Eyes on the prize

Rewarding someone else’s loyalty isn’t always rewarding for your restaurant.

Rewarding someone else’s loyalty isn’t always rewarding for your restaurant.

Is it more effective to partner with someone else’s loyalty program, or to start your own? The answer isn’t as simple as you may think

It seemed too good to be true—pay-per-customer marketing to a database of affluent credit card holders and frequent flyers. For a restaurant in a competitive market, being a reward for an airline or bank loyalty program can potentially offer great, targeted and measurable promotion. Any restaurateur would jump at the chance of being able to promote themselves to high-net-worth individuals, and technology now makes it possible to know, down to the individual, which of your customers is dining in your restaurant as a result of your partnership with that loyalty program.

However, some restaurateurs—and some marketers—are discovering that technology can be a mixed blessing. While it extends the reach of loyalty programs and the speed of transactions, which greatly benefits members, it also adds complexity and enormous—almost too much—transparency. A case in point is the partnership program attached to Qantas’s Frequent Flyer program, as well as Westpac’s Gold Altitude Card holders’ program, and loyalty programs for Macquarie Bank, Citibank, Myer and Diners Club. After a year of operation, some restaurateurs are finding that rewarding someone’s loyalty to, say, Westpac or Qantas, isn’t necessarily rewarding for them.

The partnership program, Extra Restaurants, is run by Pinpoint Marketing on behalf of those companies. The proposition is simple: by becoming a partner restaurant, your customers are offered bonus loyalty points for dining with you. You know whether the customer is eligible because when they pay their bill, their card (provided by the program sponsor) is swiped through an EFTPOS terminal supplied by Pinpoint, which also sends information on the transaction back to their database. For eligible customers only, a fee of six per cent of the bill is direct-debited from the restaurant’s account. The Pinpoint application runs these programs for millions of customers in the Asia Pacific, including in high-traffic casual labour environments such as Dymocks, Amcal & Guardian phramacies, and many more.

“We’re offering a suite of customer loyalty programs,” explains Pinpoint’s marketing director, Gary Becus. “And the restaurants can be part of that as a partner. What they do is offer bonus points to attract patronage.

“The various loyalty programs all offer the same benefits to partners: significant promotion at no cost, because the sponsors all fund the promotion. So in the past, whenever a restaurant has wanted to promote themselves, they need to buy a list, say, to send their promotion to if it’s direct mail, then pay for design, printing, and delivery—and on top of that, they have to pay for an offer, which may be something like 20 per cent off the cost of a meal.

“In the ‘Extra’ program, they just pay for the bonus offer. It is a performance-pay model—if we do not generate sales from customers, then there is no cost. The second major benefit is the program is targeted at highly affluent individuals. The credit cards represented are only gold and platinum card holders. So it’s only affluent individuals who dine out often. Also, there’s the element of preferred partnerships. As a basic example, say there were two Chinese restaurants in an area—only one of them would be able to join, because by joining it can drive a competitive advantage.” There are many other benefits Pinpoint indentify, but a key one, says Becus, is it’s “superior to a stand-alone loyalty program as it allows you to access a larger customer base, and attract customers who are not already yours.”

It’s an attractive proposition, and of course, when presented to restaurateurs, different people will get their buttons pushed by different aspects of it. For Marilyn Domenech of Baguette Bistrot and Brett’s Wharf Seafood Restaurant in Brisbane, the main attraction was the Qantas Frequent Flyer database. “There’s four to five million Qantas frequent flyer members in Australia. That’s a huge database,” she says. “One of our biggest fixed costs is marketing and advertising, and I did think, well, I can cut out the marketing cost, because a lot of business would be forthcoming from being in the program. We have two restaurants; Brett’s Wharf seats 240 and Baguette seats 90. We don’t have little restaurants, so we thought this would work well for us. And the Qantas brand is so strong. People are  enticed to spend because they get three points for every dollar.”

Serge Dansereau of The Bathers Pavilion in Sydney liked the idea of accessing the Westpac customers through their loyalty program: “The idea was to attract some new customers, and that made sense. We had a strong relationship with Macquarie Bank already, and with Qantas—when Qantas has a need to entertain, we do provide service, we did provide vouchers for the restaurant. So I thought it would be complementary and it would be an added bonus. And at that point, with the Westpac program, it was about capturing new customers. With Qantas it was about maintaining the relationship and providing Qantas customers with additional rewards at Bathers.”

But some restaurateurs we have spoken to faced a common series of problems, which came back to either technology not working well enough, or working too well.

The first problem was the EFT terminals supplied by Pinpoint. “There were some issues with equipment,” says Marilyn Domenech. “The frequent flyer cards didn’t always work, so you keyed in the number manually, but often there weren’t enough numbers on the card. You had to tell the customers to apply to Qantas to get their points, and the customer would just assume you don’t know what you’re doing, then Qantas wouldn’t always acknowledge the spend, and blame the restaurant.”

The Bathers Pavillion also experienced a number of glitches with the terminals, Dansereau says, including transactions being put through the café in the business which wasn’t part of the program. “It was a difficult birth,” he says politely. “There were a lot of teething problems, which we sorted out over a number of months.”

“We would have fewer issues now than when we started. We had to launch a couple of hundred restaurants quickly, so the volume of problems would naturally be higher.” Gary Becus, Pinpoint

To their credit, Pinpoint acknowledges those teething problems. “We would have fewer issues now than when we started,” says Becus. “We had to launch a couple of hundred restaurants fairly quickly, so the volume of problems would naturally be higher.” He adds that many problems they deal with are due to membership cards provided by program sponsors not working—in that case, the program sponsor issues a new card to rectify the issue.

He adds that the program has a dedicated call centre just to deal with restaurants, and that there is a manual process for capturing transactions while you wait for issues with the terminal or the card not swiping correctly to be resolved.

Which is not unusual in terms of the day-to-day problems that would face any restaurateur. What was more of a concern was confusion on the part of restaurateurs as to whose customers they were rewarding when they realised all of the various loyalty programs bundled into the deal.

“We didn’t leap into this,” says Marilyn Domenech. “At Brett’s Wharf we have a full-time accountant, and we got him to do modelling on what it would mean to the business. In the end we decided to go ahead.”

Domenech signed a contract in August last year. She was immediately frustrated by the fact that it took until mid-November for her restaurants to appear on the Qantas frequent flyer website. But she was even more frustrated that customers paying with Westpac gold and platinum cards were doing so without any knowledge of the restaurant’s partnership with their loyalty program: “In August, they started to deduct money for Westpac customers who were already our customers. These folk did not know we were associated with the program—they would just turn up for lunch, present their credit card, and that just went through the terminal, and we were paying six per cent on these sales. This was not new business.”

Although current marketing material for the Extra Restaurants program clearly states the different loyalty programs associated with it, it is possible that it was unclear there were partners other than Qantas, Westpac and Macquarie Bank. That’s certainly Marilyn Domenech’s recollection.

“All these direct debits started coming out of our account with weird names against them,” Domenech recalls. “I just went straight to the bank and cancelled all direct debits.”

Down in Melbourne, Jason McLean of Bluestone Restaurant & Bar was having a similar experience: “Pinpoint then had other affiliations with other programs and just put us on with other incentive programs, so we were paying for this, and we’d be slugged twice if, say, you had a frequent flyer with a Westpac Gold card. It took a lot of time and effort to have that removed and refunded.”

As Marilyn Domenech points out, “Most restaurants don’t make six per cent net profit before tax, so to give six per cent away, this has to be new business that you would not have got by any other means.”

Jason McLean says, “We basically withdrew our interest in it because it was expensive and by then we had our own loyalty program which we thought would work better for us.”

Gary Becus denies that double-dipping is likely with the program, saying, “There is little or no cross-over between Extra customer bases, so there is no double dipping.”

Much of the frustration felt by restaurants R&C magazine spoke to centred around their feeling that they were stuck with paying six per cent on meals ordered by existing customers, or customers they weren’t interested in enticing. No-one suggested that Qantas was at all at fault, for example, in having their program associated with, say, Myer.

Becus points out that the program is not an ‘all-or-nothing’ proposition. “If restaurants ask us to not be included in a particular program then this is actioned,” he says, “but it is to the benefit of restaurants to participate in all Extra programs on offer and most restaurants do participate in all programs.”

Says Serge Dansereau: “The Westpac program was the one that didn’t work for us, because customers didn’t realise they were getting the points. So after a long discussion, I’ve terminated the Westpac one and Pinpoint were willing to work with me to adjust the program to suit us. I think it is important that the customers are aware when using a restaurant that they make a conscious decision to earn points, which was not quite evident in that case.”

But one aspect of the program that worked exactly the way it should was its accountability: restaurants could see exactly how many new customers they were getting out of each loyalty program. “In the four months we were involved, Baguette didn’t get any new business from it,” says Marilyn Domenech. “Brett’s Wharf had a few Qantas frequent flyers come, because they earned some points, back in December, when we were doing huge business anyhow. Maybe down the track it would have been better—but in my opinion, our experience was not a positive one. All up, I think restaurants should really do their homework before getting involved.”

Jason McLean of Bluestone says, “The Pinpoint program wasn’t bringing in new traffic. But at the same time we started our own VIP club, and we wanted to focus our attention on that. With our VIP club, our customers can join online or at the restaurant, and if you’re a VIP member you get 10 per cent discount off everything at any time in the venue. You also get priority seating, newsletters and discounts at special events. It allows us to really pinpoint areas of our own business, and reward our customers rather than someone else’s customers.”

Everyone we spoke to advised thinking very carefully before signing up to someone else’s loyalty program, and asking a lot of questions. But whether or not you decided to go with it, says Serge Dansereau, really comes down to your appetite for risk and your willingness to accept the cost attached.

“There’s lots of electronic arrangements coming such as web-based marketing and online booking and so on,” he says, “And if you want to stick your neck out there’s a bit of risk and you get to go through the journey. It was the same with Pinpoint. We dealt with the issues, neither of us ran away from it, but I can imagine it gets quite complicated. We dealt with the issues, neither of us ran away from it, but as original users I have to say it was an uncertain outcome at the start, but if you do not try then they will be no gain.”

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