The Importance of Customer Loyalty in 2020

Your Source for Restaurant Marketing & Retail Marketing Best Practices

Posted by Allen Graves on Dec 11, 2019 8:36:00 AM
Allen Graves

Why are loyal customers important?  It seems like an easy question to answer, but not all restaurant owners and operators understand how costly it is to lose, and then have to replace, their customers.  Plus, companies may be doing irreparable harm to their brand if they aren’t recognizing why customers aren’t loyal to their brand.  

Many restaurant marketers underestimate the importance and value of their loyal customers. Others recognize the importance, but struggle to find a way to track customer loyalty and reward their loyal customers.

The Loyalty Landscape

Acquiring and keeping loyal customers is critical to the success of nearly every business. Of course, it is not always easy, especially with the amount of competition in the restaurant industry in 2020. Marketers can’t deny the importance of capturing the hearts and wallets of millennials, whose purchasing power is expected to hit $1.4 trillion in 2020.  Yet, millennials, and those following behind them, are a new and challenging type of customer to engage.

testing-personalization

The real trick is in customer retention.  This comes down to, among other things, customer service, access to information, brand recognition and special perks for repeat customers.  According to one digital marketing company, sixty-six percent (66%) of customers switch brands because of poor customer service.  Likewise, fifty-eight percent (58%) will never do business again with a company after a bad experience.  

Conversely, over seventy percent (73%) of customers will fall in love with a brand just from friendly customer service representatives.  And, access to information will capture the hearts of fifty-five percent (55%) of customers.  

Then, there’s the wallet factor.  Many customers are simply looking for the best deal. If one company isn’t offering it, loyalty to that company isn’t going to keep them from shopping elsewhere. Of millennials aged 20-34, sixty-eight percent (68%) would switch brands to get more program rewards.

Brand recognition is also important in 2020.  This may be due to people wanting to feel like the brand they love is loved by their peers. In the same way millennials turn to social media for personal reinforcement (hence, the popularity of status-sharing and selfie-taking), they also look for this with regards to the brands they choose to do business with.  It’s no surprise that brand recognition is just slightly behind quality as the most important driver of brand loyalty for millennials.  

Why are Loyal Customers So Important in 2020?

Loyal customers provide the foundation for a profitable and successful restaurant business.  These valuable customers not only help a company grow quickly when times are good, but they also help companies stay afloat when times are tough.  Loyal customers are your best brand advocates.  And, they show their loyalty through their wallets, buying more and buying more often.

Strengthen Your Bottom Line Customer Loyalty Program

A loyal customer also costs a business less.  Once acquired, the company has spent what they need to spend up front (at least for the most part).  Losing that customer means having to replace them, and paying the costs of client acquisition all over again. Loyal customers will stay up to date on the brand, find answers to questions, and are willing to spend their social capital on the brands they love.

Sip on this. Coffee is ubiquitous.  It’s cheap and you can find it anywhere.  To many, it “all tastes the same.”  Yet, a loyal customer will not only bypass a closer, more convenient shop, but they will bring their friends in, set up business meetings there, join the loyalty program, post Instagram photos of their cup o’ joe, and put up with a long wait or a mixed-up order. They’ll even tote around your branded tumbler if they really love you.

Yet, because of the prevalence of quality coffee shops, with an instance or two of poor service, a rise in price, or growing popularity of another nearby shop, a loyal customers may well be out the door.  Because the lifetime value of a customer is tied to business success, monitoring customer loyalty metrics is a good way of keeping an eye on the overall health of the business.  

Here are some customer analytics metrics to which companies should pay attention.

1.  Customer Return Rate

In some ways, hotels have it easy in the brick and mortar space.  Each time a customer visits, they make a reservation.  So, it’s fairly easy to know how many times a customer returns.  For a retail store or restaurant, this isn’t so easy.  However, with a quality Wi-Fi analytics platform it can easily be done.

Every cell phone has a unique identifier known as a MAC address, and your Wi-Fi hotspot can use this to identify individual customers, whether they log into WiFi or not. Every time they visit the store, the device will be recognized and those visits can be counted.  If you find that customers are not returning very frequently, you can work to address this with your marketing.  Over time, you can also create buyer personas so that you better understand individual customer patterns and customize your marketing, accordingly.

Restaurant Customer Segmentation Guide

2.  Loyalty Program Sign-ups

Customer loyalty programs are important to perk-driven millennials. Wouldn’t it be nice to know how many customers who are presented with the opportunity to join your customer loyalty program sign up?  If you were to introduce the program with a seamless sign-up process as your guests log in to your free wireless internet, you could have that data.

If you find that you’re struggling to get customers to join the program, you could survey your Wi-Fi users about what they look for in a loyalty or rewards program.  All you need to do so is implement custom messaging on your Wi-Fi connection landing page.  Or, offer a discount for signing in to the internet with an email. With that email address, you can invite them to join the program, reminding them of all the benefits they will receive.

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3.  Churn Rate

Churn rates and customer loyalty go hand-in-hand.  If customer retention is low, it is indicative of a problem with the company’s ability to build and maintain loyal customers.  

One way to track churn rate is to track how much traffic fails to return to the location after they visit.  In tracking this metric, it is equally important to know the personas of the customers, so churn rates aren’t calculated as higher than they truly are.  Having the tools to to identify and understand individual dining habits provides more accurate data.

Marketers can employ various tactics to avoid losing customers and improve customer retention.  One way is to quickly and effectively manage feedback.  Online reviews are becoming ever more critical to solicit and digest, as they can be a key indicator of why a company’s churn rate is higher than it should be. 

Easily-deployable tools such as a Wi-Fi marketing platform can provide guests with the opportunity to give instantaneous feedback, with the capability to send negative feedback to your customer relationship management team and positive feedback to online review websites.  

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4.  Net Promoter Score

A net promoter score tells a business how likely their customers are to recommend your product or service to others. This is an important component of customer analytics.  If few of your customers are willing to tell others about your brand, you may lack the base of loyal customers you need.  

Tracking net promoter scores can be particularly easy if you offer free Wi-Fi at your locations.  When someone logs in, you can present the user with the question of “how likely are you to recommend our business to others?”  You could even consider requiring that customers answer this question before they connect.  With the response data, you can start to understand this important metric of customer loyalty.  

If your net promoter score is low, you can consider what next steps you need to take to boost the experience your customers have.  Consider increasing opportunities for your customers to “bond” with the brand.  Host “limited-space” events, dedicate time to “like” and “share” photos your customers post on Instagram and Facebook, train your employees on ways to remember customers and their “usual” order.

One cannot overemphasize the importance of finding a tool that can track these key customer loyalty metrics.  Such a tool can help operators maintain a profitable and thriving business and can give marketers extra ammunition to fight brand wars. A Wi-Fi marketing and analytics platform that complements the free internet a business already offers to its guests is one tool to seriously consider.

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Tags: Customer Loyalty, Restaurant Marketing, WiFi Marketing, WiFi Analytics

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