Subscription is the new loyalty and other takeaways from HOSTECH 2022

This year’s HOSTECH event brought the effect of the pandemic on the hospitality industry sharply into focus.

It rapidly accelerated customer adoption of food delivery – enabled in large part by technology – and created an opportunity for entirely digital business models in hospitality.

The same technology that opened up these new sales channels and experiences also brought complicated logistical challenges and system and provider integration nightmares.

While the pandemic was a clear theme, an even stronger theme was everyone’s focus on getting closer to customers and trying to make sense of the vast datasets produced by new digital solutions.

Brands are clearly working extremely hard in a broad swathe of ways to maintain the customer relationship and not lose it completely to delivery platforms.

We see an expansion of traditional marketing outreach, social media engagement, personalisation, loyalty schemes and more.

But the two most interesting talks of the day came from Victor Lugger, CEO and co-founder of Big Mamma Group and Sarah Venning, chief information & transformation officer at Pret A Manger.

Victor talked about how much impact a simple, focused product–facilitating payment on a customer device rather than a card machine–has on a business, the experience delivered and the server’s time.

Sarah spoke about the success of the coffee subscription service Pret launched last year.

And that’s when I realised: a subscription is the answer to all these challenges.

It’s a fast track way to better understand customers, build loyalty, facilitate seamless payments and more.

It’s too late to simply digitise loyalty

The first initiative we worked on with Nando’s was moving its loyalty programme from plastic to a digital solution. That was three years ago.

Many businesses, especially coffee shops, still have a paper and stamp loyalty programme, and they are only now thinking about how to make it digital.

Even if they start now, by the time they get there, it will be obsolete, or at least nothing unique.

The main argument for a digital loyalty solution is reducing friction (and eliminating the waste of issuing and managing physical loyalty cards).

It is definitely easier to tap a loyalty card on your phone, than digging a physical card out of your wallet, if you even remembered to bring it with you.

The side effect of adding the card onto a phone (via email or an app) is coupling it to the customer’s identity - or at least an email address.

The benefit for the business is it now knows how to get in touch and is granted access to some portion of behaviour and habits.

But it also benefits the customer since they can now be offered more personalised benefits relevant to them.

The second benefit of this linking is automating loyalty altogether (at least the earning part). Every time a customer transacts with the business digitally, they can automatically earn points.

And once enough points have been collected, they can be notified about earning a reward, via email or a notification on their phone.

However, physical transactions still have friction. At the minimum tapping the phone on a reader, as well as paying for the food and drinks. Loyalty schemes are still ‘bolted to the side’ of the business. 

So, as a thought experiment, let’s put Sunday, Nando’s loyalty and Pret coffee subscription together, and see what happens.

Subscription as identity, loyalty and payments: an example

I think the easiest way to imagine this is from the customer’s perspective as their overall experience. Let’s say I moved to a new neighbourhood and down the street, there’s a cosy coffee shop.

It’s one of a mid-sized chain but feels local, and I really like that feeling, it’s personal.

The first time I get a coffee there, the barista asks me whether I’m a member, and when I say I’m not, she tells me I could get my first coffee for free if I sign up.

All I need to do is scan a QR code. It only takes a minute, and I get one coffee free every month.

That sounds great, so I do. All it takes is to give my email address and I get an Apple Wallet membership pass.

But a short time later I get an email, suggesting I download the coffee chain’s app. It will let me order coffee ahead of time and if I let it remember my debit card, I can also skip the payment.

I just turn up, tap my phone to check in, get my delicious coffee, say hello to one of the many dogs that are always inside, and I’m done.

I drink a lot of coffee (trust me, I do), and since I go to this shop every morning, soon enough I get another email saying “you’ve earned a reward, get any cake for free with your next coffee.”

Sure enough, the next day the barista reminds me about that. I will never say no to cake.

And while I’m there I’m also going to get a croissant for my girlfriend. I get my card out to pay, but the barista says “no it’s okay, I can charge that to your saved card”.

Clever, I think to myself.

The next day I go into the city, and as I’m walking my phone buzzes – there’s a shop from my local chain around the corner, would I fancy a coffee?

I really would actually, so I turn the corner and go visit. 

As I walk in, I get another buzz – achievement unlocked, I visited another store, the coffee is on the house this time.

I didn’t know there were achievements, this is fun, what else can this app do?

Turns out, I can pay with the app for everything I get from the shop, pre-ordered or not.

And there’s a subscription option too – pay £5 a month and get one free coffee every week, or £25 for completely unlimited coffee. Caffeine addiction ahoy!

Interestingly, as a subscriber, I can also switch to monthly billing for all the food (apparently powered by Klarna, never heard of it, but great).

Apparently, they are also trialling a checkout-free shopping experience with no tills at all, like Amazon and the big supermarkets.

Just walk in, check in with my phone at the door, get the coffee and food, walk out and get the bill later.

I could keep going, there are so many ideas to try out, but hopefully, you get the idea.

The value of memberships and subscriptions

Memberships and subscriptions are the ultimate loyalty scheme. As a customer, I get rewarded and I don’t have to do anything.

I’m happy to part with some of my information because I know what I’m getting in exchange.

Meanwhile, the business gets to know me, gradually. It can connect my digital and physical identities, understand my habits, and send me relevant offers.

They also save on payment transaction fees and on staff time dealing with the card machine, build a steady, predictable revenue stream from subscriptions, and, most crucially, bring me back more often, because I’m a member and I benefit from choosing this shop over the competition.

This doesn’t only apply to coffee shops or quick-service restaurants either.

As a member of a dining chain, I can still get perks like fast-track table bookings, and the restaurant can remember my egg preference for breakfast!

And if I pay a monthly subscription, maybe I get a bottle of wine for free every week and no delivery fees if I order from home?

The resulting experience is like a local restaurant, where the manager remembers me.

When done right, technology disappears into the background

I really believe the best tech is no tech at all. If I can get an experience of a local place with the efficiency, convenience, consistency and prices of a large chain, that’s a win-win.

At the moment, it feels like the application of technology focuses on individual pieces of the puzzle – better loyalty, better marketing data, better online ordering, better payments – creating integration challenges and improving the experience in bitesize chunks.

I think we can sidestep all those incremental improvements and associated challenges and go straight to the logical conclusion.

It will involve less legacy (because honestly, who likes integrating things with the POS system?), and will end up being cheaper and a better return on investment.

So where do I sign up?