Are Loyalty Rewards Programs Even Worth It?

Ivan Milivojevic

Loyalty rewards programs. You may be thinking about that free coffee you plan on getting for having seven coffee stamps from your nearby coffee shop. Or you may be thinking about how many points you need until you receive a free donut from your favourite donut shop. These are both examples of loyalty rewards programs.

As a consumer, I always loved places that had any rewards programs. Why?

Because I could get stuff for free! And everything tastes better when it’s free.

I knew loyalty rewards programs were great for consumers like me, but I never understood how they were worth it for quick service restaurants.

A donut shop giving a free donut is losing potential profit. Why would it do that?

Plus it would have to invest both money and time to start a loyalty rewards program. Seems like a waste to me!

It was only once I started working at Spoonity that I realized how crucial loyalty rewards programs are for the success of quick-service restaurants.

Thanks to the RBC uOttawa CO-OP Entrepreneurship Program, I was given an opportunity to work at a startup called Spoonity.

Spoonity creates feature-rich platforms for digital loyalty rewards programs.

Say goodbye to all the paper coffee stamps you keep losing! Now you can save all your rewards on an app built by Spoonity.

But anyway, whether it’s a paper or digital reward, how is this worth it?

Loyalty rewards programs are not just extra, nice to have programs. They are a vital marketing tool which targets consumers who generate a significant source of profit for a business.

From the above graph, you see that the majority of profit for a quick service restaurant come from only a tiny fraction of consumers. The most valuable consumers are repeat customers or “regulars”.

Now you may be thinking that this is just a broad graph with made up statistics. Well, let’s take a look at data from one of Spoonity’s clients.

The graph to the left divides a group of users from a loyalty rewards program by how frequently they used our program. The graph to the right shows how much revenue each group of users brought in through our app.

You can see that only 16.68% of consumers accounted for 54.08% of the total revenue that came in from our app. This goes to show the importance of retaining and appreciating the most valuable consumers since they account for the majority of the profit.

A quick service restaurant should not focus its marketing on acquiring new consumers that will probably only come into the store a couple of times.

Instead, its marketing goals should focus on retaining and increasing the frequency of “regulars”.

Now how exactly can a quick service restaurant do this?

You guessed it, a loyalty rewards program!

“Regulars” benefit the most from these programs as consumers who spend the most and come most frequently get the most rewards.

This encourages consumers to stick to one quick service restaurant which helps convert normal consumers into “regulars”.

Ultimately, a loyalty rewards program is one of the best forms of marketing for quick service restaurants since it targets the most valuable consumers while simultaneously retaining them.

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