How to Build a Loyalty Program (Lessons from QSR’s and Frequent Flier Programs)

A solid business case for the development of a customer loyalty program.

Last Update: January 20, 2015

Let’s indulge for a moment.

I’m a huge fan of frozen yogurt shops. I’m an even bigger fan of frozen yogurt shops (QSR franchises) that employ simple yet innovative business practices to turn my love of yogurt (products) into an enjoyable experience that keeps me interested (customer loyalty).

Namely, one such company that I stumbled upon in recent months – does that and more. I’m speaking of Menchies, a frozen yogurt chain with over 195 locations in the US, Canada, Japan and Australia.

Menchies has uncovered something so simple … that I began to wonder, “Why aren’t more companies doing this?” And possibly, some are — but they didn’t quite capture my attention.

 

What Makes Menchies So Special

Since Menchie’s 2007 launch, the chain has grown quickly, despite the competitive market growth – I Heart Yogurt, Yogurtland and so on. In July 2010, Restaurant Business Magazine ranked Menchie’s #1 on their Future 50′ list rating Menchie’s as the fastest growing restaurant franchise with a 748 percent growth.

While I don’t have the inside track on their business development strategy, I’d wager that a large majority of the growth is tied to their loyalty program.

 

Using Loyalty Programs to Increase Sales

Even if you aren’t particularly fond of frozen yogurt – as an entrepreneur, you should undoubtedly admire how Menchies leveraged a strategic partnership to take a simple and proven idea from the airline industry and turn it into a winning frozen yogurt formula.

The program is simple. “Reaching 750,000 participants in the first six months, Menchie’s mySmileage loyalty program offers a unique spin on the traditional frequent flier programs that airline companies offer consumers. Through a simple online signup at menchies.com, members of the mySmileage program earn one “Smile” for every dollar spent in stores. Each time a guest earns 50 “Smiles,” Menchie’s automatically loads $5 in Menchie’s money onto their mySmileage card,” according to Franchise Chatter.

Who’s behind this innovative model? Tom Epstein, president and CEO of Franchise Payments Network, worked with Menchies to develop the simple approach. “Our client wanted a program that was hassle-free to its fan base but provided immediate benefits and consistently drove traffic to its stores,” said Epstein.

 

How to Launch a Loyalty Program

Is there a solid business case for developing a loyalty program?

Absolutely. Not only do loyalty programs drive customer retention, they create long-term value, drive direct sales, increase retail foot traffic, encourage online engagement and more. And to be frank, “it costs a business about 5-10 times more to acquire a new customer than it does to sell to an existing one — and on average those current customers of yours spend 67% more than a new one.”

 

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