The economic story of 2022 has been around one word: inflation. But there’s a second story that has remained under wraps: how loyalty programs keep customer spending in line with inflation. By studying the check sizes for customers of 64 restaurants and convenience stores, Paytronix data analysts discovered that loyalty customers kept their check sizes roughly the same, despite the rise in prices.
Of particular note, the customer segment hit especially hard by inflation was fuel purchasers at convenience stores, who saw their prices more than double between January 2020 and June of 2022 (though fuel prices have since dropped). Despite this rapid rise, fuel-purchasing loyalty members continued to buy until prices rose nearly 80%, and even then continued to spend more. As prices once again dropped, loyalty spending quickly moved to match.
Turning to restaurant concepts, QSRs saw a similar pattern from their loyalty members. Prices did not increase as rapidly as they did for fuel, but the most loyal customers of these QSRs kept increasing their spend, at times doubling the rate of the increase in menu items.
As the rest of the data brief shows, inflation is difficult to overcome, but restaurant loyalty programs provide the ideal tool to hedge against even the toughest economic circumstances.[CT1]
When Dunkin’ announced the revamp of its rewards program in early October, there was fierce consumer backlash. One headline blared, “What idiot do you think I am?” But behind the scenes, Dunkin’s decisions come from years of menu growth, and exemplify how a carefully planned loyalty strategy pays off over the long term.
To get the full story, I went back to the start of Dunkin’ Rewards, originally called DD Perks. The program launched in 2014, when the Dunkin’ menu focused on hot and iced coffee, with very few specialty drinks in between. Back then, Dunkin customers earned 5 points for every dollar spent. After spending $40, a customer who redeemed points for a free Dunkin iced coffee ($2.69) enjoyed a 6.7% discount which was in keeping with the typical 6-7% discount rate for QSRs at the time.
But as Dunkin’s menu grew, their rewards program did not. Over time, Dunkin’ found customers were redeeming for more expensive drinks and enjoying a significant discount. As the modern Dunkin’ menu included much more expensive drinks ($6-7), customers were gaining redemption values of up to 15%, which exceeds Paytronix’s recommended range of 7-8% value for QSRs.
I suspect there were greater reasons for a revamp, driven by customer feedback. First, customers may have found the rewards limiting. DD Perks did not extend to Dunkin’s growing food menu, which would have left many food-buying customers dissatisfied. The program also lacked a recognition element – there was no way to recognize the most valuable customers. Lastly, Dunkin’ may have felt the pressure from its competitors to switch over to a the most popular loyalty model in the QSR space, bankable points.
So, what does the new Dunkin’ Rewards look like? The new bankable points program awards 10 points on every dollar spent to be redeemed on items of their choosing across the entire menu. To cover any point discrepancies, Dunkin’ awarded their customers 150 bonus points for participating in the new program.
The real innovation from Dunkin, however, comes in its boosted status. A great example of loyalty gamification, customers gain access to the boosted status once they visit 12 times in a calendar month. It’s the first time we’ve seen a restaurant concept use a visit challenge monthly, rather than by year. With an offer cadence you’d see in convenience stores, the boosted status is a new pathway for coffee QSRs to engage their most frequent customers.
The new Dunkin’ Rewards is producing impressive results. In its first full week, the program produced one of the best week-on-week loyalty sales increases ever for Dunkin. Additionally, 20% of active members have already earned the Boosted Status, indicating most of the brand’s high frequency members have stuck around.
But what about all the media backlash? You may ask. In short, this is typical. If a program conserves the rewards customers have earned and is designed to provide comparable, (if not better) value, your customers will love it.
Successful programs give brand advocates a simple way to refer your brand to friends, family, and colleagues. Some programs are also used to bolster relations throughout local communities, as well as for trade programs, employee dining, and guest recovery. Overall, gift card programs are beneficial for top-line revenue, but at the same time, they can become a drain on accounting resources and add friction to franchisee relationships.
See if you can relate to any of the gift program horror stories below. And check out the tips offered to steer clear of them.
There’s some tasty news to celebrate this summer. Delish Sisters, a fresh and wholesome food brand from South Africa, opened its first-ever U.S. location at Clemson University’s new The Shepherd Hotel, a full-service accommodation that employs individuals with disabilities.
Delish Sisters sought out Paytronix technology for online ordering and delivery, customer loyalty, gift cards, and the launch campaign. As part of the Paytronix Gives Back program, the cost of the programs were covered in full.
According to the Delish Sisters’ website, the eatery’s collaboration with The Shepherd Hotel and the ClemsonLIFE program brings, “a team concept with heart, centered around empowering and employing people with special needs/abilities.” The Shepherd Hotel was founded with the mission of positively impacting lives, while ClemsonLIFE empowers students with intellectual disabilities. Paytronix could not be more proud to have a customer that supports this mission.
Though the original plan was to launch in March, construction delays had no damper on the Delish Sisters’ opening day. On August 8, gorgeous green plants, a bouquet of fresh flowers, and freshly baked croissants were arranged neatly in the light-filled restaurant. Employees smiled as Delish Sisters welcomed its first customers—just in time for fall semester.