An examination of restaurant loyalty programs: what kinds of rewards do customers prefer?

Abstract

PurposeThis study aims to investigate customer preferences towards loyalty reward programs in the restaurant industry. Willingness to join such programs and expected benefits are also examined.Design/methodology/approachFocus group interviews followed by a survey methodology were used to test the research questions. The study sample included participants in a popular arts festival in Pennsylvania, USA and restaurant patrons in Las Vegas, USA.FindingsA vast majority of study respondents favored immediate, necessary, and monetary gratification. These results were consistent across restaurant types (fast‐food versus casual dining). Although savings was the most sought‐after benefit, intangible benefits such as quality and convenience also received high ratings. Casual dining customers, in particular, seemed to be highly motivated by exploration and entertainment‐type benefits.Research limitations/implicationsFuture research should investigate the optimal level or combination of rewards. In addition, other types of restaurants (e.g. fine dining) might require different types of reward schemes.Practical implicationsThe findings of this study suggest that restaurant operators in the casual dining and fast‐food segments should consider employing immediate, necessary, and monetary rewards as opposed to points‐system, luxury, and non‐monetary rewards. In terms of motivation to join loyalty reward programs, the study results indicate that casual dining patrons are looking for exciting and entertaining rewards in addition to mere cost savings.Originality/valueThis paper helps restaurant managers to better understand customer preferences for loyalty reward programs and to realize the value of targeted rewards.