Are subscriptions the future of loyalty?

 

By: Ray Chelstowski / Hilton Barbour

Subscription services have found their way into every possible nook and cranny of our lives in the past 2 years. Marketing professor Scott Galloway frequently talks about “rundles” (recurring revenue bundles) on his popular podcast PIVOT and with good reason. Amidst the uncertainty and yo-yo that is our global Covid lives, if a business can consistently secure recurring revenues from a loyal customer base, then some of that revenue and operating uncertainty goes away. Executives like that. So do shareholders and market analysts.

The restaurant business, a sector that has personified the yo-yo of trying to operate during Covid, has seen a fair amount of subscription experimentation in the last 2 years. Panera Bread was an early adopter of a subscription business and, by most accounts, has seen fairly consistent returns since going national. This episode of the “ Let’s Talk Loyalty” podcast talks about the Panera Bread story which is fascinating. Well worth 30 minutes over lunch…and a Panera sandwich?

This week we caught the news that fast casual chain Sweetgreen were testing a new subscription plan called “Sweetpass”. Sweetpass will offer daily discounts instead of free items. For a monthly fee of $10, subscribers receive a $3 discount on each purchase. The pass is available through mid-January and is valid for 30 days, with the pilot ending mid-February. The Sweetpass pilot comes on the heels of Olive Garden’s “Never Ending Pasta Pass” and Taco Bell’s “Taco Lovers Pass”.  

The news about Sweetpass comes six weeks after the brand’s initial public offering (IPO) in November, which beat initial pricing estimates. Since then, share prices have dipped which probably highlights the volatility of the sector more than the Sweetgreen offering but does require the company to respond with something like a loyalty or subscription offering. The brand is betting that a subscription program could boost frequency and trial with its semi-frequent customers, converting them into fans and building habits that last beyond the duration of their subscription.  

 

Many brands in the QSR space are going to keep a close eye on this test and begin to model out how a subscription initiative may best serve their most loyal customers. North of the border McDonalds Canada launched their MyMcDonalds Rewards in November 2021 and early signs suggest that guest uptake has been strong, particularly over the holiday period. The inherent benefit is that these subscription programs reward additional purchases as opposed to giving away free items. It limits cost exposure and puts the focus on increasing a customer’s visit frequency.  

 

Loyalty and subscription programs aren’t a sure-fire hit though. Particularly because they can operational complexity at the store level which can negatively impact customer experience. In late December, news broke that sandwich and coffee chain Pret a Manger is facing widespread customer backlash after failing to accommodate subscribers’ asks for menu items supposedly covered by the program. Determining how to deploy and what demand a brand can meet is critical to success on a short- and long-term basis. If a program gets off on the wrong foot, it might be difficult to regain trust with those who had once been your most loyal customers.  

Right now, the risk seems to be worth the potential reward. According to Zipporah Allen, chief digital officer at Taco Bell, said the brand is “thrilled with the positive reception the Taco Lover’s Pass has received” but declined to disclose quantitative details about the program’s performance so far. 

While it’s too early to call this a “must follow” 2022 trend, if the Sweetpass pilot is a success it’s a fairly safe bet to assume that the marketplace will soon be filled with more casual dining subscription efforts.

 

A January Shout-out

We push this newsletter out each week to several thousand of our closest loyalty friends. We appreciate the time you give us in your busy schedule. If you’ve got feedback, or suggestions, on how we can make this newsletter more interesting and useful for you, drop us a line. We’d love to hear from you.

 

Ray.chelstowski@kognitiv.com