©mesut zengin via Canva.com
December 5, 2024
Is There a ‘Death of Loyalty’ in Fast Food? How Quick-Service Restaurants Can Bolster Traffic and Retention
There’s little doubt that the fiercely competitive fast food space has been further embattled by macroeconomic forces such as supply chain concerns and broader inflation — the latter of which is causing cash-strapped customers to consider the value proposition offered by chains more closely.
RETHINK Retail once referred to a potential “death of loyalty” in the fast food industry, highlighting the risk of losing formerly brand-loyal burger-and-fries enthusiasts. But does this trend truly exist? And regardless of the answer, what strategies can quick-service restaurants implement to drive traffic and improve customer retention on a broader scale?
The Pillars of Customer Loyalty in Fast Food, According to Survey Results
As a recent Marigold survey cited by QSR Magazine indicated, there are rocky roads ahead for many of the nation’s most iconic fast-food brands when it comes to relying on existing loyalty trends and initiatives.
According to survey results, 37% of those polled indicated that they had become less loyal or had switched fast-food brands within the last year. Furthermore, 33% found marketing content was currently “disconnected from their actual needs,” and nearly 40% were displeased with irrelevant marketing efforts targeting them.
Marigold put forth four essential pillars of modern relationship marketing in response to these concerns:
- Personalization
- Omnichannel experiences
- Loyalty
- Trust
Personalization seems to pay dividends in an era where bland mass marketing and messaging often turn off consumers. According to its data, Marigold suggested that 79% of respondents were more likely to engage with brands that put great efforts into delivering personalized messaging — namely, high performers such as McDonald’s and Nando’s. Receiving targeted and relevant messaging that appeals to your personal preferences and needs can mean the difference between a sale and an abandoned app.
The appeal of omnichannel experiences to the modern fast food consumer should be obvious. By offering convenient ways to order food and beverages, restaurants ranging from Burger King to KFC can maximize returns. Omnichannel experiences typically include in-person ordering, online ordering in advance, and online delivery platform ordering, as well as merch and app offers for true brand loyalists.
Traditional loyalty programs featuring stingy points-based rewards are still hanging on, but as TLC Worldwide suggested, gamification and loyalty tiers can make things a bit more interesting. Pizza Hut and KFC have previously partnered with Roblox, for example, and now Asian-inspired fast-casual Wow Bao is getting in on the action, as Flaunt detailed. Additionally, according to Tasting Table, most of the higher-ranked loyalty programs under its analysis — including the No. 1 pick, Chick-fil-A — offered tiered rewards to loyal diners.
Trust may be even more important than price, at least according to Marigold. A full 57% of its survey respondents indicated as much, with privacy concerns and data security being mentioned. According to Reader’s Digest, the most popular answers to the question of what makes a restaurant brand trustworthy are: delivers on promises (36%), asks for honest reviews and feedback (36%), offers pricing transparency (35%), builds relationships with consumers (34%), and produces consistent performance (33%).
Is There a Death of Loyalty in Fast Food, or Is the Customer Just Pivoting?
With soaring food prices causing skeptical customers to be choosier over when and where they spend their dollars with a long-time favorite restaurant, can it be said that fast food fans are reshaping what it means to be brand loyal?
As Fast Company outlined, quick-service restaurants are turning to loyalty apps in droves in an attempt to drive up retention. Particularly challenging is the attempt to regain interest from low-income customers (defined as those making less than $50,000 per year) — customers who are often choosing between an affordable deal beneath the Golden Arches or something pre-packaged from the grocery store or convenience store.
Will targeted in-app offers and increased gamification — and other omnichannel approaches to provide value and build trust — be enough to woo back the much-desired loyal customer in the fast food space? Amid the significant transformation currently taking place in the quick-service restaurant sector, the answers are unfolding in real time.
Discussion Questions
Are modern marketing and loyalty initiatives enough to overcome price pressures facing fast food’s core demographic?
What can fast-food restaurants do to inspire loyalty in the currently competitive (and pricey) business landscape?
Which brands are currently doing the best job of creating loyal customers, and which restaurants are putting forth a weaker effort?
Poll
Loading …BrainTrust
Chuck Ehredt
CEO, Currency Alliance
Cathy Hotka
Principal, Cathy Hotka & Associates
Mohamed Amer, PhD
CEO & Strategic Board Advisor, Strategy Doctor
Recent Discussions
More Discussions
Would Recording In-Store Associates Help as a Training Tool?
Ethosphere is banking on AI-driven recordings of in-store associate practices as the next big thing in…Some Retailers Are Trimming Holiday Sales Discounts: Is This a Dangerous Play?
Some retailers are pulling back from deep discounts this holiday season. Is this a dangerous play?Has Kroger Discovered the Limits of Automated Warehouses?
Kroger is winding down its relationship with Ocado, citing cost overruns and a reorganization of its…
I don’t believe that the central problem for most of fast food is one of declining brand loyalty. Most diners have their go-to fast food fixes and don’t tend to shop/dine around all that much, other than mixing up cuisine types. The real issue is prices, which have risen sharply over recent years. What was once a cheap treat is now fairly pricey. That means people have cut back on fast food dining occasions and this has squeezed volumes at the major operators. The one possible exception to this is Starbucks which, as well as volume slips, has seen defections to independent restaurants because the quality of its café experience has declined.
I don’t know about today, but a month ago it was possible to spend over $13 on a sub at Subway. That’s eye-popping. Count on consumers to turn away from pricey splurges and pivot to more affordable options.
Some QSRs, such as Chick-fil-A and In-N-Out, have cult-like followings despite limited menus and a lack of omnichannel pizzazz. In addition to taste, for cash-strapped consumers, value for the price is paramount. Having a “secret” menu or highly customizable items adds to creating the desired loyalty effect. The foundation for building loyalty is to keep the menu simple (reduces costs and improves operational efficiencies), deliver generous portions, and keep the prices as low as possible (value meal concept) while offering in a dine-in or drive-through format. Third-party order and delivery models are price-prohibitive in the fast food segment.
The fast-food restaurants that are currently thriving are those that provide something genuinely unique, setting themselves apart from the competition.
This leads us to the concern of declining brand loyalty. The main factor contributing to this decline is that nearly all fast-food chains have expanded their menus to include a diverse range of items, which has muddied the waters of differentiation.
Seafood chains are now serving fried chicken, while chicken chains have added wraps, ham, salads, sides, and even desserts to their offerings.
Roast beef chains are selling burgers and fries, and some have even introduced fried chicken and tacos to their menus. Tacos can now be found at various hamburger chains, roast beef establishments, and even ice cream shops.
Burger chains have expanded their menus to such an extent that it has become challenging to fit everything on their drive-thru menus.
Do you know where you can find burgers, hot dogs, tacos, salads, barbecue beef sandwiches, pizza, and fried chicken? Dairy Queen!
Convenience stores are also carrying prepared foods of all types, with some even offering pizza delivery through various services.
Moreover, the glory days of the past are long gone, when McDonald’s neon yellow arches set it apart from Wendy’s and Burger King.
Today, most fast-food restaurants are housed in dull gray structures that resemble warehouses.
There isn’t a loyalty concern with fast food…but there is a price concern. Price, price and price should be the key concerns of all of the fast food retailers. Losing or gaining customers is primarily based on price. Worse yet, these retailers know this and have learned this lesson many times over. Yet, they still refuse to truly accept this golden rule. It is the exception that they appeal to this part of their customer’s needs, except with a few promotions per month. If I am an online loyal customer, why aren’t I always getting $1 fries, or a flat-rate drink every time I come to order? These are very profitable items, which always brings customers back, and when they order they order many other things, which generate more profits. Penny pinching drink promotions will only cause customers angst and the QSR will only end up losing the customer. Be generous with your high-profit items all of the time, and watch your sales increase, and your profits soar!
Loyalty is not dying in QSR, but there is a huge gap between those brands applying modern tactics and broader strategy to keep customers engaged. There are numerous loyalty programs with very high levels of customer engagement – but those high performers are using omni-channel communications and personalized offers to keep customers engaged and deliver value. It is true that when consumers are nervous about their wallet, they may dine out less or seek cheaper alternatives, but this is a natural phenomenon. I would say those brands most affected by customer switching are those that don´t differentiate their service or provide motivation to each customer to keep coming back. Loyalty marketing works, but it does not work if brands don´t keep initiatives fresh and focus on customer needs. Furthermore, loyalty is not built based on offering some points, but based on the overall customer experience and perceived value. Customers still splurge in tough economic times, but they are more discerning.
There is little doubt that consumers have experienced sticker shock over the last few years, at what might have been their go-to fast food restaurants in the past. And it’s arguable that food quality has declined at the same time that prices have risen — I’m talking to you, McDonald’s. Given the far greater choices available to customers — instead of the ubiquitous golden arches — and given competitors’ efforts to provide more value, it’s no wonder that habits have changed.
Last night I called to order two large pizzas from a local joint. Nothing special, the pizza isn’t insanely good, but it was what I needed in a hurry. When the person who took my order said the total was close to $70 I cancelled the order. Then I went to Costco and got two of the same topping pizzas for $9.95 each. And those pizzas were larger than the $70 pizzas. So, yeah, price is an issue.
As a consumer, I have never really considered whether I am loyal to a fast food restaurant. When traveling, I am willing to stop at whichever one is the most convenient. If I’m at home I will probably go to McDonald’s. I love a Big Mac, but that doesn’t translate to loyalty. It’s more like I have been conditioned over time to choose one QSR over another.
I just returned from conducting a retail safari in New York for a QSR client. Some fast food diners are fickle and opportunistic and some QSR brands enjoy tremendous loyalty, Raising Cane’s Times Square location was filled to the rafters as a DJ spun Christmas-themed mixes (loud!) and an enviable number of young Gen Alpha kids bopped around. Sure, it’s a flagship store in a location that can’t help but get business but the diners I spoke to love the brand. Chik-Fil-A’s Upper East Side mobile pick-up location (sans dining area or even surfaces on which to rest a sack) is an important test for a brand intent on spreading its urban footprint. Taco Bell’s Cantina concept (beer anyone?) and Pizza Hut’s pop-up locations are spicing up Yum!’s offerings. In short, there is a lot of action and experimentation happening in the QSR world, much of it focused on killing with convenience and choice. Loyalty is not dead overall but it falls on a spectrum.
Let me be contrarian. If we look a level deeper than the surface message of the fast food industry’s current obsession with digital loyalty programs, we see a real possibility where they might be focuses on the lower impact approach. Perhaps there is an over indexing on measuring loyalty and spending less attention on creating memorable and delightful experiences worth being loyal to. The most intriguing paradox is that while chains pour millions into sophisticated personalization algorithms (*to be clear, I’m a fan of this and believe there is immense value, especially for those that have not previously flexed this muscle*), there is a risk that they’re simultaneously standardizing the very experiences that originally created authentic brand connections. Are we entering into an era where traditional brand loyalty becomes obsolete in favor of something entirely different: moment-based emotional connections. And how will additional modalities (e.g. wearables, the eventual metaverse adoption) impact this approach?
Customer loyalty is an overused term. Customers do not need to be loyal to fast food restaurants. Be loyal to your family, church, country, etc. Instead, fast food restaurants need to be loyal to their customers. How? Simply deliver consistently on their promise. Give customers a reason to visit.
Reduce all compromises – inappropriateness of menu, high prices, lack of cleanliness, poor food quality, slow speed of service, etc. If restaurants follow these suggestions they still cannot expect customer loyalty. However, profitable continuity of purchases should flow.
Just like the supermarket sector where shoppers have strategies to cope with food price inflation, the same applies for fast food. People are making choices based on price and their pocketbooks.