Boosting Customer Frequency and Retention in the QSR
To strengthen customer loyalty and frequency, a leading QSR brand in Turkey encountered several obstacles which needed to be tackled. The client wanted to increase customer engagement and boost their purchase frequency. However, the current stats showed that 60% of customers only made a single purchase in a year and only 5% had five or more purchases during this time frame. The Turkish QSR market is highly competitive with many local and global brands. Price wars are commonplace and the barriers to entry are very low, intensifying competition even further. The company had ambitious objectives and sought our assistance to help them reach it. We designed a loyalty program with micro-segmentation analytics, communication plan and tactical campaign strategies tailored to the customer needs and their behavior. To enhance key performance indicators, we employed a gamified concept as part of the program, based on user research and focus groups.
Objective
Our project's main mission was to increase customer loyalty and decrease the rate of one-time customers, which we did so through creating a gamified loyalty program that offered customers tailored rewards based on the brand's products.
Research & Collaboration
To develop an effective loyalty program, we undertook a wide-ranging research project. This included focus groups with different consumer subsets to learn what kind of rewards they wanted to receive and how they make purchase decisions. Additionally, we collaborated with the client's international counterparts in the USA and Russia to gather insights and share best practices from their markets.
To ensure success with loyalty program rewards, it is important to take into account the industry trends, consumer habits and the principles of human behavior. As shoppers, people look for convenient and affordable options when they visit a retail store. This often leads to multiple purchases, especially when there are relevant rewards or discounts available. It's easy to overlook that customers have lives outside our brand and it's important to keep in mind their purchase history, frequency and recency when preparing personalized offers. To gain an understanding of these metrics can be hugely beneficial for any retailer. An essential factor to take into consideration when designing a reward program is the type of rewards that are available. Such rewards can be taken from the brand's own products, third-party partner services, or a combination of both. In the banking industry, you will observe a combination of both in-house and external products when it comes to reward strategies.
For instance, banking loyalty programs tend to consist of a combination of internal and external products that suit the different requirements and tastes of their customers. Banks often team up with airlines, hotels, retailers & other companies in order to give customers the chance to get rewards like air miles, hotel bookings, cashback offers, discounts and even early access to certain events.
There are several reasons why QSRs often choose not to incorporate third-party partner offerings in their loyalty programs. Customers in some areas struggle to stick with one QSR brand as there are many alternatives available and switching brands is simple. Instead of loyalty-based incentives, the need for QSRs arises mostly due to urgent hunger. For example, choosing between pizza and burger based on convenience. Customers usually associate QSR brands with when they are hungry, which explains why their loyalty towards them tends to be less stable than with industries like banking and telecommunications. This is because customers tend to have more loyalty towards these brands when they are not hungry.
Our research has revealed two distinct types of brands: always-on and situational. QSRs fall under the situational brands type. Fast-food restaurants often feature their product range in loyalty programs to inspire customers to explore new items and options. Take, for instance, a previous client who was in the QSR industry and had multiple franchises providing burger delivery. They wanted to encourage customers to try something different because many of them habitually chose the same product.
When deciding on the right rewards strategy, factors such as cost management, profit margins, brand recognition and operational effectiveness should all be taken into account. However, the most critical determinant in the decision-making process is customer behavior, as understanding and catering to the unique preferences of QSR customers are crucial to designing a successful loyalty program.
Program Design
After conducting comprehensive research and working closely with our partners, we crafted a straightforward, game-like loyalty scheme that rewarded customers for every purchase. The points earned were called "units" of the pie and when customers accumulated enough slices, they would then receive a full "set”. When a customer earned a full set, they were eligible to redeem it for a complimentary item from the QSR's menu.
To tackle the problem of customers with a low frequency of purchase, we implemented a bonus unit system. This allows us to give attractive offers and incentive to customers who have not made any purchases for almost a year and also plan to use it for boosting specific products. Our program has been created with scalability in mind, so client can easily improve or modify it according to the changing market trends and customer preferences.
Implementation
To ensure successful implementation of our services, our team had a close working relationship with client internal teams. This involved digital reporting, product development, UI/UX design and creation of channel-based strategies for physical stores, online orders and mobile app orders. We lent a hand in customizing the CRM system for our client, particularly by incorporating a loyalty program and making it more customer-oriented.
We collaborated on developing key performance indicators (KPIs) and objectives and key results (OKRs) for the program, as well as designing customer segmentation and communication strategies to ensure the success of the loyalty program. We use PowerBI reports to provide the KPI, OKR and weekly reporting needs in cooperation with clients' internal data science teams. This helps us monitor performance and make the required alterations to campaign designs & communication plans accordingly.
Results & Conclusion
After introducing the gamified loyalty program, the customer frequency and retention metrics drastically increased within a year - proving that it was an effective decision. Within one year, the number of customers visiting just once dropped by over 20%, yet the average frequency of their visits increased by 30%. By designing a simple, gamified loyalty program tailored to the client's target audience and brand offerings, we were able to significantly increase customer frequency and retention in the QSR sector.
Boosting Customer Frequency and Retention in the QSR
Article created by: mertbarbaros.com