How McDonald's and other restaurant brands are driving loyalty apps in face of inflation

You know the saying, “There’s an app for that”? That’s what restaurants want customers to think the next time they crave their favorite drink, burger or burrito. While chains ranging from McDonald’s to Chipotle have been pushing loyalty apps for a while, they have become increasingly important in the fight for market share as inflation-pinched consumers look for more value from rewards programs. This has forced loyalty teams to rethink offers and dig further into customer insights on what will keep them coming back. “You can’t rest on your laurels,” said Jason Scoggins, senior director of loyalty and customer relationship management at Chipotle, which has over 33 million rewards members, most of whom use the app. “Customers are evaluating every rewards program they are a part of, and not just restaurants, but also industries like travel and hospitality. There are other brands who are setting the bar for what customers expect from a program, so now we are working to compete with and exceed those expectations.” Look back: Analyzing McDonald's first year of its loyalty program During the pandemic, more customers started ordering food online and limiting their in-person visits, thus affecting their connections to a brand. Companies started relying on apps and loyalty programs as a way to rebuild some of that lost connection, and to get a fair amount of first-party data in the process, including emails, birthdays and ordering habits. All of that data has been used to drive more engagement with consumers or encourage them to buy more. But at a time when inflation-conscious customers are looking to save, many brands are also facing economic headwinds. As a result, they have increased the amount of purchases customers have to make before rewards kick in, or have made rewards less frequent—both of which are counter to what younger consumers want from their rewards programs. Fifty-seven percent of Gen Zers have one or more fast food apps on their phone, and their top reason for using them is to save money, according to a survey by performance marketing and customer acquisition firm Fluent. “I often get asked if value wars are coming back,” said David Portalatin, senior VP and food industry advisor at Circana, which analyzes consumer behavior. “And the answer is: not exactly. It’s not about value menus, but more about other promotions, or getting discounts on full-price items.” Increasingly, apps are where chains are flaunting those deals—and the promotions are being plugged into ads across TV and social media. Chipotle encouraged its social media followers to download the app for free delivery for the week of Cinco de Mayo. Chipotle’s app was ranked No. 12 in the Apple App Store food and drink category as of May 22. View this post on Instagram A post shared by Chipotle (@chipotle) McDonald’s, which had the top slot in the food and drink apps category as of writing, has run several TV commercials highlighting app features, including skipping the line or earning future free food. Panera took advantage of the NBA playoffs to run ads, featuring basketball player Kyle Kuzma, for the chain’s new “Unlimited Sips” subscription for rewards members. Panera sits at No. 15 on the food and drink app chart. There are several approaches to drive loyalty, beginning with rewarding consumers for downloading an app. Subsequent purchases, as well as volunteered customer information, help generate personalized offers and deals. Panera is among the chains digging into app data for targeted outreach. “Maybe I don’t want a Chicken Avocado Melt as a reward, because I’m vegetarian. I would get a salad reward instead,” said Meenakshi Nagarajan, Panera’s senior VP of digital, loyalty and subscriptions. Nagarajan said that looking at the brand's 54 million rewards members also helped the brand see “tribes” within their customers, including those who wanted to eat more sustainably. The brand rolled out Coolfood meals, or climate-friendly, low carbon footprint options. Another loyalty driver is in-app, member-exclusive items. In February, Chipotle added two quesadillas inspired by TikTok food reviewers that could only be ordered through the app or online. McDonald’s rewards users can now buy Big Mac sauce through the app, and a limited run of the brand’s Szechuan sauce was also available on the app last year. (It was originally available in 1998 as part of a Happy Meal promotion for Disney’s “Mulan.”) Read more: How Chipotle adopted viral TikTok menu hacks “If our app isn’t culturally relevant, it gets deleted,” Caleb Pearson, VP of media and digital at McDonald’s, wrote via email. “With the ever-growing evolution of digital it’s more important now than ever to listen and learn from our fans to cement our place—and our app—in culture.” The McDonald’s app was downloaded over 40 million times last year, according to Pearson. At Panera, only rewards members are able to purchase the brand’s “Unlimited Sips” subscription, giving customers unlimited drinks for $12 a month. While adding a subscription service to tight wallets might seem counterintuitive, it drives steadier revenue for the brand and can also nudge customers to make food purchases. “That $3.50 or $4 drink is free with your subscription, so maybe you get a bagel with your free coffee, or a pastry with your afternoon iced tea,” Nagarajan said. At McDonald’s, loyalty data has led to more efficient ordering. According to Pearson, customers wanted faster and more seamless ordering and pickup processes. Now, McDonald’s ads encourage customers to order ahead in the app to save time and show them skipping long drive-thru and in-restaurant lines, or getting their order delivered curbside. Customers can also turn on their phone’s location services, which gives restaurant employees time to more efficiently prepare meals so that they are hot when mobile customers show up. “This improvement utilizes technology that allows restaurant teams to begin preparing mobile orders when customers are near the restaurant, making it faster and more convenient for those ordering ahead through the McDonald’s app, and a more seamless experience for our crew members,” said Pearson. Apps are even being linked to video game marketing. For instance, Chipotle is allowing rewards members to earn points by playing Street Fighter 6. Beginning June 2, players of the game will be able to earn in-game currency Fighter Coins with digital orders on the Chipotle app and website. For every qualified order, players will receive a code for 250 Fighter Coins while supplies last, allowing them to purchase in-game characters, outfits, and gear. Chipotle is well-versed in connecting gaming with the brand. It gave promo codes to rewards members who completed the brand’s Boorito Maze or Grill Simulator in Roblox. Another area to watch is the crossover between restaurant and retail, according to Julie Craig, VP of shopper insights at Kantar. “Think of a brand salad dressing, or Chick-fil-A sauce, or a frozen option in a grocery store,” she said. “What if apps helped bridge that gap and helped consumers find store locations or reward them by proving they purchased a brand’s product in a store?” Another tactic involves releasing brand merchandise to reward customers first. In April, Panera launched an online merch store that was only available to its rewards members before being opened to the general public. McDonald’s last year turned its app into a summer camp experience with app-only deals, merchandise, and musical performances. Chipotle rewards members can choose to redeem their points for free food or merchandise or to donate to Chipotle’s charity partners, including the National Young Farmers Coalition. Still, pushing the right discount or reward to the right customer at the right time is challenging. Despite the troves of data, exact personalization can be difficult to achieve. “I order our McChicken sandwich all the time,” said Ian Borden, McDonald’s executive VP and chief financial officer, during the brand’s most recent earnings call. “I say this to the team—I should never be getting on my app an offer for the McChicken sandwich. We’re not yet at that level of sophistication, but we’re going to get to that level of sophistication.”

How McDonald's and other restaurant brands are driving loyalty apps in face of inflation

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