In an industry where customer acquisition costs are high and margins slim, it’s absolutely critical to implement an effective loyalty-building strategy. Fostering lasting connections with your patrons is going to help you thrive in a competitive market and ensure long-term stability.

To this end, many F&B operators, especially small establishments and independents, run generic loyalty schemes driven by basic customer data. The result? Impersonal, one-size-fits-all incentives that ultimately lead to lower engagement levels and underwhelming retention rates.

To avoid this common pitfall, a more sophisticated approach is required that allows you to glean deep and actionable insights about your customer base. The best way to achieve this is through loyalty segmentation.

What is Loyalty Segmentation?

Loyalty segmentation is a powerful strategy that involves analysing sales data and then organising customers into groups based on factors such as spending patterns, ordering tendencies and engagement levels.

Based on these groupings, it then becomes easier to create more engaging, tailored rewards that resonate with customers. When implemented properly, it can dramatically improve engagement, boost customer retention and generate a better ROI.

How to Segment Customers Based on Loyalty

Although a seemingly daunting process, customer segmentation is a fairly logical approach that can be broken down into five steps:

1. Define Your Goals
2. Collect the Data
3. Choose Your Criteria and Segment
4. Develop Targeting Strategies
5. Monitor and Refine

1. Define Your Goals

The first stage is all about goal definition. Before delving into things like data collection and analysis, you should clearly set out what you want to achieve. With a clear set of objectives in place, you’ll then be able to align your strategy with your restaurant’s business goals. Typically, these goals may include some or all of the following:

• Increase Visit Frequency
• Boost Average Spend
• Improve Customer Engagement and Retention
• Reward Brand Advocates
• Optimise Marketing Spend
• Increase Lifetime Value of Customer
• Drive Digital Engagement

2. Collect the Data

Once you’ve decided on your objectives, move on to data collection. This is going to form the foundation of your entire strategy, furnishing you with key insights about your customers’ behaviour, purchasing patterns and preferences.

To access the data, you’re going to need access to transactional metrics relating to visits, orders, order sources, payment methods, tech usage, promotional usage and demographics.

For F&B operators, this kind of information is typically gathered from multiple platforms including POS terminals, online ordering systems, mobile apps, CRM/loyalty software and website analytical suites. And unfortunately, this many data sources often leads to data fragmentation which in turn leads to inconsistent and unreliable information.

It makes sense then, to have in place a comprehensive, fully-integrated POS and restaurant management system that centralises all operational metrics. Without one, the quality of your data will be degraded.

3. Choose Your Criteria and Segment

Assuming that you’ve gathered your reliable data, the next stage is to select the segmentation criteria by which you want to organise your customers. This should of course be based on the goals you specified in Stage 1. Here’s a run-down of each required metric and the type of customer information it can reveal.

• Visit/Order Frequency – Reveals frequent, occasional and lapsed customers
• Visit/Order Recency – Reveals customer engagement and potential churn
• Average Spend Per Visit – Reveals high spenders and budget-conscious customers
• Total Lifetime Spend – Reveals high-value and loyal customers
• Time of Visit – Reveals peak and off-peak visitors
• Order Composition – Reveals customer preferences
• Order Channel – Reveals preferred ordering platform and also tech usage
• Promotion/Discount Usage – Reveals customers most responsive to promotions

From this information you can create a variety of segments. Typical loyalty groupings include:

• New Customers
• Frequent Visitors
• High Spenders
• Occasional Visitors
• Lapsed Customers
• Brand Advocates
• Budget-Conscious Customers
• Digital-Only Customers

4.  Develop Targeting Strategies

With your restaurant loyalty objectives clearly defined, the data collected and customers categorised according to your chosen segments, you’re now ready to put in place targeting strategies to achieve your desired outcomes. With this in mind, we’ll now look at all of the typical goals mentioned in Stage 1, detailing some of the strategies that you could employ.

Increase Visit Frequency

Increasing visit frequency is all building stronger connections with infrequent and lapsed customers that simply encourages them to return more often.

Useful Strategies:

• Punch Card Rewards (Buy 1, Get 1 Free)
• Milestone Discounts (Discount After Every 5^th Visit)
• Weekly/Monthly Visit Challenges (Visit 3 Times This Month for a Reward)
• Time-Specific Promotions (Double Loyalty Points on Wednesdays)
• Recurring Visit Bonuses (Bonus Points for Multiple Visits Per Week)
• Time-Limited Discounts (5% off for Visiting Within 5 Days)
• Personalised Offers (“We Miss You” Discounts)
• Frequency-Based Tiers (VIP Status for Visiting Specific Number of Times Per Month)
• Loyalty Streak Bonuses (Rewards for Consecutive Visits)

Boost Average Spend

For any restaurant, boosting average spend among loyal and returning customers is going to be a major priority. In terms of strategy, you’ve got a number of potential options here, some of which overlap with visit frequency allurements.

Useful Strategies:

• Spending-Based Rewards (Earn Extra Points for Orders Over £50)
• Upselling Offers (Double Points When You Buy a Dessert)
• Tired Discounts (Spend £60, get 10% of Next Visit)
• Bundled Offers (Two Entrees, a Shared Appetiser and Dessert – Just £15 Per Couple)
• Free Delivery Thresholds (Get Free Delivery for Orders Over £20)
• Cashback on Large Orders (£5 Cashback for Orders Over £30)

Improve Customer Engagement and Retention

Given that customer retention is far more cost-effective than acquisition, reducing churn and keeping hold of your patrons is obviously going to be a big priority. Personalisation and exclusive offers are a good place to start.

Useful Strategies:

• Personalised Email Rewards (Hi Joe! We See That You Enjoy Margherita Pizza - Enjoy 20% Off Your Next Pizza Order)
• Personal Milestone Rewards (Birthday, Anniversary Offers)
• Personalised Reminder Emails with Rewards (‘We Miss You – Enjoy a £10 Discount When you Next Visit’)
• Exclusive Loyalty Offers (Priority Seating, Exclusive Dishes for Members)
• Exclusive Event Access (Tastings, New Menu/Dish Roll-Outs)
• Triple Point Days (It’s Triple Point Tuesdays!)
• Loyalty Streak Awards (Rewards for Consecutive Visits)

Reward Brand Advocates

Frequent and loyal customers should be segmented as brand advocates and rewarded with high-tier or VIP perks to encourage word-of-mouth recommendations.

Useful Strategies

• Referral Rewards (Claim a Free Entrée When You Refer a Friend)
• Ambassador Reward Scheme (VIP Tasting Event – Be the First to Sample Our New Menu!)
• Personalised Rewards (Thank You for Your Loyalty – Enjoy £5 Off Your Next Meal)
• Reward Codes for Friends and Family (Share the Joy! Sent a 10% Discount with Code FAMILY5)
• Personalised Merchandise (Branded Gifts for Top Advocates)
• Social Media Rewards (Get 5% Off You Next Meal When You Post a Review About Us)
• Feedback Rewards (£5 Off Your Next Visit When You Complete Our Survey)

Drive Digital Engagement

Reaping the benefits of digital engagement requires a flexible approach that targets specific channels and platforms.

Useful Strategies

• Channel-Exclusive Rewards (Unlock a Free Beverage When Your Order Through Our App)
• Online Order Perks (5% Off for All Online Orders)
• Push Notification Rewards (Special Deals Sent Via Push Notification)
• App Loyalty Tiers (Tiered Schemes Exclusive to App)
• In-App Surveys (Complete Our In-App Survey, Claim 10 Customer Points)
• QR Code Discounts/Loyalty Points (Scan to Save! 15% When You Scan with QR Code and Register )
• App-Only Personal Milestones (Claim Your Birthday Gift Via Our App)

5. Monitor and Refine

The final stage is to monitor the performance of your newly-launched loyalty incentives and refine accordingly. Analyse and track the key metrics you used to segment your loyalty customers to begin with and, if possible collect direct customer feedback through surveys, app prompts and digital channels such as social media.

Look for patterns that suggest what’s working and what isn’t, based on metrics such as visit frequency, customer spend, redemption rates and average spend per visit. Obviously, data analysis should be regular and consistent. For the best rules, a comprehensive restaurant analytics suite should be utilised that provides clear and consistent information that allows you to make impactful data-driven decisions.

Final Thoughts

As you can hopefully see, loyalty segmentation is an impactful strategy that can build stronger, deeper connections with customers that ultimately drive growth and boost profitability. All that’s needed is a clearly set out strategy and access to reliable, comprehensive data.

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