NRA 2011: Providing incentives to loyal customers pays off

When Papa Gino's/D'Angelos rolled out its new rewards program, the company executives' biggest concern was that it would offer discounts to guests who would have come into the restaurants anyway.

But they went ahead with the program anyway because they wanted to drive increased guest frequency and they wanted better data about their guests' behaviors. The implementation proved to be a huge success for the 350-unit sister brands.

The rewards platform was installed through a partnership between pizza concept Papa Gino's, sandwich concept D'Angelos, restaurant loyalty technology firm Paytronix and research firm Open-i Media.

How the chains leverage this data to focus marketing expenditures on its heavy-user guests was one of the topics discussed at the National Restaurant Association Show session titled "The Secret Sauce Behind Identifying Papa Gino's/D'Angelos Most Profitable Guests" last week. Panelists included Andrew Robbins, president of Paytronix, and Dana Story, COO of Open-i Media. Papa Gino's director of projects John Eagles was unable to attend due to a family emergency.

Loyalty program results positive

The Papa Gino's/D'Angelos rewards program was first launched in December 2009 and both brands experienced a 35 percent increase in member visits within the first few months.

Additionally, the company has seen a 35 percent increase in guest visit frequency. And once the restaurants began reminding loyalty guests at the point-of-sale about their potential rewards with certain purchases, check averages rose 24 percent.

Now that the rewards program has been in place for more than a year, the company is armed with more specific data about its guests – new and returning – and has more confidence in the decisions they make because of this information, Story said.

"You can use this data for every aspect of your business. For example, D'Angelos just launched café sandwiches because they saw a need to increase its share of female customers at lunchtime. They experienced positive results within a week," she said. "The promotion was a big win. They saw a climb in frequency for every group – from heavy users to moderate users and down the line."

Keeping the rewards program simple is key

Robbins, speaking on behalf of Eagles, said the program was launched not only to acquire better data and increase guest frequency, but also to decrease the dependency on bulk email couponing and FSI direct marketing efforts. The company was looking for a program that was both simple and online compatible.

"(The company) had concerns. They had to know how to communicate to guests so it didn't feel like they were bribing or confusing them. And they knew it had to be simple because 5,000 associates in the system had to be trained," Robbins said. "Also, they wanted the program to work both in restaurants and with online ordering because it adds so much convenience to have both."

The program's simplicity began with a 10 percent reward. For example, a customer earns 50 points for every $5 spent.

"They believed 10 percent wasn't too high to compromise other promotions down the road, which guests also enjoy," Robbins said.

The company also offers three benefits to registering:

  • A free small pizza (Papa Gino's)
  • A free sandwich (D'Angelos)
  • 25 automatic points

Registration is short, but includes specific demographic questions such as age, gender and whether or not the customer has kids. This data when pulled can be customized into specific incentives for new or changed guest behavior, which helps the overall objective with the program: Retention of heavy and super heavy customers, and turning light and moderate customers into heavy customers.

"We've found that rewards programs affect behavior. Someone may drive a little further to get a sandwich because it'll benefit them on a later visit. Someone who usually just comes in over lunch may come in on a Saturday if we offer a kids' deal and we know from their registration that they have kids," Story said. "We'll offer discounts for online ordering if we know a customer is a heavy dine-in customer. Knowing our guests' patterns helps us optimize our discounting dollars"

The brands are able to increase exposure with cross promotion, too. For example, frequent Papa Gino's customers are offered incentives to D'Angelos, such as a free sandwich, and vice versa. This opportunity usually entails a big discount, but gets new people in the door, a trade-off Story said is more than worth it.

"The big thing about a program like this is you have to be OK with the initial giveaway and realize it is going to mean a small check," she said. "But at least 50 percent of those guests come back later and make a full price purchase."

Challenges with a rewards program

An increase in guest frequency and brand exposure, as well as the optimization of discount dollars through data mining are all appealing reasons to implement such a rewards program. But a rollout isn't without its challenges, according to Robbins, including:

  • An increase in calls from guests inquiring about the program. Robbins said this has equated to an additional part time staffer and more training and reporting;
  • An increase in fraud that comes with this "new currency;"
  • More promotions mean more training systemwide;
  • More communication with staff to assure consistency;
  • More data leads to more questions, some of which are difficult or impossible to answer at this time, Robbins said.

The program continues to evolve

Papa Gino's/D'Angelos continues to work through the challenges and train and tweak as necessary. The company conducted a survey to gauge the best frequency to contact loyalists via email and/or texting about promotions (once or twice a month depending on user level), and added an opt-in choice for one or both brands.

They are also looking at different card levels for different levels of guests, such as a "diamond card" and sports tie-ins offering non-dining incentives for the heaviest guests. Card-free initiatives are on the table, for example through a mobile platform. And both brands are contemplating the creation of a Facebook page honoring their most loyal guests.

"We want the general managers to know who their top 50 customers are – their names, when they usually come in, what they order, etc.," Robbins said. "We want many more people using this program so we can make sure those guests have a reason to come back. A program like this makes it fun for people to come in."

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