What the heck is lifecycle marketing?

Bite-Size Loyalty Newsletter

ISSUE 004

Hi Reader,

Loyalty programs continue to be a hot topic in restaurant industry news. This week, I’ll share my personal endorsement for “paying” customers to enroll in loyalty, explain why lifecycle marketing should be in every restaurants’ playbook, and check in on Chipotle’s recent performance (spoiler alert, they continue to crush).

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Why is Roti paying customers to download their app?

Roti just did something brilliant. They are “paying customers” to download their app. Like other brands who offer an intro reward for enrolling in loyalty, Roti is gifting a $10 reward for signing up, but by promoting the incentive this way, they will surely get the attention of many of their loyal customers who otherwise wouldn’t have gone to the trouble of adding yet another app to their phone.

You might be saying to yourself…a $10 credit is pretty expensive for a simple app download. Doesn’t that investment go against everything you have been recommending around non-discount rewards? No. Here’s why…

First, this level of investment shows me that Roti has done the math and understands the value of enrolling customers in their loyalty program. Many brands hesitate to offer an “expensive” introductory reward, concerned that too many guests will cash in, then never come back. That argument only holds water if your loyalty members don’t spend significantly more than your non-members. I’ve never once seen an example of this. Taco Bell saw a 35% increase in spending after guests joined their loyalty program. Takeout loyalty members spend twice as much as non-loyalty members.

For example: Say non-member revenue per customer per period is $100 vs. $135 for members, that’s $35 of incremental spend to play with (and that’s just during the single period being measured, now multiply that by the # of periods in lifespan of an average loyalty member)! $10 once is a small price to pay for what is clearly significantly higher revenue per customer over time.

Second, one of the big concerns with discounting is that you are training guests to wait for coupons or discounts before making a purchase. With this promotion, Roti is rewarding a non-transactional, one-time action not setting an expectation of future discounts.

Finally, app downloads at Roti = automatic enrollment in loyalty = purchase tracking = more personalized outreach. Now Roti can engage with those guests, track their purchases, send them relevant communications, and build a relationship that ultimately increases cLTV. What’s the dollar value your team places on adding one more active customer to your database? If you don’t know the answer, maybe you should.

*For transparency, Roti is a Thanx customer.

Luckily for restaurants, habits are hard to break

Lifecycle marketing is a pillar of e-commerce marketing that restaurants have only recently begun to deploy – thanks in large part to digital orders and loyalty programs creating a gold mine of customer data. Now, the question we keep hearing is “what do I do with all this data?”

Once guests have entered your database by enrolling in your loyalty program, the key is to influence their journey through the conversion funnel to become activated customers. For too long, restaurants have focused exclusively on acquisition. Did you know that a restaurant customer has only a 27% chance of making a second purchase after making their first purchase? However, they have a 54% chance of making future purchases after their third purchase (data referenced looks at a 90 day window). That’s why I recommend a focus on getting as many customers as possible to make a third purchase.

But how do you get them to make a third purchase? Enter lifecycle marketing, or the strategy of driving conversion across the entire lifecycle funnel rather than just focusing on that initial purchase. While their loyalty program is new, McDonald’s is already focused on activating customers in this way. In a new promotion, the chain is offering a choice of a free item for a limited time after joining their loyalty program and making a first purchase. With this promotion, McDonald’s is using a bounce-back offer to incentivize guests to return quickly for their 2nd purchase while betting on triggering the overspend effect to drive ROI – predicting that people will spend more than normal when they return to redeem their rewards. They aren’t the only ones. Chipotle has been doing this for awhile (I documented their activation journey here in The Complete Guide to Digital Maturity).

Here are some tips to guide your customers from first purchase to activation:

Get guests to make their 1st purchase by setting up a welcome email that conveys the benefits of your loyalty program then encourage them to make a purchase.
Creating a bounce-back campaign to lock in the second purchase immediately after the first. This is a campaign sent without delay after the first purchase that features your product or mission or even a small incentive.
Inspire the third purchase by engaging customers that made their second purchase 30 days ago but haven’t returned and incentivize them to do so with a small reward.
Keep your active customers engaged by creating a VIP program to encourage customers to spend big by rewarding them when they do or a surprise and delight campaign to give select customers a special gift.
A/B test the hell out of all of the above to find what works best

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How do you grow same-store sales (SSS)?

Last week Chipotle posted strong Q4 2021 SSS performance bolstered in large part by the success of their digital strategy and loyalty program. Chipotle has one of the best digital strategies in the restaurant industry and it’s no surprise that they have outsized results to show for it. Chipotle achieved 15.2% SSS growth and their loyalty program enrollment continues to skyrocket (now 26.5MM members). Yes, the 4% increase in menu prices contributed to the strong quarterly sales figure, but so did the growing reach of their loyalty program, a relentless focus on customer experience and meeting customers where they are (congratulations to female badass, Nicole West), and the execution of a thoughtful digital strategy that prioritizes direct ordering channels (notably driving traffic to both their mobile app AND WEB…take note McDonald’s).

Non-Discount Reward of the Week?

It’s a mystery!

Taco Bell’s rewards game is so hot right now, I have no choice but to feature them again in this section. To be fair, I actually have no idea whether or not the reward is non-discount. That’s because the reward is yet to be revealed!

Taco Bell ran a Super Bowl LVI ad teasing a major reward for anyone signed up as a member for Taco Bell Rewards by 11:59 p.m. Pacific time that night. Only those who sign-up by the deadline will get the “saucy” “IOU,” redeemable beginning 5/19. Now that’s an intriguing sign-up promotion!