The Lowdown: Digital loyalty schemes
Haven’t these been around from some time?
Yes that’s right, we’ve all had our Caffè Nero coffee card stamped in the past and many will be familiar with using their smartphone to build up and redeem stamps and points. But the last month or so has seen some of the UK’s biggest names - including McDonald’s, Burger King, Pret a Manger and Tortilla - launch all singing, all dancing digital loyalty schemes. And it’s not just these big players, new research from Barclays found that 34% of hospitality businesses had recently invested in CRM tech to better enable them to ‘track and respond to their customers’ changing priorities’.
That seems unlikely to be a coincidence...
Indeed. Clearly digital loyalty schemes have the potential to drive both visit frequency and spend and are therefore a key part of the marketing mix for big brands as they fight for customers in an increasingly challenging trading environment. But that doesn’t explain why these titans of the UK eating out space have chosen now to shake things up.
Any theories?
The pandemic has seen digital sales - whether online, via a mobile app or through third parties such as Deliveroo and JustEat - leap, so it’s unsurprising that restaurants are now looking to improve the way they compete for the attention of digitally-savvy customers. There’s an element of keeping up with the competition at play too - especially in the case of McDonald’s and Burger King - but this would have all been planned some time ago as digital loyalty schemes are complex things to pull together. The pandemic and the easing of the lockdowns also laid bare to businesses just how important loyalty is, with Pret’s coffee subscription launched as a direct result of a loss of trade and a need to become a regular part of a person’s day once again.
What’s the difference between these services and those that have come before?
As a general comment this feels like a new generation of more sophisticated app-based digital loyalty schemes. Tortilla makes use of smartphone wallets to provide an impressively-frictionless experience, while the new scheme from McDonald’s is fully-integrated with its in-store kiosks, allowing customers to log-in prior to ordering.
How do the schemes work?
All have slightly different mechanisms, but allow customers to earn digital points or stamps that can eventually be redeemed for freebies. Rivals McDonald’s and Burger King have launched remarkably similar schemes, with both offering points for every penny (or in the latter’s case pound) spent and pitching the freebies offered at an almost identical level. Tortilla and Pret’s schemes, meanwhile, see customers collect digital stamps. Interestingly, McDonald’s is using its scheme to nudge customers towards its more virtuous items, with bonus points available for burgers that are under 400 calories, and salads.
What discounts and freebies are available?
While the fast food giants are hoping to entice customers with one-off freebies, these schemes appear to signal a move away from deep discounting, rewarding regular customers with fairly minor freebies. For example, McDonald’s awards 1 point for every penny spent but customer’s need to acquire 1,500 points to get to the first rung of free stuff, which include inexpensive items such as small fries, hash browns and regular coffees. To get a free Big Mac customers must rack up a mighty 4,000 points, equivalent to a £40 spend.
Feels like Ronald is being a little tight-fisted...
Agreed. Pret a Manger’s scheme works differently but is equally frugal when it comes to dishing out rewards. Pret Perks nets customers a single star for each transaction regardless of value. 10 stars bags a perk which - like McDonald’s - are low-value items, including bags of popcorn, and cookies. It’s therefore difficult to imagine Pret regulars getting overly excited about the scheme, especially those that buy multiple items in one transaction. A better option for McDonald’s customers, perhaps, is to use the points to make a charitable donation, with 1,500 points equating to a £1.50 donation to charities including Children in Need, Fareshare, and the Ronald McDonald House Charities.
Why are these schemes so mean?
As evidenced by McDonald’s putting up the price of its single cheeseburger for the first time in 14 years, times are tough and margins are tight. These brands appear to be taking the view that loyalty must now be the key battleground, not price, and that now is the time to move away from offering big discounts and freebies. It seems there really is no such thing as a free lunch, at least for the moment.
