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McDonald's Just Launched Its Loyalty Program. Here's How to Make Yours Succeed. These three tips will help your franchise roll out its loyalty program.

By Abhik Choudhury

This story appears in the June 2022 issue of Start Up.

SOPA Images | Getty Images

McDonald's, Taco Bell, and other major food brands have been investing heavily in their loyalty programs, and with good reason: Every profitable venture is built on the love of its loyal customers, and these kinds of programs make loyalty a priority. After all, it's much easier to serve an existing customer than it is to find a new one.

Think of a loyalty program this way: It's a wholesome club that feels exclusive enough to make membership desirable, while also collective enough to make everyone feel like they're part of something bigger. In a loyalty program, your brand is the host of the party — and its biggest star. Your customers are there because, so long as you treat them right, they have every intention of coming back. The longer a loyalty program's life cycle, the bigger the spend and better the profit.

So how can you maximize this relationship? Here are three ways.

Offer value that can be earned, not bought.

If your loyalty program gives members what nonmembers can easily buy, then it's not a particularly strategic program. All you're doing is making people work to get something that's only slightly better than the status quo. Rewards should be the baseline of your plan, while special privileges make up a bigger chunk.

Consider what the Austin-based chain Torchy's Tacos does. Its loyalty program is called Taco Junkies Rewards Club, and when members made a purchase in January, they could enter to win one of multiple prizes — including free queso for life. That's what success looks like: When you make something that your customers will brag about — that, at heart, they're going to be proud to take part in — customers become your ambassadors. That's free PR! And their joy will make others want to join, too.

Related: 3 Ways to Use Authenticity to Build Customer Loyalty

Connect sincerely in niche ways.
Loyalty program data can help you earn more revenue, but it also gives you something arguably even more important: An understanding of what genuinely delights your customers.

The North Face does this very well. In addition to selling shoes and jackets, the brand curates adventure experiences, like mountain treks in Nepal, for its loyalty program members. That way, the members can place these trips on their wish lists — and, in preparation for them, might just spend even more on North Face gear. In this way, the program's emotional perks are far more effective than offering basic financial perks.

Personalization can be especially useful for smaller franchises that run on neighborhood regulars. With a little investment in AI technology, these brands can make each regular's experience unique. For example, an intelligently designed loyalty program could help brands curate new products that are in demand locally, better market the old ones, cross-sell strategically, retain long-time shoppers, and solve operational issues that they may not otherwise have known existed.

Related: 4 Tips for Finding Your Profitable Blogging Niche

Commit to a long relationship.

Some brands treat loyalty programs as a numbers game. They'll offer a big instant goodie for new members, see a spike in sign-ups, and congratulate themselves on a job well done. That's a mistake. Loyalty programs should bring value over a long period of time — but that only happens if you're willing to treat customers as a long-term investment.

Companies with strong loyalty marketing programs "grow revenues roughly 2.5 times as fast as their industry peers and deliver two to five times the shareholder returns over the next 10 years," reports Harvard Business Review. Amazon is perhaps the most powerful example of that: Amazon Prime had 200 million paid subscribers as of 2021, and the average member reportedly spends $800 more than nonmembers per year. That's $160 billion a year!

How do you activate that growth? Actively engage your members in novel experiences. The more you do, the more they'll expect of you — and in return, the more you can expect of them. Create mutual value. Learn from them. Grow together. That's what loyalty looks like.

Related: The New Strategy for Lifetime Loyalty: Balancing 'Products' and 'Services'

Abhik Choudhury

Chief Strategist & Founder of Salt & Paper Consulting

Abhik Choudhury is the chief strategist and founder of Salt and Paper Consulting. He is also a visiting faculty of marketing research and campaign planning at the Indian Institute of Mass Communication. He has cross-category experience with over 75 global brands.

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