Loyalty Trends 2024: The Rise of Next-Gen Loyalty Programs

Key Takeaway: Guests value loyalty programs with flexible reward structures that meet their individual needs. It’s time for operators to reassess their loyalty programs and make sure they’re delivering the right kind of engagement to improve visit frequency, average-order growth, and higher customer lifetime value (CLV). 

Changing consumer behaviors are having an impact on restaurant and convenience store (c-store) loyalty programs, requiring many operators to move beyond traditional one-size-fits-all approaches to loyalty. Staying relevant in a competitive market—where  57% of restaurants and 66% of convenience stores offer loyalty programs—means providing a loyalty experience that resonates with individual guests in different ways. 

Previous blog articles in this series highlighted the importance of data expertise and personalization for driving loyalty program performance. However, program design and reward flexibility have also emerged as critical differentiators: 

• 85% of adults are willing to take advantage of dining discounts during off-peak days, according to National Restaurant Association’s 2024 State of the Restaurant Industry,  
• 60% of consumers rate rewards like early access to products and brand experiences as important or very important, according to a Deloitte survey, and 
• 68% of US adults like to receive personalized offers or discounts based on their purchase history, according to eMarketer. 

Advancements in technology are enabling innovative approaches like gamification and AI-powered guest segmentation at a granular level. These capabilities allow brands to craft highly engaging, customized loyalty experiences that resonate with modern consumers. 

Realigning Your Loyalty Program for Greater Relevance 

The first step toward a more effective loyalty strategy is to evaluate your current program's performance. As an operator, you should assess key metrics like penetration, growth rate, discount levels, and whether members' behaviors align with your corporate goals. Specific questions to ask include:

• What percentage of sales come from loyalty members? 
• What is the program's net membership growth (new members minus attrition)? 
• Are you over-discounting or being too generous with rewards? 
• Do members' visit patterns and spending meet your engagement objectives? 

Understanding your program’s strengths and weaknesses can help you create a more dynamic offering that aligns with critical goals, including customer engagement, profitability, and CLV.  

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Peet’s CoffeeTM is a good example. For a long time, a lack of data-driven insights made their loyalty offers a guessing game with suboptimal results. When the company relaunched Peetnik Rewards on our platform, it leveraged test-and-learn capabilities and behavioral data to deploy personalized, targeted offers. Within six months, membership skyrocketed by 350% and loyalty check penetration increased by 47%. 

The Demand for Flexible, Value-Driven Rewards  

Through our work helping thousands of restaurants and convenience stores build effective loyalty programs, we've found consumers increasingly want flexible rewards that, in turn,  provide what they value most. 

Basic programs rewarding guests with discounts based simply on visit count or spending levels no longer have the same impact. To expand loyalty program relevance, many operators offer choices when it comes to redeeming rewards and incentives to qualify for higher membership tiers, like free merchandise or exclusive menus. Operators benefit from this model as well, as it generates strong engagement while supporting a mix of valuable guest engagement opportunities. 

With loyalty program adoption rapidly growing—PYMNTS found 51% of restaurant guests belonged to a program in March 2023, up from 45% in 2022—now is a great time for brands to implement more robust, contemporary offerings. The National Restaurant Association’s 2024 State of the Restaurant Industry report revealed the average consumer belongs to 3.6 restaurant loyalty programs, with 78% more likely to visit places where they can earn points, even if it’s less convenient. 

Convenience store loyalty participation is on par with restaurants. Convenience Store News’ 2024 Realities of the Aisle study revealed 50% of guests report being enrolled in a loyalty program when offered, and another 19% say they’d enroll if one was offered. However, satisfaction with c-store loyalty programs dropped six points to 68% from the previous year: “Less-than-satisfied loyalty program members feel rewards are not valuable to them and too many purchases are required to obtain rewards.” 

Recognizing these shifts in behavior, leading operators are actively making changes to their loyalty programs for better performance. PYMNTS noted that in 2022, Chipotle grew its loyalty program membership 20% to 31.6 million by leveraging smarter data for more relevant content, targeted offers, and gamification. El Pollo Loco rolled out a new tiered program structure, while Noodles & Company made perks available daily. 

We've driven similar program enhancements for clients like convenience store chain Break Time. By partnering with Paytronix Data Insights, Break Time transformed MyTime Rewards into an automated tier program rewarding frequency and spend, with members re-evaluated monthly. 

Break Time’s new tiered structure increased loyalty penetration to 42%  and increased customer spending by 25.6% 

MyTime Rewards automatically triggers a series of personalized, action-oriented messages to members when they’re nearing a new tier. And when members move up levels, congratulatory notes are automatically sent with information on new program benefits. 

All these changes led to impressive results: 

• 12,000 guests in “Big Time,” the top rewards tier 
• 42% of all transactions completed with MyTime Rewards 
• 2% increase in gas gallons pumped, directly attributable to the program 
• 25.6% increase in customer spend 

As these examples show, implementing a thoughtfully designed, data-driven loyalty program with compelling rewards can pay substantial dividends for restaurants and convenience stores. 

Designing Loyalty to Drive Engagement 

Forward-thinking operators are leveraging their loyalty programs as powerful sources of customer insights. By capturing first-party transactional and behavioral data from program members—enriched with third-party data from reliable sources—brands gain a comprehensive view into their most valuable guest segments. This deep understanding allows them to continuously optimize engagement strategies as members move through the loyalty lifecycle. 

At Paytronix, we recommend segmenting loyalty members into four core groups based on lifecycle stages: 

1. New members 
2. Potential loyalists 
3. Core/pro loyalists 
4. Lapsing members 

Operators can then build even more granular segments, tailoring specific offers, campaigns, and tactics to elevate performance within each specific cohort. This data-driven approach requires continuous testing and learning, exemplified by Peet's Coffee's use of control groups to validate program enhancements: 

The most effective loyalty programs are designed from the ground up to foster insights into guest behavior, preferences, and core motivations. Armed with these insights, marketers can segment customers based on their current brand relationship, designing personalized campaigns that cultivate deeper loyalty, more frequent visits, and higher spend per visit. 

HuHot Mongolian Grill’s BOGO Grill Pass is a good example: For $9.99/month, guests earned a free grill meal with the purchase of one full-priced meal. This premium offer successfully drove customer lifetime value and revenue while elevating the overall guest experience. Despite offering a high-value discount, the resulting increase in visit frequency and spend made it a worthwhile investment by striking an ideal balance between customer value and bottom-line returns.

While the subscription model worked well for HuHot, there’s no one-size-fits-all approach for designing an effective loyalty program. The tactics and mechanisms that resonate will vary based on a brand's concept, service model, customer base, and financial objectives. Given the vast array of program options, it’s important to lean on your customer data and analytics to determine the best engagement strategies and mechanics, including: 

• Which reward layers and promotions will best motivate your particular guests? 
• What tactics align with your brand identity and service experience? 
• Which program elements can be realistically executed by your staff? 
• What strategies will drive the highest return toward your financial goals? 

Next-generation programs are going beyond basic discounts by incorporating innovations like subscriptions, multi-tier rewards, social impact/affinity elements, exclusive menus and experiences, and gamification. These advanced tactics tap into psychological drivers like the desire for achievement, social recognition, competition, and the fear of missing out (FOMO). 

Gamification is gaining traction for driving engagement. According to PYMNTS, Denny's embraced this trend in the summer of 2023 with a revamped program tailoring "challenges" to different guest segments based on dining habits. One early promotion offered a free Grand Slam breakfast to members who visited four times before July 4th. 

Other brands using gamification include Jimmy John's, Just Salad, and Sweetgreen, as well as Great Harvest Bread Co.® and Original ChopShop. Great Harvest drove 35% increases in visits, frequency, and spend, using AI to create engaging, 1:1 "Visit Challenges." It’s now expanding the program with a steady rotation of personalized campaigns.

“Before Paytronix, we struggled with slow seasons,” says CEO Mike Ferretti. “By leveraging 1:1 campaigns, we engaged customers on a personal level and increased sales in ways we hadn't thought were possible. More campaigns and opportunities like this will only help grow our business and the future of our guest engagement strategy.” 

Unlocking the Power of Next-Generation Loyalty 

Loyalty programs have evolved far beyond basic punch cards and visit tracking. To stay competitive, operators must transition to data-driven, personalized loyalty strategies that captivate modern consumers. By leveraging AI, advanced segmentation, subscriptions, gamification, and continuous testing, brands can design dynamic loyalty programs that drive deeper engagement, visit frequency, and CLV. 

Getting loyalty right can have a substantial bottom-line impact. According to McKinsey, companies that excel at personalization generate 40% more revenue from those activities than average players. 

Loyalty modernization worked in a dramatic way for Dutch Bros., a Paytronix client and one of the fastest-growing coffee companies in the US. After replacing an old punch-card system with its first-ever digital loyalty program on the Paytronix customer experience platform, the brand gained 1.4 million members in the first month alone. Dutch Bros. attributes the success of the launch to capabilities like personalization and audience segmentation, digitized Dutch Bros. stickers and other gamification elements, and real-time nurturing for each user journey.

The opportunity is clear for restaurants and convenience stores to foster brand affinity and profitability by implementing next-gen loyalty capabilities. With a best-in-class, data-driven loyalty platform, you can deploy innovative reward structures, intelligent customer segmentation, and engaging experiences that keep your guests coming back. 

To learn how Paytronix can help you develop a high-performing, personalized loyalty program tailored to your business, download our complimentary loyalty guides for restaurants or convenience stores today. Contact us now to take your customer loyalty strategy to the next level.