Switch to Digital Restaurant Loyalty Card: How and Why?

If you’re still using paper loyalty cards at your restaurant, it might be time to consider going digital. Traditional paper-based loyalty cards are becoming a thing of the past. Switching to a digital loyalty card system isn’t just about keeping up with the times–it’s about making life easier for you and your customers. Not to mention, you’ll save money and ditch the hassle of dealing with physical cards! 

Digital loyalty programs offer convenience, better tracking, and more personalized rewards, helping you build stronger relationships with your patrons. But how exactly can you transition from paper to digital, and why is it worth it?

In this post, we’ll explore the benefits of going digital and provide you with the step-by-step guide on how to switch to a digital restaurant loyalty card seamlessly, all while enhancing customer loyalty and boosting your bottom line. Let’s dive in!

What is a Loyalty Card?

A loyalty card is a card that businesses give to customers as a way of rewarding them for their repeat business. The main idea behind a loyalty card is to create an incentive for customers to keep coming back by offering rewards, discounts, or exclusive offers based on their purchase habits. These cards help businesses track spending patterns and build stronger, long-term relationships with their customers.

Types of Loyalty Cards

There are two types of loyalty cards, but they generally serve the same purpose: to keep customers engaged and loyal to the brand.

1. Stamp Cards

Stamp cards are one of the simplest and most common types of loyalty cards, typically used by small businesses like cafes, restaurants, and retail shops. With a stamp card, customers get a stamp each time they make a purchase. Once the card is filled (e.g. 10 stamps), they earn a reward, like a free product or a discount.

2. Magnetic Strip Cards

These cards are more advanced and are often used by larger businesses. They work similarly to a credit card, with a magnetic strip that holds customer information and tracks their purchases digitally. For example, Coffee Bean and Aeon Member Cards allow customers to load funds or earn points, which can be redeemed for discounts or free items.

How Does a Loyalty Card Work?

If you already have a loyalty card system in place, you’re probably familiar with how it works. But let’s take a quick refresher!

Loyalty cards come in many different forms of loyalty programs, and their mechanics vary depending on the business. Here are some examples of how popular brands use loyalty cards:

1. Point-Based

In a points-based system, customers earn points for every purchase they make. For example, Starbucks offers stars with every transaction, which can later be redeemed for free drinks, food, or discounts. The more customers spend, the more points they earn, creating an incentive to keep coming back.

2. Cashback Program

Some businesses use a cashback model, where customers earn a percentage of their purchase back as credit. For example, Aeon Member Card gives customers cashback for every purchase made, which can be used toward future purchases. This system gives customers immediate value for their spending, encouraging them to keep coming back. 

3. Stamp Cards – The Journey

For small businesses, stamp cards are a simply and effective way to build loyalty. For example, Tedboy Bakery offers a “Sip & Collect” stamp card where customers get a stamp for each drink purchase. Once the card is full, customers can redeem their stamps for a free drink. This creates a clear, tangible goal that motivates customers to return and complete the card.

There are more tried and tested types of loyalty programs out there–each offering different benefits depending on your business model and goals. Whether you’re looking for a simple rewards system, something more personalized, or even a problem that encourages social engagement, the options are endless. Test out different programs, analyze the results, and refine your approach until you find the perfect fit.

Now that you’re reminded of the different types of loyalty programs, let’s look at the pros and cons of physical loyalty cards and digital loyalty cards.

What Are the Different Ways to Digitize Your Loyalty Cards?

As businesses increasingly shift towards digital loyalty programs, there are several options available for you to transition from physical cards to a more efficient, scalable digital system. Depending on your needs, budget, and resources, you can choose from a variety of methods to implement digital loyalty cards. Let’s explore the three main options available: Customer Relationship Management (CRM) vendors, point-of-sale (POS) vendors, and building your own custom solution.

1. CRM Vendors

CRM vendors specialize in offering comprehensive solutions for managing customer data, loyalty programs, and marketing campaigns. These platforms often come with built-in loyalty functionality, making it easier for businesses to implement a digital loyalty system without needing extensive technical expertise.

• Pros:
  • Turnkey Solution: CRM vendors provide an all-in-one solution, which means you don’t have to worry about developing or maintaining the system yourself.
  • Integration: Many CRM systems are designed to integrate seamlessly with your existing sales and marketing tools, helping you manage customer relationships and loyalty efforts from one platform.
  • Data-Driven Insights: CRM platforms usually offer robust analytics, enabling you to track customer behavior, loyalty trends, and program performance.

• Cons:
  • Cost: CRM vendors typically charge ongoing subscription fees, and while these fees often cover customer support and updates, they can be expensive, particularly for smaller businesses.
  • Customization Limits: Depending on the vendor, you may be restricted in terms of customizing the loyalty program to fit your brand’s unique needs.

Popular CRM Options: Salesforce, HubSpot, Zoho CRM, and SimpleLoyalty are among the most commonly used CRM platforms for businesses looking to digitize their loyalty programs.

Many POS systems now come with built-in CRM functionality, which can help businesses manage digital loyalty programs directly through their sales platform. If you already have a POS system in place, this could be the most seamless and cost-effective way to digitize your loyalty cards.

• Pros:
  • Integration with Sales: POS-based loyalty systems allow you to collect customer data automatically during transactions, making it easier to track purchases, issue rewards, and create personalized offers.
  • Ease of Use: Since the system is integrated into the POS, your employees don’t need to learn a new platform or process.
  • Lower Implementation Costs: Many POS systems that offer CRM and loyalty features are often more affordable than standalone CRM platforms.
• Cons:
  • Limited Functionality: While POS systems with CRM features are great for managing loyalty data, they may not offer the level of customization or advanced features available with dedicated CRM platforms.
  • Dependence on Hardware: If your POS system is outdated or needs upgrading, digitizing loyalty cards could become more complex and costly.

Popular POS Vendors with CRM and Loyalty Integration: Square, Lightspeed, Shopify POS, and Toast POS all offer integrated loyalty functionality.

3. Create Your Own (Custom App or CRM)

For businesses with the resources and a desire for full control, creating your own custom loyalty app or CRM is another option. This approach allows you to build a tailored solution that meets your exact needs and brand requirements.

• Pros:
  • Full Customization: A custom app or CRM gives you complete control over the design, user experience, and loyalty mechanics. You can create a truly unique program that reflects your brand’s personality and goals.
  • Ownership: You have full ownership of the system, including its data, functionality, and updates.
  • Scalability: As your business grows, you can adapt and scale your system to meet new demands without relying on a third-party vendor.
• Cons:
  • High Cost: Developing your own custom solution can be expensive, particularly if you need to hire external developers, designers, or a full technical team.
  • Manpower Requirements: You’ll need specialized personnel—such as developers, project managers, and UX/UI designers—to build and maintain the system. Finding and retaining the right talent can be time-consuming and costly.
  • Maintenance and Troubleshooting: A custom system requires ongoing maintenance to ensure smooth functionality. Regular updates, bug fixes, and troubleshooting can be time-intensive and require dedicated technical staff.
  • Time to Develop: Creating a functioning app or CRM with a custom loyalty program can take several months (typically 6-12 months, depending on the complexity). During this time, your business will need to continue operating without the benefits of the new system.

Key Considerations: If you decide to build your own system, be prepared for long-term commitments in terms of time, costs, and resources. You’ll need a team with specialized skills in software development, database management, and system security to ensure your loyalty program runs smoothly.

Step-by-Step Process to Transition from Loyalty Cards to Digital Loyalty

Making the leap from physical loyalty cards to digital loyalty programs is a significant move that can improve customer engagement and streamline your business operations. Here’s a step-by-step guide to help you smoothly transition to a digital loyalty system. 

Step 1: Evaluate Your Current Loyalty Program

Before you make the switch, it’s essential to assess how your current loyalty program works and how it can be improved with digital integration.

• Assess the Existing Loyalty Structure: Take a close look at your current physical loyalty card system. How effective is it in driving customer retention? What are the existing customer engagement levels?
  • Customer Loyalty: Are your customers returning frequently? What behaviors does your current reward structure encourage? For example, do customers earn a free coffee after collecting 5 stamps, or 100 points for a free item?
  • Reward Structure: Understanding how customers interact with your rewards (such as collecting stamps or points) will give you a clearer picture of what digital features should replace the traditional method. Make sure to have a clear map of how the new system will mimic or improve the existing reward structure.

Step 2: Choose a Digital Loyalty Program Provider

Now that you understand your current system, it’s time to select a digital loyalty program that best meets your business and customer needs.

• Understand Your Business Needs: Look for a provider that aligns with your business size, industry, and customer base. Digital loyalty systems are designed to scale, but you need to make sure the one you choose supports your unique needs.
• Customer Preferences: 53% of customers prefer loyalty programs that are easy to use. This means the digital solution you choose must have a user-friendly interface, be easily accessible, and have seamless integration with your existing systems.
• Key Features to Look For:
  • User-Friendly Interface: The system should be intuitive for both your customers and your staff.
  • Customer Data Management: Look for a solution that makes it easy to collect and manage customer data (e.g., contact information, purchase history, and preferences).
  • Mobile App Integration: Customers should be able to access their loyalty rewards easily via a mobile app, making it convenient for them to check points and redeem offers on the go.

During the Transition, Collect Customer Data

When moving from physical loyalty cards, there are several steps you should take to ensure that you don’t lose valuable customer data during the switch.

If You’re Using Stamp-Based Loyalty Cards:

1. Manually Compile Customer Data: Since stamp cards don’t capture customer data, manually compile any available information, such as email addresses, phone numbers, and birthdays, by encouraging customers to submit their details for a reward (e.g., free coffee) when they return their cards.
   • Offer Incentives for Card Return: Incentivize customers to return their stamp cards by providing a reward in exchange for providing their contact details.
   • Data Transfer: Assure customers that any stamps collected will be transferred to the new digital loyalty system once they register their details.
2. Input Data Into a Spreadsheet: Store this customer data in a spreadsheet (e.g., Excel). You can then share it with your digital loyalty provider so that they can upload it into the new system. This ensures that these customers can continue receiving rewards post-transition and that their information is used for marketing campaigns.

If You’re Using Magnetic Strip Loyalty Cards:

1. Understand Your Current Data: Magnetic strip cards store essential customer information such as membership ID, name, and sometimes contact information. When a customer uses a card at the POS, this information is sent to your loyalty management system (or ERP).
2. Check for Key Identifiers: Digital loyalty programs typically use a phone number or email as the primary customer identifier. Check if you already have customers’ phone numbers or email addresses in your database.
3. Tie Membership IDs to Customer Identifiers: If your existing system doesn’t already include phone numbers or emails, you’ll need to link them to the loyalty card information:
   • Website Linking: Create a page on your website where customers can link their physical loyalty card to their phone number or email. They will input their membership ID and personal details, making it easier to match them to the digital system.
   • In-Store Linking: When customers return to the store to collect rewards, ask them to provide their phone number or email. This process requires integration with your digital loyalty provider’s system, allowing you to update their profile in real-time.
4. Simplify the Process: Instead of using a membership ID, switch to a simpler identifier (e.g., phone number or email). This removes the hassle for customers and makes it easier for them to engage with the program.

Step 4: Announce Your Transition to Digital Cards

Once the new system is in place, it’s essential to communicate the change effectively to your customers.

• Clear Communication: Let your customers know about the switch to digital loyalty cards. Explain the benefits, such as easier rewards tracking, faster redemptions, and the convenience of accessing their loyalty rewards via an app.
• Reassure Customers: Assure customers that any rewards collected on their physical cards will be transferred to their new digital accounts. Transparency is key to maintaining customer trust during the transition.
• Leverage Social Media: Social media platforms like Instagram, Facebook, and Twitter are great tools to spread the word. 70% of shoppers look to Instagram for inspiration before making a purchase, so be sure to promote the new system across these channels. You can use posts, stories, and even influencer collaborations to get the message across.

Step 5: Phase Out Physical Cards and Gather Feedback

After transitioning, it’s important to phase out physical cards gradually while ensuring that the new system is working smoothly for your customers.

• Create a Transition Period: If possible, set up a timeline for phasing out physical cards. You can offer customers a few months to link their physical card to the digital system and use both cards during the transition period.
• Customer Feedback: Collect feedback from customers regularly to see how they are adapting to the new system. Use surveys or direct communication to learn about their experiences, and make improvements where necessary.
• Set a Final Deadline: Once the transition period is over, set a clear deadline for fully phasing out physical cards. After this date, all loyalty interactions should be digital.

Step 6: Promote the Transition

To ensure a smooth transition, actively promote the new digital loyalty program and highlight its benefits. Here’s how you can promote it effectively:

• Special Promotions: Offer exclusive rewards or discounts for customers who transition to the digital loyalty program. This can help incentivize customers to make the switch quickly.
• In-Store Promotions: Use in-store signage and staff to remind customers to download the app or register for the digital loyalty program.
• Email and SMS Marketing: Send out emails or SMS to your existing customers, letting them know about the changes and how to get started with the new system.

How to Determine if Loyalty Cards Are Worth the Investment for Your Restaurant

Implementing a loyalty program can transform your restaurant’s customer retention strategy, whether you’re already using one or are considering launching one. The key to success lies in evaluating both the potential benefits and the costs before moving forward.

Whether you’re considering physical stamp cards, membership cards, or a sleek digital loyalty card, understanding the financial and operational impacts is essential to ensure you’re making a smart investment.

1. Cost-Benefit Analysis for Physical Loyalty Cards

Stamp Cards:

For traditional stamp cards, businesses can track their effectiveness by collecting fully stamped cards or monitoring the number of incentive redemptions. This will give a basic understanding of how many customers are using their cards and the overall uptake of the loyalty program. However, a major limitation of this approach is that it provides very limited data. Businesses can count how many cards are used, but the analysis of customer behavior and engagement is far more challenging.

• Data Tracking: You’ll have to manually check how many cards were issued, how many were returned, and how often customers redeemed their rewards. This makes data collection tedious and prone to human error.
• Effectiveness Comparison: To determine if the stamp card is working, businesses often need to compare customer behavior before and after the program’s launch. This could involve tracking sales or visits during a specific period to see if there’s a noticeable increase after the loyalty program is introduced.

Member Cards [e.g., Coffee Bean)

Businesses offering membership or reward cards (like Coffee Bean & Tea Leaf) may have a money formalized system where customers register their cards, providing better tracking ability.

• Usage Rate: One effective way to assess the success of a membership card is to measure how many customers are using their card, how often, and whether those cardholders are making additional purchases. For example, If a customer uses their card five times in a month, does this increase their average spend per visit compared to non-members?
• Sales Impact: If the loyalty program has a clear incentive structure, businesses should calculate if the additional purchases from loyalty members offset the cost of offering discounts or rewards.

In both cases, evaluating the effectiveness of physical loyalty cards can be time-consuming and often lacks the precision needed to gain valuable insights into customer behavior. Without detailed data, you’re left making educated guesses rather than informed decisions.

2. Digital Loyalty Cards/Memberships: Streamlining the Process

Digital loyalty cards and memberships can greatly simplify both the customer experience and the business’ ability to analyze data. Here’s how they compare why they might be more beneficial than physical cards:

Elimination Physical Inconveniences:

Unlike physical cards, digital loyalty cards don’t take up space in customers’ wallets or purses. There’s no need to worry about lost or forgotten cards. With a smartphone app or a website, customers can always check their status and rewards at any time, making the process more convenient. Brands like Starbucks and TGI Fridays have perfected this model, making it easy for customers to view rewards, track purchases, and access promotions in real time.

• Instant Customization: With digital loyalty programs, businesses can quickly update the terms and conditions, reward mechanics, or promotional offerings. If you need to change the program (e.g., adding new rewards or changing point accumulation rates), you can update the app or website instantly. This is far more efficient than reprinting physical cards or manually informing customers about updates.
• Scalability: Digital loyalty systems scale much more easily than physical cards. Whether you’re running a small local café or a chain of restaurants, digital cards can be distributed without worrying about card inventory or distribution costs. Moreover, scaling up the number of customers doesn’t require physical resources like new cards or stamps.

Convenience for Customers

For customers, digital loyalty programs are extremely convenient. All they need to do is download an app or access a brand’s website to track their points or rewards. This real-time access to their loyalty status helps maintain engagement with the program. For example:

• Starbucks allows customers to check their rewards status, use mobile ordering, and receive targeted offers all within their app, making it easy for users to engage with the brand.
• TGI Fridays uses a similar app, where customers can earn and redeem points digitally, ensuring a seamless experience for those who prefer digital engagement over physical cards.

Data Collection and Analysis

One of the major advantages of digital loyalty cards is the ability to collect rich data on customer behavior. With digital systems, businesses can systematically track customer activity, purchases, preferences, and engagement. This data can be stored in a database and used for marketing campaigns, personalization, and analysis.

• Marketing Opportunities: Digital loyalty systems allow businesses to reach out to customers through push notifications, emails, social media, or in-app messages. This data can drive targeted marketing efforts, such as offering personalized discounts or promotions based on customer preferences and previous purchases. For example, if a customer regularly purchases a particular drink at Starbucks, the app can send them a personalized offer or discount for that specific item.
• Tracking Customer Behavior: By analyzing digital data, businesses can identify trends and adjust their loyalty programs to maximize effectiveness. For instance, if a particular reward is not enticing enough to encourage repeat visits, businesses can quickly tweak the rewards structure without waiting for a new round of physical card printing.

Costs: Flexible Model

The cost of implementing a digital loyalty system can vary. There are free options, like integrating a simple loyalty program through your website or social media platforms, or paid options, where you can invest in dedicated loyalty platforms with more robust features. Paid systems often come with advanced analytics, real-time reporting, customer segmentation, and automated marketing tools that make them worth the investment for many businesses.

• Low Entry Cost: Many platforms offer free trials or tiered pricing based on the number of users or features required, making it easier for businesses of all sizes to enter the digital loyalty space without a hefty upfront cost.

Example of Brands Who Went Digital

The transition from physical loyalty cards to digital has become increasingly popular across various industries, especially in Food & Beverage (F&B) and Retail. Let’s look at some prominent examples of brands that made the shift, and the benefits they’ve reaped by going digital. 

F&B: Starbucks and Coffee Bean

• Starbucks: One of the most recognizable names in the F&B industry, Starbucks initially relied on physical cards for its loyalty program. However, with the rise of digital technology, Starbucks shifted to a mobile app that integrates loyalty rewards with features like mobile ordering, personalized promotions, and payment options. Customers can check their rewards balance, earn stars, and redeem offers all within the app, offering a seamless experience. Starbucks’ digital program has significantly improved customer engagement and increased retention, with users able to easily track their rewards and receive timely offers. The physical card option is still available for those who prefer it, but the app has become the primary platform for Starbucks loyalty.
• Coffee Bean & Tea Leaf: Similar to Starbucks, Coffee Bean transitioned from physical cards to a hybrid system, where customers can use both physical cards and the Coffee Bean app. The app provides digital loyalty tracking, exclusive offers, and promotional campaigns. It allows customers to collect rewards digitally, track points, and redeem them for free products, providing added convenience and personalized experiences. By embracing digital loyalty, Coffee Bean has enhanced customer convenience and made it easier to engage with their brand.

Retail: Sen Heng

• Sen Heng: This Malaysian electronics retailer has successfully transitioned from a physical loyalty card system to a digital one through its Sen Heng PlusOne membership program. Initially, Sen Heng offered a traditional membership card, but as technology advanced, the brand launched a mobile app for easier access to membership perks. The app allows customers to track points, access exclusive deals, and receive personalized discounts based on their shopping history.
  Through the Sen Heng PlusOne app, customers can:
  • Earn loyalty points with each purchase.
  • Receive real-time updates about promotions and special offers.
  • Redeem rewards quickly and conveniently using their smartphones.

The digital shift has made the loyalty program more efficient, reducing operational costs and increasing customer engagement. With app notifications and personalized offers, Sen Heng has been able to create a more tailored shopping experience for its customers, which has helped to increase brand loyalty and repeat business.

Ready to Go Digital?

Transitioning from physical loyalty cards to a digital loyalty program doesn’t have to be overwhelming. By following the step-by-step process, you can smoothly shift your business to a more efficient and scalable digital solution. With careful planning and clear communication, your customers will appreciate the convenience and benefits of a digital loyalty program, and your business will see the rewards in increased engagement and retention.

Ready to make the move to digital? SimpleLoyalty offers an easy-to-use platform designed to help businesses like yours transition seamlessly to a digital loyalty program.