loyalty program

4 common mistakes to avoid when building a loyalty program tech stack

By Mo Chaar

Customer loyalty is key for Canadian consumers, who are among the world’s most frequent users of a loyalty program. Over half of Canadians make reward-earning purchases several times a week, and a recent Givex survey found that 56 per cent of Canadians say loyalty programs make them more likely to dine out at a restaurant.

However, while it’s clear that loyalty is a significant motivator for Canadian diners, not all programs are created equal.

Without the proper tech stack ⁠— the combination of technology apps and tools — operators could be missing out on critical insights that will help drive business. Investing in an omnichannel POS platform allows restaurant owners to capture customer data such as historic reward data, meal preferences, and purchase frequency — all of which can be used to curate custom, value-driven loyalty programs. 

The pandemic accelerated the adoption of tech in restaurants, but knowing what elements to incorporate into a high-functioning tech stack — and the mistakes to avoid — can help restaurant operators make better decisions to improve their bottom lines and keep customers coming back for more. 

Here are some common mistakes to avoid when building a loyalty program.

Mistake #1: Misunderstanding the data

A robust tech stack begins by finding the right tools to support a restaurant’s business needs. An effective POS system will provide valuable guest data, which can be used to craft a tailored loyalty program to entice guests.

It might sound simple, but the first step toward getting the most out of a restaurant loyalty program is understanding the software. It’s easy for restaurant operators to get this crucial first step wrong if they don’t understand the data they’re receiving. To successfully target customers, businesses need to have the analytics in place to better understand their motivations. A robust system will pull reports that can be used to analyze data and determine what is resonating with guests and what isn’t. Understanding the information that’s being collected about the customer, product mix, and KPIs is paramount to avoid wasting time and resources on irrelevant information. 

Mistake #2: Over-discounting products

Restaurant owners have all the data they need to build a comprehensive loyalty program with data-driven incentives at their fingertips, including buying trends and customer demographics. With this information, restaurants can share targeted offers and messaging based on customers’ purchases and previous reward redemptions.

However, while it may be tempting to provide the most valued customers with generous promotions, operators should not sell themselves short and over-discount the product.

To avoid over-discounting, operators can use non-discount rewards such as exclusive access to limited-time offers. Gamification also allows restaurants to incentivize loyalty program participation without offering a tangible award. These types of rewards can perform just as effectively in driving loyalty.

Mistake #3: Using one-size-fits-all loyalty programs

There are multiple ways to structure a loyalty program, and brands should offer a unique and personalized customer experience. One trend in loyalty today is instant gratification rewards systems that offer immediate incentives once a guest is on site based on historical data like past purchases, menu SKUs, and inventory availability. Other ways to tailor a loyalty program include layering personalized rewards or introducing gamification with tier-based programs. 

To avoid a blanketed approach, operators can also consider implementing a points-based rewards program to target the most loyal repeat customers, with exclusive promotions that are only available to members once they unlock a certain number of rewards points.

Mistake #4: Over-complicating

From a customer perspective, the right restaurant tech should focus on the customer’s experience and ease. Globally, more than six out of 10 consumers agree that loyalty programs are too hard to join or earning rewards is too difficult. If the program is too difficult for the customer to navigate or understand what they are interacting with, it discourages adoption and long-term use. 

The solution

To avoid these common loyalty program mistakes, restaurant operators should start by implementing a tech stack that is consistently capturing and analyzing the most important data at every touchpoint with the consumer, so that they can understand the metrics and make informed decisions. 

A thriving loyalty program isn’t a one-size-fits-all strategy, and personalization is key. Points-based rewards systems and exclusive promotions can be used to encourage customer loyalty, and restaurants should keep in mind that non-discounted rewards perform just as effectively as heavily discounted products.

Lastly, while having a program in place that is easy to understand and interact with from an operator’s perspective is necessary, it’s equally important to keep in mind ease of use for guests. As with any program, if the technology is too complex for the end-user to understand, operators risk deterring customers and diminishing the brand’s return on investment. 

Loyalty has never been more important than now. With inflation rising, Canadians are planning to eat out at restaurants less frequently, and restaurants will need to do more to keep customers returning.  

A lot of thought goes into building the perfect tech stack, and avoiding these four common mistakes will go a long way toward setting a restaurant up for success. Ultimately, crafting a loyalty system that brings the most value to guests is the key to nurturing a long-lasting relationship.

Mo Chaar is the Chief Commercial Officer of Givex, where he oversees commercial strategy and development worldwide, including the development of GivexPay, as well as managing sales teams within North America.