Why Price and Service Matter More Than Loyalty Programs for Restaurants

 

Getting things right takes hard work and continue refinement and retooling according to Steven Johnson, Grocerant Guru® at Tacoma, WA based Foodservice Solutions®. Success does leave clues and understanding the right clues to success is one of the first steps.

First let’s look at the old formula for the price, value, service success was: Price + Quality + Service + Portability = Value; Value = increased customer frequency.  That formula has evolved with Gen Z and Millennials today.  Foodservice Solutions® Grocerant Guru® has once again retooled, reevaluated, calculated then evolved the formula and here is the new formula:  Price + Quality + Social + Portability = Value.

That said, loyalty programs are often seen as a way to attract and retain customers in the competitive restaurant industry. However, recent research suggests that loyalty programs may not be as effective as they seem, and that other factors, such as price and service, may have a bigger impact on customer satisfaction and loyalty.

The Limitations of Loyalty Programs

According to a survey by Deloitte, loyalty programs ranked only 19th out of 23 attributes in terms of what is important to restaurant consumers, and only 24th out of 28 factors that drive repeat patronage¹. Moreover, many customers are not even aware of the loyalty programs offered by the restaurants they visit, or do not find them appealing enough to join. The survey found that 43% of respondents stated that the restaurants they visit do not offer loyalty programs, and 48% said that they have no information about the loyalty programs of the restaurants they visit¹.

Another challenge for loyalty programs is that they can be costly to operate and maintain, especially for independent or small-scale operators. According to a report by Paytronix, loyalty programs tend to be more expensive than regular discounting, and require a lot of data analysis and marketing to optimize their performance². Furthermore, loyalty programs may not be able to differentiate a restaurant from its competitors, as many restaurants offer similar rewards and benefits to their customers.

The Advantages of Price and Service

While loyalty programs may have some benefits, such as increasing customer engagement and retention, they are not the only or the best way to achieve these goals. In fact, the Deloitte survey found that a few basic things matter the most to everyone: price, taste, and service¹. These are the factors that customers look for when choosing a restaurant, and that influence their satisfaction and loyalty.

Price is a key factor for customers, especially in times of economic uncertainty and inflation. According to a survey by QSR Magazine, 91% of restaurants said they have increased their prices since 2020, and 20% of customers said they will cut spending due to rising inflation³. Therefore, restaurants need to offer competitive and fair prices that match the value and quality of their food and service.

Service is another crucial factor for customers, as it reflects the professionalism, friendliness, and attentiveness of the restaurant staff. Service can also enhance the dining experience, create a positive atmosphere, and build trust and rapport with customers. According to a report by FSR Magazine, full-service restaurants often use service as a way to deliver a more personalized and memorable dining experience, and to differentiate themselves from quick-service or fast-casual restaurants⁴.

Think About This

Loyalty programs are not the silver bullet for restaurant success, and they may not be worth the time, money, and effort for many operators. Instead, restaurants should focus on the fundamentals of price and service, which are the main drivers of customer satisfaction and loyalty. By offering reasonable prices and excellent service, restaurants can attract and retain customers, and stand out from the crowd.

Don’t over reach. Are you ready for some fresh ideations? Do your food marketing ideations look more like yesterday than tomorrow? Interested in learning how Foodservice Solutions® can edify your retail food brand while creating a platform for consumer convenient meal participation, differentiation and individualization?  Email us at: Steve@FoodserviceSolutions.us or visit us on our social media sites by clicking the following links: Facebook,  LinkedIn, or Twitter