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The loyalty programs of quick service restaurants (QSRs) like Starbucks, Dunkin’, and McDonald’s have come a long way since the days of the paper punch card. As technology advanced, punch cards were largely abandoned in favor of plastic cards. Later, mobile apps became the predominant platform used to host QSR loyalty programs.
But there are shortcomings to these programs. The process of signing up and using a QSR loyalty program can add a burdensome level of friction to the customer experience. Customers who do sign up often forget to pull up their app as they make their way through a drive-thru. Luckily, modern technology makes addressing such pitfalls possible.
To learn more about what QSRs can do to improve customer engagement by enhancing their loyalty programs, PaymentsJournal sat down with Tom Byrnes, VP of Marketing at Quisitive LedgerPay and Raymond Pucci, Director of Merchant Services at Mercator Advisory Group.
Friction is the biggest obstacle for QSR loyalty program adoption
“To attract diners, all the big restaurant chains dropped the old plastic loyalty card approach and moved to tech-driven systems to encourage folks to dine out more frequently,” said Byrnes.
But to sign up for loyalty rewards programs, consumers have to take the time to download an app, enroll in the program, fill out their profile, add a debit or credit card, then remember to actually use the app as they pull up to order their morning coffee. As a result, “the biggest issue with traditional loyalty programs is that they have a high degree of friction,” explained Byrnes.
The bottom line? Traditional loyalty programs have a lot of friction built into them by design, which results in a high churn rate with mixed financial gains.
Overly generic loyalty programs have a high churn rate
Getting customers to sign up for a loyalty program is difficult, and the low percentage of customers using loyalty apps means QSRs have a huge blind spot as to what a majority of their customers are ordering.
A recent Deloitte study found that only 15% of QSR users download a loyalty app to begin with. Just as alarming is the churn rate of those that do take the time to download the app: the average QSR loyalty app loses 95% of its active users within the first 90 days of being downloaded.
A major contributing factor to why QSR loyalty programs aren’t retaining customers is that they aren’t well-aligned with consumers’ personal preferences. For example, a promotional offer from Burger King offering a discount on a cheeseburger isn’t going to land if it’s sent to a vegetarian customer. But due to the generic nature of such programs, that’s exactly the type of marketing that’s occurring.
Factoring in immediacy drives loyalty program success
Another shortcoming of QSR loyalty programs is that they fail to capture customers as they’re making purchases. Pucci noted that getting fast food is often a spur of the moment decision, and loyalty programs need to take that into consideration.
“People are driving down a road, a street, or a busy commercial area and there are maybe five or six QSRs on either side of the street to choose from,” he said. “It’s so important that when a QSR [has] the customer there to order, that’s the exact moment they give them an offer that’s appealing and personalized and geared to their past purchases.”
LedgerPay makes it possible for QSRs to better engage with loyal customers
By addressing the low adoption, high churn, and lack of immediacy that hinder loyalty programs, QSRs can reap the benefits of acquiring and retaining more loyal customers. This means taking steps to provide increasingly personalized product offers and recommendations and engaging with customers while they are in the act of placing their order.
“Loyalty is really about being known as a customer, it’s about being valued, it’s about being understood [in terms of] what your own personal preferences are and having a merchant acknowledge, affirm, and reward them,” explained Byrnes.
LedgerPay’s payments intelligence solution enables QSRs to do just that. It captures individual anonymized purchase behavior, linking it in real time to every specific debit or credit card being used at the point of sale. This removes friction entirely by eliminating the need for customers to enter an identifier or complete an enrollment into a loyalty program.
QSRs can leverage this purchase data to create and execute highly relevant promotional offers to customers based on the history of what they like to eat and drink. They can then use LedgerPay’s prosperity promotions engine to deliver those promotions to the customer in the moment that they’re ordering food. “At LedgerPay, we believe that true, lasting customer loyalty needs to be earned rather than bought. What QSRs really need is a solution that reduces friction and enables promotions that engage the customer in a personalized way while they’re in the act of dining,” concluded Byrnes.