Moving from discounting to loyalty: A look at the hospitality sector

It used to be the attentiveness of the staff, or the free ‘night cap’ at the end of the meal that attracted diners to a restaurant. Increasingly it is now the lure of a discount.

Rising inflation in the UK has led to a tightening of purse strings, with dining out deemed a luxury. Restaurants on the high street are often competing for the same guests. Many restaurants view enticing potential guests with a discount as a reliable way to get guests through the door.

However, heavy discounting cannibalises sales and isn’t sustainable. There is the risk that almost every customer coming through those restaurant doors could present a discount code at the end of their meal. Meaning restaurants may only make a profit through drink sales.

The main issue evident is that restaurants are focusing too heavily on fast sales. Rather than aiming for repeated sales from loyal guests. By moving away from discounting and instead putting a loyalty scheme in place, restaurants can begin to identify and understand their guests and use a variety of methods to encourage repeat visits. Without the need for blanket discounting.

The difference between discounting and loyalty

Consumers love great deals, especially when dining out. Offering a percentage discount off their bill, 2-for-1 on main meals or a three-course set menu for £12.95 is likely to motivate.

However, there is a fine line between creating compelling enough offers that your guests will respond well to, and pricing yourself out of profits all together. That is where the shift to loyalty comes into place.

loyalty is about creating a personal relationship

Loyalty is about creating a personal relationship and rewarding guests for visiting. One of the overarching aims of a loyalty programme is to gather information about guests, identifying different guest segments (for example parents, vegetarians, non-drinkers) and using that information to provide loyalty-based rewards in keeping with their personal preferences.

The success of Nando’s in the UK, for instance, is a by-product of its effective loyalty programme. Nando’s never entices its guests through discounts or set menus.

Through its loyalty scheme, it can track who’s coming in, how much they are spending, what they are eating and how frequently they are returning. In turn, Nando’s rewards its guests with chilli’s. Every three chilli’s equals a reward in the form of food.

Dangers of discounting

Understandably, the benefits of discounting include quick and easy sales. Offering discounts ensures tables are relatively full. A quick email to every guest who has registered to the restaurant’s website offering them a discount code or voucher is sure to work. But it’s short lived.

What’s more worrying is that restaurants are now offering discounts to everyone, not just targeted segments. This includes providing discounts to loyal, frequent guests who will always visit, regardless of a discount code or not. Cannibalising full-price sales in one fell swoop.

Another danger is that guests become accustomed to using a discount code every time they visit a particular restaurant. These guests simply won’t visit the restaurant without one. Once the restaurant stops the discount, those guests will look to other restaurants instead. An instant loss in revenue.

How to seamlessly move from discounting to loyalty

Moving from discounting to loyalty isn’t a speedy process. But it is worthwhile.

Low-frequency guests are the ones to target, those that visit occasionally, but visit other restaurants more. The potential to move low-frequency guests into a higher-frequency segment is where the value of any successful loyalty programme comes into play.

low-frequency guests are the ones to target

Tracking these guests can be easy. It starts with selecting a loyalty technology partner that is integrated with the ePOS, followed by buy-in from the top down for the programme design, then motivating front-of-house staff to invite guests to become members.

Once the loyalty programme is established, guest segmentation can occur to identify low frequency, medium frequency, and high frequency guests. Along with their menu preferences and visit habits, to name just a couple.

The benefits of loyalty

A loyalty programme can bring many benefits to restaurants, including a greater understanding of guests’ purchase and visit behaviour. Servers soon get into the habit of asking guests if they have a loyalty card or app.

Encouraging them to do so if they don’t. In turn, restaurants become more agile, are able to make informed decisions on promotions, and can ultimately win guest loyalty through relevant engagement. It’s a win-win situation.

 

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