Marketing Byte: How do Franchises Use Customer Loyalty Programs?

The 2024 Annual Franchise Marketing Report (AFMR) provides data-driven insights that marketing professionals and other leaders can use to measure and elevate their efforts. The franchise space is constantly faced with opportunities and challenges as marketers adapt to industry shifts, including the need to accelerate the digital transformation of their brands.

Franchise CMOs, CEOs, VPs, directors of marketing, and other senior-level marketing leaders completed detailed questionnaires for the sixth annual AFMR. The data and statistical findings were aggregated and analyzed to comprehensively examine the marketing practices, budgets, and strategies across a broad spectrum of franchise brands and sectors.

The use of customer loyalty programs

We have seen many brands use customer loyalty programs to attract new business while also engaging existing customers. These programs often require customers to download an app or join an email list to receive company news, discounts, or promotions. They are most used by restaurants, particularly fast food and QSRs.

Just less than half of the franchises surveyed in the AFMR (46 percent) said they participated in customer loyalty programs. It should be noted that franchises responding to the survey operated in many different industries outside of the food and restaurant space. Unsurprisingly, 96 percent of respondents said they managed their loyalty programs electronically.

Twenty-six percent of the franchises said they offered a free product or service through their loyalty programs, while 17 percent offered a discount. The majority of respondents – 57 percent – offered both a discount or something free through their programs.

There was some variation in how these loyalty programs are managed. Nearly half of the franchises in the survey manage it in-house (48 percent), while 26 percent outsource it. Twenty-six percent said they handle it both in-house while also using an outside company. Nearly all respondents (95 percent) indicated that the loyalty programs are supplemental to their other forms of marketing.

Determining profitability

The question on this topic that received the widest array of responses was in how the franchises determine if the customer loyalty programs were profitable. The straightforward “frequency of purchases” led the way with 55 percent. Three other considerations each received 32 percent of the responses – “customer retention rate,” “average order value,” and “redemption rate.” “Customer lifetime value” (18 percent) and “surveys and feedback” (14 percent) were among the eight different responses to the question about program profitability.