Episode Summary
In this episode of “Restaurants Reinvented,” host Jen Kern talks with Zach Goldstein, CEO of Thanx, about the evolution and future of loyalty programs in the restaurant industry. Zach argues that traditional loyalty programs, which focus heavily on discounts and lack personal engagement, are outdated.
Jen and Zach dive into the shortcomings of “Loyalty 2.0” and the potential of “Loyalty 3.0,” which aims to enhance customer lifetime value by understanding and effectively engaging customers. They discuss the industry’s over-reliance on discounts and explore modern loyalty strategies that prioritize personalization and customer experience over generic rewards.
The conversation wraps up with insights into how technology and better data management can revolutionize customer engagement. They emphasize the need for restaurant brands to adopt more dynamic, data-driven approaches to maintain relevance and competitiveness in a rapidly evolving digital landscape.
Guests-at-a-Glance
Key Insights
➡️ Technology as a Revenue Generator vs. Cost Center
Restaurants are still viewing technology as a cost center, says Goldstein. “That is a very dangerous approach because it results in checking the box on technology versus focusing on actually driving results for the business.” (Preach Zach, Preach!)
➡️ Convenience is Key to Loyalty Program Adoption
Zach talks about the unspoken (and undervalued) element of loyalty being convenience. “Consumers are far more likely to participate in a program when it’s attached to something that feels convenient to them,” says Zach.
➡️ Data-Driven Personalization is Key
Effective loyalty programs that focus on personalization are known to drive engagement and customer retention. Leveraging data to deliver targeted communications and offers, rather than generic promotions, significantly increases relevance and customer lifetime value.
Episode Highlights
New Definition of Loyalty: Focusing on Customer Lifetime Value
Zach redefines loyalty by emphasizing that loyalty should focus on enhancing Customer Lifetime Value (CLV) rather than just visits. He advocates for a more holistic view where loyalty is about creating value through understanding customer behaviors and needs.
“To me, the definition of customer loyalty is not the tool. It’s the outcome. It’s about driving customer lifetime value. And if you break down customer lifetime value, it’s what are people spending on an average ticket? What is their visit frequency and what is their longevity with the brand?”
The High Cost of Discount-Driven Loyalty Programs
Zach discusses the pitfalls of loyalty programs reliant on discounts, explaining how they can erode the foundation of true customer loyalty and negatively impact the business financially. He emphasizes that discount-heavy strategies do not foster genuine loyalty and may not be sustainable in the long run.
“Legacy loyalty programs… aren’t even being measured against [key metrics], which is why people are saying they’re broken.”
Frictionless Signup: A Red Herring in Customer Engagement
Zach critiques the focus on frictionless signup for loyalty programs, labeling it a “red herring.” He argues that making signup processes easier does not necessarily translate to increased customer engagement or retention. He stresses the importance of creating meaningful reasons for customers to engage repeatedly with the brand rather than just simplifying the enrollment process.
“Asking people to sign up for your loyalty program ignores the way every other industry does it. Which is, can we get you to make a digital transaction through any of our digital channels.”
The Future of Loyalty: Integration and Innovation
Zach explores the future of loyalty programs, suggesting they should integrate more seamlessly with a business’s overall strategy and leverage flexible, modern technologies to stay relevant.
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