StrategyLoyaltyHow to overcome inflation with a customer loyalty program

How to overcome inflation with a customer loyalty program

While inflation can erode the value of customers' reward points, a well-designed program can help offset the effects of inflation and keep people frequenting places they might otherwise cut from their monthly budget.

30-second summary:

  • Effective customer loyalty programs can help brands keep their customers close in uncertain economic environments, offering ‘inflation-proof’ solutions to rising prices and providing unique opportunities to incentivize brand loyalty.
  • Loyalty programs are not one-size-fits-all and should be constantly analyzed and adapted to meet ever-changing consumer needs.
  • The benefits of consumer loyalty programs go beyond inflation resistance and guest experience.
  • Will Hanrahan, Senior Marketing Manager of Loyalty Strategy, Fazoli’s, provides three pillars for effective customer loyalty programs that help customers and marketers combat inflationary pressure, and uses Fazoli’s Rewards as a practical example.

Riding out the inflationary storm with a customer loyalty programKeeping your customers close in an uncertain economic landscape is no easy feat. And when prices are on the rise across entire competitive landscapes due to inflation, it can be tempting for businesses to take a laissez-faire approach to the pressure.

It’s easy to hope customers will simply adjust their expectations given that prices are rising across the board and convince yourself they have no choice in the matter.

But customers do still have choices, especially within non-essential industries like fast food. And while people generally eat out less during times of economic stress, the past six months have shown an increase in fast food visits compared to fine, casual, and fast-casual dining, presenting a unique opportunity for fast food companies.

As customers continue to ride out the inflationary storm, they’ll be quick to seek out businesses offering a buffer against rising costs. One of the most effective buffers available is a strong customer loyalty program.

Three pillars of an inflation-proof customer loyalty program

A customer scans their customer loyalty appLoyalty programs can take many forms, but at their core, they work to encourage customers to return repeatedly by offering some type of discount or incentive. They can be an excellent way to keep customers happy and spending during economic uncertainty and inflation.

While inflation can erode the value of customers’ reward points, a well-designed program can help offset the effects of inflation and keep people frequenting places they might otherwise cut from their monthly budget.

But how can others make sure their loyalty program is inflation-proof? Here are three pillars to follow:

1). Offer more than just discounts

Since the end goal of a loyalty program is to increase customer spending overall, offering incentives other than discounts is crucial to a successful program. Since Fazoli’s system is point-based, for example, they can incentivize customers to take particular actions and be rewarded with points that can be redeemed at a later time.

A point system also allows businesses the opportunity to go above and beyond for their most loyal customers – in one particular instance, Fazoli’s sent branded socks to their biggest fans as an unexpected prize.

2). Keep it fresh

On the customer front, regular updates to rewards programs ensure the guest experience stays exciting so that nothing becomes stale or forgotten. This could mean adding new perks, changing up rewards, or even offering a loyalty offer program that’s tailored to specific seasons or holidays. But ‘keeping it fresh’ can be beneficial internally as well, as demonstrated by Fazoli’s recent approach to its loyalty program updates.

In addition to the refresh of its mobile app experience and rewards program for guests, they have made a keen effort the past few years to focus on internal engagement, collaborating with operations and training teams to loop employees in on recent updates and entice them to communicate changes and updates to customers.

Allowing everyone a piece of the pie can incentivize employees to run internal contests to promote the loyalty program, encourage guest participation and enhance the experience for everyone.

3). Be responsive to feedback

Businesses must pay attention to what customers are saying about their loyalty program and switch things up when they’re getting too much negative feedback.

Fazoli’s app is designed to make leaving feedback easy, providing a gold mine of information for future app improvements. Between May and August of 2022, guests provided over 60,000 cases of individual feedback that each presented a unique opportunity for Fazoli’s franchises to build customer rapport by quickly resolving issues and rewarding points or credit towards future purchases.

Mini Case Study: Fazoli’s Rewards

Fazoli's Customers
An effective customer loyalty program can keep customers onboard throughout inflationary pressure

Fazoli’s Rewards is one such example of a strong loyalty program. A recent survey indicated that Fazoli’s Rewards Members were less apt to restrict future visits to the restaurant due to price increases. In fact, from May to August of 2022, Fazoli’s saw a nearly 4% increase in average spend total for loyalty-based transactions, compared to non-loyalty transactions.

This makes sense, given the way Fazoli’s structures its Rewards program. Guests earn 1 point for every $1 spent, making the model inherently “inflation-resistant” since guests earn more points as prices go up. It’s a great way to ensure that customers always feel like they’re getting a deal.

And it’s not an illusion. The same study saw nearly $1.8 million in savings across 176,724 unique guests (that’s about $10 per guest). And overall, Fazoli’s Rewards Members associated Fazoli’s with a generous loyalty program, more so than competitors like McDonald’s, Burger King, or Wendy’s.

What’s more, Fazoli’s loyalty program is flexible. Guests can choose to redeem their points for a free entree, or they can save them up for a bigger discount down the road. This allows guests to tailor their rewards to match their current needs and budget restrictions.

Why customer loyalty matters

Of course, Fazoli’s isn’t the only restaurant to have found success with a rewards program. Chick-Fil-A, for example, saw tremendous engagement following its 2018 mobile app refresh & loyalty program launch, with year-over-year gains in visit share of 8.7%, a 2.3% increase in check size – and an app usage increase of 79% within the first 8 months of launch.

Because these programs keep customers coming back, they can help offset any downturn in business due to economic conditions. A study by the White House Office of Consumer Affairs showed that, on average, loyal customers are worth up to 10 times as much as their first purchase.

Loyalty programs help businesses build goodwill among customers during frustrating economic times, offering them relief from inflationary pressures and keeping them brand loyal.

Beyond inflation resistance

But they also have benefits to both businesses and customers that go beyond inflation resistance.

These programs also offer the ability to track customer behavior and preferences more easily, which in turn allows them to optimize the guest experience.

For example, Fazoli’s uses its loyalty program technology to easily create audiences based on things like ordering type preference (online or in-store), or frequently ordered items and segment them accordingly. This also alleviates unnecessary promotions by allowing messages for particular segments so that they receive personalized messaging.

In addition to their 1-to-1 point earning structure, Fazoli’s has implemented several successful campaigns that offer unique deals to its members, including incentives for visiting newly opened restaurants as well as segmented offers for ‘New Fans’ and ‘Super Fans’ to give further exclusivity to their membership. A 2022 campaign at a new Ft. Payne location launched to kick-start the opening of its online ordering system generously rewarded guests with $5 off a $10 order and saw over a 6% redemption rate among customers.

Looking ahead: AI and the role in customer loyalty

The ever-changing landscape will, of course, keep food chains like Fazoli’s on its toes moving forward, providing new challenges for loyalty engagement, particularly within the AI space. Initiatives like Campaign Send Time Optimization, which helps marketers increase customer engagement through email and push notifications by sending time-personalized messages based on automated analysis of past interaction data, will be heavily explored by Fazoli’s shortly.

Sentiment analysis through AI is also on the radar, which provides insight into customer feedback by applying natural language processing (NLP) analysis to customer reviews to gain accurate brand sentiments based on customer feedback and experiences such as customer service, food quality, ambiance, wait time, and app experience.

Inflation may be out of our control, but by combining a strong customer loyalty program with the most advanced technology available, companies can not only give customers the power to save but also create opportunities to deepen engagement and brand loyalty even in times of economic uncertainty.

Will Hanrahan is responsible for digital marketing at Fazoli’s, leading the digital strategy for the largest premium quick-service Italian restaurant chain in America, with nearly 220 restaurants in 28 states. He focuses on CRM, websites, social media and digital advertising. Since launching the Fazoli’s app in 2017, Will has overseen the growth of the Fazoli’s Rewards Program to over 1 million loyalty members.

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