Navigating DoorDash’s Loyalty Landscape: Is It the Right Fit For Your Restaurant Brand?
The restaurant industry is currently undergoing a significant digital transformation. As more consumers lean towards the convenience of food delivery services, the challenge for brands is to retain their loyalty in this evolving landscape. Simultaneously, the allure of rewards platforms has surged, with consumers eager to maximize their dollar's value.
Recognizing these trends, DoorDash, a prominent third-party delivery (3PD) service, has launched a new loyalty program feature. This initiative allows restaurants to incentivize frequent users with spending-based discounts, mirroring the loyalty benefits usually reserved for patrons of major restaurant chains. For instance, a restaurant might offer a $5 discount for every $50 spent within the DoorDash app, fostering both consumer and brand loyalty to DoorDash. While this strategy undoubtedly presents value for the consumer, it's essential for restaurant brands to weigh the potential advantages against the inherent challenges of such an offering.
A Strategic Move for Brands in the Digital Dining Era
Because of its large pool of customers, DoorDash’s rewards program can entice more customers to order from restaurants leveraging its loyalty feature. With access to a broader customer base, brands can potentially reach new demographics and geographical locations, increasing their acquisition and overall sales. As an added bonus, DoorDash marks participating restaurants with an icon to indicate to customers which brands have implemented the feature.
The rewards program also encourages repeat business and higher average order value (AOV) with spend-based discounts through frequent or larger orders. This heightened loyalty can benefit restaurants by establishing a base of regular customers who regularly return for their favorite meals.
With the exception of the reward itself, brands with a DoorDash storefront are able to configure and enroll stores in their programs at no additional cost. There are no additional marketing fees or commissions beyond the standard DoorDash pricing structure.
As with other marketplaces, this may be a solid start for smaller brands and should be considered as a potential component to any restaurant’s overall strategy.
Strategic Advantages of DoorDash's Loyalty Program
- Broadened Customer Reach: DoorDash's vast user base offers restaurants the chance to tap into new demographics and regions. Participating restaurants are even highlighted with a special icon, signaling their loyalty offerings to potential customers.
- Enhanced Customer Retention: The program incentivizes repeat orders, potentially boosting average order values and fostering a loyal customer base.
- Cost-Effective Marketing: Restaurants can leverage DoorDash's platform without incurring additional marketing fees, aside from the reward costs.
Challenges with DoorDash's Loyalty Initiative
While DoorDash’s loyalty feature offers several benefits, it is not without its drawbacks, particularly for larger or digitally-mature restaurants who want to strengthen their own digital offerings.
First, there’s the profitability problem. Orders placed through 3PD platforms typically come with high fees for restaurants. This cuts into profit margins, especially for smaller businesses with limited resources to absorb these additional costs. By encouraging customers to order through 3PD with additional savings through the loyalty program, brands risk narrowing already-thin margins even further.
Additionally, with DoorDash’s one-size-fits-all loyalty program offering, restaurants cannot offer programs or rewards that are more specifically tailored to their guests. Compared to a more tailored loyalty offering developed for native web and apps, an undifferentiated rewards program may not be as successful in attracting new customers, providing value to end users, fostering relationships, and increasing guest loyalty.
Perhaps most importantly, DoorDash's loyalty feature could result in decreased engagement for restaurant brands on their own apps. As customers are enticed by the rewards and advantages provided within the DoorDash ecosystem, they may be incentivized to order more frequently through the platform to reap these benefits. As a result, brands could see reduced activity in their native apps and loyalty programs as customers migrate toward DoorDash’s loyalty program.
- Profitability Concerns: High commission fees on 3PD platforms can erode profit margins. The loyalty discounts might exacerbate this, especially for smaller establishments.
- Generic Loyalty Offerings: DoorDash's standardized program lacks the personal touch that a brand-specific loyalty program can offer.
- Potential Decline in Native App Engagement: As customers flock to DoorDash for its loyalty benefits, brands might witness a dip in their native app usage and engagement.
- Loss of Direct Customer Interaction: Interacting through a third-party platform can dilute the brand experience and lead to potential communication gaps.
Key Takeaways: Crafting Effective Loyalty Programs
- Customization Over Conformity: While DoorDash offers a broad loyalty solution, restaurants should prioritize tailored programs that resonate with their unique customer base and brand identity.
- Value Beyond Discounts: Successful loyalty programs provide both monetary and experiential rewards, setting brands apart in a competitive market.
- Strategic Partnerships: Investing in a strategic agency partnership can amplify a brand's loyalty efforts, ensuring a program that benefits both the restaurant and its patrons.
Final Thoughts: Navigating the Loyalty Landscape in the Digital Dining Era
DoorDash's loyalty program is an interesting proposition, but brands must evaluate its fit with their larger business strategy. As the digital landscape evolves, brands need to have the partnerships and strategy in place to help navigate these changes, ensuring they remain at the forefront of customer loyalty and engagement.
To keep up with other industry trends and developments, follow Bounteous Restaurant & Convenience on LinkedIn.