Restaurant tech: Online ordering and loyalty programs help drive customer lifetime value
Besides wiping down groceries, one of the most profound changes to society coming out of the COVID-19 pandemic was the acceleration of digital transformation across nearly every industry. C-suite executives were forced to reorient their businesses with a digital first mindset practically overnight.
A meme that emerged in early 2020 summarized the dynamic well:
McKinsey estimates that e-commerce adoption accelerated by nearly 10 years in just a matter of months.
Meanwhile over the prior decade, a group of intermediators have increasingly disrupted the relationship between brands and consumers, preventing the collection of consumer data and post-purchase communication. The triopoly of Google, Facebook and Amazon controls ~70% of online ad spend but doesn’t readily share underlying customer information with brand marketers.
One segment that saw a particular need for digital transformation during the pandemic was the restaurant industry. With dining rooms across the world virtually shut down overnight, the need for online ordering capabilities was imperative. Restaurants have only recently begun to embrace the online pickup and delivery trend, with the majority of the top ~100 chains in the early innings of building out their digital presence. Similar to the advertising triopoly, aggregators such as Uber Eats, Doordash and GrubHub have presented a challenge to restaurant CMOs, disintermediating the relationship between brand and consumer.
“Covid-19 is accelerating existing QSR trends around the use of technology to enable contactless delivery”
~ David Gibbs, CEO of Yum! Brands on Q1 ’20 earnings call
In the restaurant context, online / mobile ordering platforms are often paired with loyalty programs as a logical extension, solving a fundamental challenge for brands which are incentivized to find ways to “own” their customers and rekindle a direct relationship, eschewing intermediaries like DoorDash and UberEats. These programs represent the reciprocity for use of consumers’ permission driven data, which is becoming the favored approach in the world of digital marketing.
“We’re trying to convert third-party to first-party sales. These companies (the third-party delivery companies), nobody really likes them. Let’s let restaurant people build restaurant tech. Enough of this giving them 30 percent.”
~ Nabeel, Lunchbox founder
Online ordering, mobile ordering and loyalty programs help drive customer lifetime value, a ~5x higher ROI proposition vs. new customer acquisition¹
Rewards programs have been around forever, but digital first, online ordering plus loyalty is a powerful combination for marketers. The largest food & bev focused loyalty platform today is that of Starbucks, with nearly 25 million members representing 53% of in-store spend.
Starbucks Rewards drives top-line growth, encourages brand loyalty, and creates a forum to capture data, enabling meaningful and personalized marketing efforts… not to mention favorable working capital dynamics from pre-paid deposits!
A number of emerging platforms and implementation partners helping build out the infrastructure of online ordering, mobile ordering and loyalty include:
Vertical pure-play SaaS platforms:
Olo (NYSE:OLO): B2B SaaS platform that develops digital ordering and delivery programs for restaurants
ChowNow: Commission-free online ordering system and food ordering app for restaurants
Punchh: Leading loyalty, offers, and engagement platform for restaurants, groceries, retailers, and convenience stores
Slice: Online food ordering platform for independent pizzerias
Odeko: Complete mobile ordering and supply chain management tool specifically focused on artisanal coffee shops
BentoBox: Platform that offers restaurants beautiful, mobile friendly websites to enable online ordering
Ordermark: Aggregates mobile orders across major providers into a single dashboard and printer
Tech-enabled, platform agnostic implementation partners:
Happy Cog: Designs and builds websites, apps, and digital experiences including online ordering and loyalty program management
5&5: Helps restaurants and c-stores implement and manage online ordering, loyalty, website development and POS management
Koala: Creates premium, customizable apps for restaurants to offer digital ordering
Hathway: Implements digital experiences including online ordering and loyalty programs for restaurants and c-stores
The emerging ecosystem of SaaS platforms as well as tech-agnostic system integrators enabling online, mobile ordering and loyalty represents a very compelling investment domain, having emerged a structural winner coming out of the pandemic. While hard hit industries are likely to see pressure in marketing spend, investments into known customers with relevant first party data represents a fairly inelastic and high ROI segment of a marketers’ budget. It’s a large addressable market, and there is massive opportunity within the restaurant vertical alone.
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- Data from Invesp Conversion Rate Optimization
