Restaurateurs learn to savor loyalty plans

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As restaurants vie for return customers and consumers increasingly expect a greater level of service, restaurateurs are turning to loyalty programs to reward customers and encourage repeat business.

"In this business . . . you learn to empathize with them about how difficult it is," said Lee Suckow, president of Chicago-based Clever Ideas, which recently launched Click, a customized loyalty program for restaurants. "A lot of people have no idea how difficult it is getting people to a restaurant."

Tim Hagar knows. He operates Mediterraneo, an upscale northern Italian and southern French restaurant in Dallas, and hopes Click will help him track repeat customers.

"My biggest concern is the acquisition and retention of customers," said Mr. Hagar, who's just starting to insert Click invitations into bill sleeves at his restaurant. "That is critical at a fine dining price point, and if I look at all the software and systems, no one is doing anything to help me, as an operator, communicate with my frequent diners."


The Click database tracks customer visits and updates data on program members. The program also automatically sends birthday cards, special promotional postcards and quarterly newsletters to loyalty program members.

Click guarantees a 6% increase in revenue as a result of using the new program. Restaurateurs pay 2% of their annual credit card sales to participate in the program.

Mr. Hagar plans to use Click to check his reservation list daily to make sure members are treated like VIPs at his 7-year-old restaurant. Mediterraneo serves about 25,000 different customers a year with a $50 average cost per customer including drinks.

Mr. Hagar hopes to increase his customer frequency 10% to 15%, and expects most customers to use the rewards for airline miles and gift certificates.

Mr. Suckow, who believes Click will be operating in 200 to 300 establishments by yearend, analyzed credit card data at 35 restaurants over the past year and determined that 15% of customers who dine more than once a year at a specific establishment account for 35% of sales. Getting one out of 10 non-repeat customers to visit once more can boost sales 6.5%.

While loyalty programs have the potential to boost sales and improve exposure for restaurants, only a small percentage of businesses offer frequent diner programs.

Restaurants were on the list of industries people wished offered more loyalty programs in a 1998 Loyalty Monitor survey by Carlson Marketing Group, Minneapolis.

In a 1997 National Restaurant Association survey, one-third of restaurant operators said frequent diner programs are gaining in popularity.


"If you look across the board, it's just in the past three to five years that other industries are starting to understand the value of retention," said Andrea Kulach, Frequent Diner program manager for Chicago-based Lettuce Entertain You Enterprises.

Members enrolling in Lettuce Entertain You's 10-year-old loyalty program pay $25 to join and receive $25 back as a reward certificate after dining three times at an affiliated restaurant.

Ms. Kulach said restaurants have likely lagged because the business is often focused on the food and the assumption that if the product is good, people will come back.

"That can't be discounted," she said. "If you don't have an excellent product, no loyalty program in the world is going to help you."


But loyalty programs can help restaurants in the ultracompetitive industry by encouraging customers to return more than once or, in Ms. Kulach's case, try one of the company's 32 different restaurant concepts.

They also provide a great feedback tool.

At TGI Friday's, operators of the chain's 400-plus restaurants use data collected from the more than 1 million Friday's Gold Points members to find different ways to honor customers with special lunches or happy hours.

Bob Rycroft, senior director of relationship marketing for TGI Friday's parent Carlson Restaurants, Dallas, sees the data compiled by the program, which last year linked with Carlson's Gold Points network, as a strategic asset that allows the restaurant to gauge customer response to programs and identify important trade areas.

Ms. Kulach agreed.

"We do members a disservice," she said, "if we don't know what they're interested in."

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