Return Engagements

"That is priceless," says restaurant industry analyst Nicole Miller, of Minneapolis-based ThinkEquity Partners. "Restaurants get to see their demographics, where are guests eating, are they coming in for lunch or dinner. They get to know who their customers are."

And the programs become a powerful draw for the restaurants themselves, giving loyal customers who dine frequently at one unit an incentive to visit its sister location or another restaurant in the rewards network.

"It's the tiebreaker," says Brent Carter, frequent-diner manager for Chicago-based Lettuce Entertain You Enterprises (LEYE), which operates one of the restaurant industry's oldest loyalty programs. "Given a choice for tapas between [a restaurant without a loyalty card] and [LEYE's] Cafe Ba-Ba-Reeba!, they choose us and the points. We get a lot of business that way."

More than half (54%) of restaurants say they offer some kind of frequent-diner program or discounts for loyal customers, according to a Restaurants & Institutions survey. Such programs are most popular among casual-dining restaurants, more than 64% of which say they use such programs to draw customers.

Data Mining

Salt Lake City multiconcept operator Gastronomy Inc. uses a frequent-diner program to collect data on how often its 18,000 members frequent its eight restaurants, what time of day they dine, the amount they spend, their addresses and what locations they choose.

"If we have a customer who enjoys seafood and likes Mexican food, we can steer them from our seafood restaurant to our Mexican concept; that's a plus for us," says Judy Reese, Gastronomy communications director.

Like most other restaurant companies with loyalty programs, Gastronomy doesn't tie the program into its point-of-sale software, so the company doesn't track which menu items program members order.

Later this year, LEYE plans to test a system allowing it to use data about customers' restaurant choices to suggest similar LEYE restaurants to them via direct mail, Carter says. "We do know where customers are dining, so if they've been to Antico Posto but never to [another of our Italian concepts] Osteria Via Stato, we would promote the restaurant and send people that way," Carter says.

On Target

Rock Bottom Restaurant & Brewery's Mug Club loyalty program collects data on how many pints of beer customers order and how frequently they visit. Members of the Mug Club get free appetizers on their birthdays and reminders if they haven't recently visited the restaurant.

"We can find anyone who hasn't visited in four months and give them an offer, such as a free tapping event," says Brian Lambert, director of loyalty programs for Louisville, Colo.-based Rock Bottom. "We can specifically target individuals based on that data, and it gives us the ability to wheel and deal with our guests."

But some companies find that low-tech loyalty marketing continues to work well too.

Costello's Sandwich & Sides, which operates two shops in Chicago, uses a punch-card system that gives a free sandwich for every 10 purchased. Owner Lisa Costello Crampton says the program has helped establish a loyal business base; she estimates about half her customers are repeat visitors, and one of every three gets a card stamped.

"We redeem between six and 30 cards every single day," Crampton says. "It sounds like you're giving away a lot of food, but every one of those people had to buy 10 sandwiches before they got that."

Customer Appreciation

Many operators say that one of the most valuable results of loyalty marketing is intangible: making customers feel that they're important to a restaurant.

Gastronomy awards the 100 biggest spenders at each of the company's nine restaurants with membership in its Premier Diners program. Members receive free valet parking and preferred seating, but company officials say that many of the elite group are happier about their status in the program than they are about its perks.

"People just like the fact that they're premier frequent diners, and the fact they have this special card is a big draw," Reese says. "They're our best diners, and they're recognized by the management staff."

Rock Bottom locations reward frequent diners with T-shirts, hats and gift certificates, but one of the most coveted loyalty rewards is membership in a restaurant's Half Barrel Club, awarded to Mug Club members who have ordered a total of 120 pints of beer.

"We put a plaque with your name on the wall," Lambert says. "That's the most important point to most of our members."

What's the Impact?

More than 61% of casual-dining restaurants surveyed rate their frequent-dining programs as successful, R&I research finds. But many operators say it is hard for them to precisely measure the effect their program has on sales. Data-driven programs can be expensive to administer and maintain. Mailing costs also can cut into profitability.

"They're an investment but they're not cheap," says Eldon Payne, chief financial officer of Gastronomy. "The metrics are really too varied, and it can be hard to measure their effect."

Contact writer at kristina.buchthal@reedbusiness.com