BRIAN CHEUNG: Well, one way for restaurants to deal with inflation? Perks and reward programs. Here to chat about the role of customer loyalty-- in this economy? In this economy?

ALEXANDRA CANAL: I was waiting for you to do that. In this economy? Please.

BRIAN CHEUNG: Yahoo Finance's Alexandra Canal. Look, I've got my Dunkin' app powered up.

ALEXANDRA CANAL: Love it.

BRIAN CHEUNG: I think I'm set for a free drink sometime soon. How important are rewards programs like this to getting customers to come back to the store at a time where things are getting expensive?

ALEXANDRA CANAL: Right, things are expensive. Consumer spend is slowing down. So these levers, right, loyalty programs, customer rewards, those can be different levers that companies can pull in order to not only get new customers into the door, but retain existing ones. So I've spoken to a few loyalty experts in this space, and they basically explained that there's a ripple effect when it comes to loyalty. There's higher traffic. There's higher spend, higher check averages, engagement.

In fact, the CFO of Chipotle was just on Yahoo Finance yesterday, talking about all the benefits of loyalty programs, as the company expands its own program into Canada. Here's a bit more of what he had to say.

JACK HARTUNG: In the US, we've had our loyalty plan for a little over three years now. We have 28 million members. And the thing that's most attractive to us is we can have a more personalized one-to-one relationship with these 28 million customers. And what we find when we look at our customers who join loyalty versus don't join loyalty, those who join loyalty, after they join, they come to Chipotle more often, and they spend more when they come.

ALEXANDRA CANAL: So really reiterating those benefits there. There are also reports that said US adults, 30% of consumers use reward programs each month, with 43% saying they're more likely to go to a restaurant if they have some sort of perk or loyalty program. So really interesting stuff. I know you use Dunkin'. I use the Starbucks app, and I'm constantly collecting stars. So I do see how this can be beneficial for restaurants.

BRIAN CHEUNG: Well, but the other thing, though, is that not all loyalty programs are created the same. I mean, your Starbucks rewards stars are a little bit different than the point system at Dunkin' Donuts. Is there kind of a winning formula, if you will, for types of loyalty programs that have a tendency to bring people back?

ALEXANDRA CANAL: So the best brands will tweak their loyalty programs depending on their needs. So some companies want to drive traffic during off-peak hours. Other companies just want to get as much data as possible on their customer to determine that long-term value. Data, by the way, is one of the most important crucial components of loyalty programs. The fact that you can tell what people are ordering, when they're ordering, how much they're ordering is so, so important.

But there is one trend that's emerging, and this is early access to special products. So we saw Papa John's do this with their epic Pepperoni Stuffed Crust Pizza. We also saw Taco Bell do this with their Mexican Pizza, offering that early to consumers that are part of those loyalty programs. And I think as inflation continues, if we continue to be in this difficult economic environment, I think those types of rewards are only going to increase because it kind of is a mutually beneficial relationship at that point.

BRIAN CHEUNG: What's your strategy on the Starbucks stars? Do you like to save them up for the bigger reward? Or do you kind of, like, slowly--

ALEXANDRA CANAL: Yes.

BRIAN CHEUNG: --leak out the stars--

ALEXANDRA CANAL: I save them up. And sometimes I get mad at myself because I use them on, like, an iced coffee, where I should have saved it for, like, a double mocha latte--

BRIAN CHEUNG: With all the fancy--

ALEXANDRA CANAL: --cappuccino. Yeah.

BRIAN CHEUNG: Yeah.

ALEXANDRA CANAL: And I'm like, gosh, why did I use my stars for that? So I do strategize for the stars.

BRIAN CHEUNG: There's like Reddit-- I feel like there are Reddit boards where it's, like, people, like, figuring out what's the maximum output--

ALEXANDRA CANAL: Are there? Should I stalk those out?

BRIAN CHEUNG: I'll send you a link. But there's a way--

ALEXANDRA CANAL: Thank you.

BRIAN CHEUNG: --that you can maximize those stars, I'm sure.

ALEXANDRA CANAL: Mm-hmm, it's all about strategy, man. All about the strategy.

BRIAN CHEUNG: Yahoo Finance Alexandra Canal, thanks so much.