It seems like loyalty programs are everywhere, from the gas station to the grocery store, and most larger chain restaurants offer some sort of loyalty or points-based programs, as well as sell gift cards. Smaller chains and independent businesses are eyeing their own restaurant loyalty programs  and gift card offerings, but may be unsure how to begin or if there are any benefits.

The Ease of Beginning Loyalty and Gift Card Programs

The costs to begin loyalty and gift card programs are relatively low. Many merchant banks offer gift card programs at minimal or no cost in order to gain or keep your credit card business, and these solutions are increasingly simple to deploy. For example, Restaurant Service Solutions (RSS) POS software makes it easy to offer gift cards, track balances, and redeem points at the point of sale. The solution makes it possible to issue cards for single-unit and multi-unit chains and even convert in-house or third-party cards. By integrating the restaurant’s POS system and merchant account, restaurants can offer multiple payment options as well as gift and loyalty cards.

Benefits of Loyalty and Gift Card Programs

Below are four ways that restaurant loyalty programs and gift cards can boost your profits:

Increased loyalty leads to more sales. A study by consulting firm Loyalogy found that consumers estimate restaurant loyalty programs could increase their visit rate to a restaurant by 35 percent. In addition, a survey by the National Restaurant Association found that six out of ten Americans said they would like to receive a restaurant gift card as a gift. Gift cards  encourage visits by new customers, and possibly help bring in more potential repeat customers.

Loyalty programs help create targeted promotions. Targeted promotions can increase response rates. Rather than simply offering generic promotions to all customers, the data generated via a loyalty card can allow you to see exactly what your customers are purchasing and then tailor a promotion based on their preferences. The promotion can be built around specific items (a favorite dessert or wine, for example) or even provide “experience” promotions, like private dining offers or special events.

These promotions can be designed to increase traffic during slow periods and boost same-day sales. A mobile marketing component tied to the loyalty card can improve response rates even more.

Loyalty and gift cards increase revenue. In most cases, customers using a gift card will spend in excess of the amount on the card because they are less price sensitive, so you get follow-on revenue beyond the face value of the card. In fact, a 2010 study by First Data found that 72 percent  of gift card shoppers spent more than the original card value upon redemption.

Higher value cards, meanwhile, encourage additional visits. Card recipients typically bring other diners with them when they redeem the cards, which can also provide additional revenue tied to the card. And selling gift cards ensure that you are visited by at least two customers per card — the one buying the card and the recipient.

Restaurant loyalty programs also boost sales. Using a point-based rewards program will encourage additional purchases as customers try to accrue points with each visit. They may increase individual purchases if it means receiving a comp offer, such as a free dessert or beverage.

Loyalty/gift card programs help you compete. For smaller restaurants, the availability of gift cards allows them to compete with national chains during the holidays. By making it possible to purchase the cards online, you can even encourage out of towners to buy cards for their friends from afar. Gift cards are also a great way to get a new customer referral that is tied to guaranteed revenue.

Implementing a restaurant loyalty program and offering gift cards can provide new revenue streams and encourage your customers to keep coming back more often (and spending more while they are there). It’s now easier and less expensive than ever to develop these programs — the time is right for taking this step toward increased profitability.

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