The customer loyalty and rewards program at Sambino's Pizza in Lorain, Ohio, is successful, if not common. On every repeat visit, customers get increasing discounts on pizza purchases. When a laminated membership card is punched 10 times, that customer gets a Sambino's t-shirt or a 14-inch pizza on the house.

According to Tammy St. Clair, Sambino's general manager, 65 percent of the customers participate in the program and many qualify for "customer appreciation cards" that offer even better incentives based on frequency.

However, as successful as Sambino's program is, marketing experts would say it falls short in one area: its ability to capture data.

Punch card systems drive sales and do reward a pizzeria's best customers, but customer information, be it demographics or simple order preferences, can't be mined easily without the assistance of an electronic database.

On the opposite end of the technology spectrum is Ernex Marketing Technologies in Vancouver, British Columbia. Using a centralized computer server connected to its restaurant clients' credit card readers, it collects customer purchase data with every swipe of each loyalty program member's customized magnetic stripe card.

Member loyalty card from the Cheesecake Cafe.

In an instant the customer's loyalty points are increased or reduced, based on whether he or she is redeeming points.

James Christensen, president and CEO of Ernex, said such a system is perfectly suited for use in a nationwide pizza chain, one that could partner with an airline, a hotel chain or clothing store chain that wants its customers to share and redeem points with other companies.

"Our system also can be integrated into the restaurant's POS," said Christensen. "But it doesn't have to be sophisticated on the front end because we've done all the work on our back-end server."

Clever Ideas, Inc., a marketing firm in Chicago eliminates custom mag-stripe cards and punch cards by tracking member activity through customers' credit and debit cards. The company's CLICK (Customer Loyalty Increased through Customer Knowledge)/Valued Member program combines customer information gathered from membership sign-up forms and payment cards, and blends that with purchasing information downloaded daily from each participating restaurant's POS system. The company analyzes the data and advises clients on how to use it in conjunction with marketing programs it creates for them.

"We function as a department in the company, someone who will do all the analysis of the data and do all the creative work to execute a marketing program," said Mary Rownd, director of marketing at Clever Ideas.

Stroke 'em

Whether loyalty programs are high tech or low tech, customers and operators like them. Estimates of customer participation in loyalty programs range from 10 to 50 percent of a restaurant's clientele. But as is often the case in many businesses, about 20 percent of a restaurant's customers account for the bulk of its sales, said Christensen.

"If you don't know who the top 20 percent of your customers are, you probably don't know where 50 to 60 percent of your revenues are coming from," he said. "That's what a (modern) loyalty program will do for you that a punch card system can't."

Customers dig program perks, too, be they discounts on food or drink, free merchandise (shirts, hats and huggers), or selective access to special promotions, such as wine tastings.

Rownd said that at one of her client's restaurants, loyalty members get preferred seating without having to part with any points.

"On a Saturday night when the wait's an hour and a half, their name goes to the top of the list," Rownd said. "That's really valuable to some people."

Paul Kraft, vice president of Clubhouse restaurants, said his company wanted to boost Sunday sales at its three restaurants. Eight weeks ago it began doubling the value of redeemable points on that day.

"Depending on the restaurant, we've seen business improve on Sundays anywhere from 18 to 22 percent," said Kraft, from his office in Oakbrook, Ill. The company's other restaurants are in Costa Mesa, Calif., and Atlanta, Ga. "Things like that really grow incremental sales, and that's what we wanted."

Christensen advised that rewards should be limited to the geographic reach of a concept. In a one- or two-store operation, rewards should include product discounts or giveaways in order to generate trial. That also keeps costs low and makes the program easily managed by the operator.

But with a large chain, partnership rewards that have nothing to do with the restaurant concept, such as vacation trips, are becoming more common when two or more retailers can team up to share points and prizes.

"At a large Japanese restaurant client's place in Vancouver, the server brought the receipt to the table, and she said they'd won a trip," said Christensen, whose company's system prints out bonus rewards and point totals on each receipt. As the buzz about the winners spread throughout the restaurant, the gave the servers a chance to tell other customers that the promotion was a result of a partnership between the restaurant and a credit card company. "That becomes dynamic marketing at the point of sale, and that's something that larger companies can do."

POS is key

While neither Clever Ideas nor Ernex has pizza companies among their clients (Christensen said Ernex is presently pitching a large pizza chain on its system), Tom Bronson, president and CEO of Rockland Technology Group believes many pizzerias that have POS systems already are well positioned to execute successful loyalty programs.

"If you don't know who the top 20 percent of your customers are, you probably don't know where 50 to 60 percent of your revenues are coming from."

James Christensen
Ernex Marketing Corporation

Because such a high percentage of the pizza business involves delivery, customers already provide operators key data that other companies have to work to get.

"When I go into a Radio Shack, they always ask me for my address and phone number, but I don't like to give it to them," said Bronson, whose company manufactures POS systems in Lewisville, Texas. "But when I call for a pizza, I give them information because I want my pizza done right and delivered."

All that data, plus customers' order preferences are stored in the POS, which provides operators a wealth of knowledge about their client base. But to really maximize it, Bronson added, an operator could hire a direct marketing firm to provide even more highly targeted data about his delivery service areas.

"You basically can take your customer data to a company like Mailmark, they'll compare it against the data they have on your entire area, and they can tell you what your market share is in that area," said Bronson.

Neil Stern, a senior partner for Chicago-based customer research firm McMillan/Doolittle LLP, agrees that successful reward programs require good data management as much as good benefits.

"Even if you can devise a meaningful consumer incentive, the real key to a loyalty program lies in how you use the data," said Stern, whose firm works closely with noted restaurant research firm Technomic. "Can the data you gather on specific customer trends be acted upon -- from a marketing, merchandising, operations perspective? That's where most companies really struggle -- actually using the data they get."

Count the cost

No matter how you cut it, a good reward program will cost an operator time, effort, money and product -- and perhaps all four.

Under Bronson's model, an operator must invest in a POS system and decide whether to hire a direct marketer to provide additional information. The operator also has to spearhead his own marketing program, something time-crunched souls loathe to do.

Unlike other loyalty programs, however, no membership card or credit card is required for data capture, and that's key in a business where so few customers ever come to the store to get their food.

"Who cares if you have a card or not? The POS system is getting all that data for you," Bronson said.

With Clever Idea's CLICK program, participating restaurants must also have a POS system, plus pay a fee for every member who signs up. In Clubhouse's case, Kraft said he's charged $8.50 for every new CLICK member (in turn, Clubhouse charges each customer $20 for membership). Kraft said the fees he pays get him invaluable marketing help.

"We started with them last November, and it's been incredible to have," said Kraft. "(Clever Ideas does) all the creative work and they help us with all the promotions."

Ernex's Christensen wouldn't say exactly what each customer pays per location to become licensed to use the service, but he said the annual charge is about the same as a "decent-size ad in the weekend newspaper. Compared to mass marketing, it's very cost effective."

Sambino's St. Clair pays much less for her program than all the others, but she receives an arguably less-finessed package. The pizzeria pays $200 for 1,000 laminated "customer appreciation" cards, and $5 each for t-shirts. Still, those items, she believes, go a long way to promote the operation, which is located near Cleveland.

"Loyalty, keeping our name out in the open, and increasing profits ... priceless," St. Clair said.

Welcome to the future

While Sambino's system isn't futuristic, Christensen admits it's the marketing standard for the near future. "There's no question that electronic, what we're doing, is in its infancy. ... It seems like every coffee house or restaurant you go to has some sort of punch card system they're using."

Customer awareness of the benefits will make electronic programs spread, Christensen added, because they'll see the benefits in real time. He also believes retailers and restaurateurs will have to learn that rewarding key customers yields better returns than trying to attract new customers with discounts.

"Discounting and other couponing efforts often are anti-best customer," he said. "Those marketing dollars are spent on the worst customers, those who don't want to spend money anyway, and then wait until they get a coupon."

Rownd agrees that electronic loyalty marketing currently is an emerging trend, but she said it will grow rapidly in the fiercely competitive restaurant industry. "With so much choice in the marketplace, we think this is a way to stand out and be different."

She envisions a day when loyalty programs are so targeted they'll include e-mails to members about their favorite dishes.

"They could get an e-mail telling them fresh lobster is coming in tomorrow," she said. "And of course, you could do the same with a special pizza. You've got all the information there already."

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