A bank of seven video monitors at the Hard Rock Café‘s Times Square location conveys the brand’s global reach. The monitors, which greet visitors as they enter the downstairs lobby, show what’s happening in Hard Rock restaurants around the world, in geographies as diverse as Beijing, London, and Rome. Most are staid, birds-eye-view shots of people dining or shopping, though there’s a sudden flurry of activity in Cairo when the wait staff launches into what seems to be an impromptu Y.M.C.A. dance.
While it’s not particularly unusual for companies with global reach to show cross-country brand unity in this manner, until last year that unity was largely superficial for Hard Rock Café customers. The issue was this: Its global loyalty program was actually a series of disconnected programs with the same name.
The brand has 177 venues in 58 countries, including 141 restaurants, 19 hotels, and eight casinos. About 60% of the restaurants are franchised and the remaining 40% are corporate owned. In the United States and most of Western Europe, Hard Rock corporate oversees the chain. But in emerging markets, Hard Rock Café restaurants are run via licensed agreements by local business partners, who have a better grasp of the cultural and economic nuances of the region.
Over time this led to inconsistencies among the franchises, many of which ran their own loyalty programs. Benefits accrued by customers worked at some locations, but not others. “Imagine you’re in Germany,” says John Galloway, Hard Rock Café’s CMO and VP of marketing. “You go to Munich, join the program, but then you go to Hamburg and the program isn’t accepted there.”
He’s referring to All Access, Hard Rock Café’s previous loyalty program, which accrued 715,869 members in a decade. On paper, it sounded like a sweet deal: first available and preferred seating and discounts on food and merchandise, bonus balances for every $200 spent, and occasional email updates.
“Unfortunately, the program didn’t work globally,” Galloway says. “For some franchises, their IT systems weren’t able to support it.”
In January Hard Rock Café’s parent company, Hard Rock Café International, announced the launch of its unified global loyalty program, Hard Rock Rewards. The press release breezily described it as “a unified guest affinity program developed to recognize and reward Hard Rock’s dedicated fans with exclusive privileges…” Hard Rock Rewards has two tiers: a free program and a VIP program, which has a $24.95 annual membership fee and offers “exclusive perks and benefits fit for a rock-star.” To sign up, customers can enroll online or through dedicated in-store kiosks.
This simplicity belies what was actually an incredibly complicated process for Hard Rock International—one that included extensive customer research, buy-in from numerous internal managers across various Hard Rock departments, a technology update, respect for the interests of existing loyalty program members, and adherence to privacy laws across countries.
The program might have officially launched in 2013, but the journey began two and a half years ago, and it was rife with challenges—both internal and external.
Loyalty is frequency
Hard Rock Café, like its peers in the casual dining space, exists in an awkward time. The emergence of “polished casual” chains, such as Yard House and BJ’s, have siphoned off some middle- and upper-income diners, says Darren Tristano, EVP at Technomic, a consultation and research firm dedicated to the food industry. Conversely, lower-income consumers are shifting down to “fast casual” restaurants, such as Chipotle or Five Guys.
That leaves casual dining restaurants like Hard Rock Café—which Tristano defines as restaurants where the average entrée ranges from $12 to $25—in a bit of a lurch. “They’re getting hit on both ends and it’s hard to steal business from other parts of the industry,” Tristano says. “Even brands like Red Lobster have been struggling of late.”
In August 2012 Darden Concepts Inc.—the parent company of Red Lobster and Olive Garden—finalized its purchase of Yard House USA for $585 million. It’s a play, Tristano says, to bring in new dining concepts to keep its upper-income customer segment intact. But Darden is still struggling; in February it announced an expected 4.5% Q3 revenue loss.
It’s unclear how the privately held Hard Rock brands are currently faring (they were purchased in 2007 for $965 million by the Seminole Tribe of Florida). What is clear, however, is that loyalty in the restaurant business is as crucial for success as it is difficult to cultivate.
A trends survey from the October 2012 National Restaurant Association’s Restaurant Industry Forecast report found that repeat customers comprise 64% of casual dining sales. Although this number is higher than it was the year previous, restaurant owners maintain that customer loyalty is increasingly difficult to instill.
This might be because restaurant loyalty programs are growing in popularity—hence, there’s more competition. Mark Johnson, president and CEO of loyalty marketer association Loyalty 360, notes that while there have been “fits and starts” in restaurant loyalty programs in the past, they hadn’t been targeted to specific audiences. A 2013 Technomic report on loyalty in the food service industry found that, among the top 200 restaurant chains (which weren’t exclusively casual dining establishments), there were few loyalty programs in place. “Finances are a major prohibitor,” Tristano says, “because you have to tie in your costs across the entire system.” Moreover, owners and managers of restaurants often aren’t savvy marketers and are more concerned with operational efficiencies like speed of service.
But Johnson sees more casual dining restaurants offering loyalty programs. Technology today, he says, makes it easier: “When you look at the simplicity of reporting and the granularity of analytics, they make [data] more actionable. If you see this segmentation, you can act on this behavior. [So,] there’s a transition now to a consumer-based marketing approach rather than a mass-market approach.”
Although most individuals don’t patronize casual dining restaurants as often as they do Starbucks or Dunkin’ Donuts (both of which have mature loyalty programs), there’s still an element of repeat business that some casual dining establishments aim to capitalize on.
“When you get down to loyalty in the restaurant industry, it doesn’t mean loyalty, it means frequency,” Tristano says. “You won’t eat at a restaurant three meals a day, seven days a week. They’re trying to find frequency programs that incent and reward patrons for coming back and being regular customers.”
In this respect, Hard Rock International finds itself in an advantageous position. Across its various properties including casinos, restaurants, hotels, stores, and sponsored concerts and performances, the chain has numerous low-cost, high-value benefits to provide customers that go well beyond a 10% meal discount.
Loyal by design
The development of Hard Rock Rewards began with an ear to the ground. With the assistance of Brierley+Partners, a firm that designs and manages loyalty programs, Hard Rock began an extensive research and survey campaign, comprising of tens of thousands of customers across multiple nationalities and languages. The goal was to ensure that loyalty value propositions resonated—and that the rewards Hard Rock wanted to offer would achieve the desired customer behavior: more visits to Hard Rock properties and purchases of Hard Rock products.
“What’s been a success and what will continue to be a success is we listened to what customers want from us,” says Kim Matlock, Hard Rock International’s senior director of digital marketing and CRM. The results of the research left Hard Rock with three key takeaways, Matlock says: customers wanted consistent communication, a points-based approach, and rewards that provided unique experiences and not just the occasional discount.
Those latter two points, says Amy Barnett, SVP of strategy at Brierley+Partners, indicate a changing trend in loyalty. “The days of real, structured loyalty, where you do one behavior and earn one reward, have [changed] quite a bit,” she says. “Those earned rewards, based on a specific behavior, are a key component for driving sales and revenue.”
The All Access program didn’t have a tremendous library of rewards, Barnett notes. “Research helped us zone in on the highest perceived value at a very profitable cost,” she says, referring to the new program. “So rather than discounts, we could give experiential rewards.” These experiential benefits include invitations to grand opening parties or backstage meet and greets with musicians.
Another area that needed to be revamped was Hard Rock’s communication strategy, primarily its approach to email. The company began systemizing its delivery to send emails at the beginning of each month, and on special occasions relevant to the customer, where before it had been haphazard. “Emails are now personalized,” Matlock says. “For birthday messages, the click-throughs are extraordinarily high and the open rates are fantastic: 60 to 70%.”
Internal affairs
Hard Rock’s initial data-gathering stage was crucial for internal buy-in. Matlock recalls hours spent on the phone to various franchise owners, cajoling and selling the project. They understood the reasons for the revamp: Customers want a seamless experience across multiple locations. But for many franchise partners, technology upgrades—usually with the point-of-sale (POS) system—were necessary. “The challenge becomes, ‘What skin is corporate going to ask of you as a partner?’” says Hard Rock International’s CMO Galloway. “There’s a financial commitment they have to make.”
In fact, financial commitments toward CRM and loyalty expenditures have become increasingly expected among restaurant franchisees. Traditionally, these programs have been part of a discretionary fee for franchise owners, notes Johnson of Loyalty 360. “Now they’re making investments in CRM and technology as required spend rather than discretionary,” he says.
Hard Rock, however, didn’t want to force the issue. “Everyone got to be heard,” Matlock recalls. “We addressed every concern that people raised…. Many [franchise owners] didn’t understand the [loyalty] points or the financial aspect of these points. They needed help understanding the impact of the financial burden to their business, that they’d make money back. That leap of faith was the challenge.”
Along with franchise owners, she had to recruit three different heads of departments within Hard Rock: the VP of company cafés, the VP of hotel groups, and the VP of franchise cafés.
For Galloway, transparency was crucial. All three department groups, and Hard Rock corporate, would be obligated to put money into the kitty to fund the loyalty program. All would be audited and everyone would know exactly how money was being invested.
“I credit our CEO [Hamish Dodds],” Galloway says. “In the end, he told us not to stop. He said keep grinding. There were windows where we wanted to launch and had to postpone three or six months. I challenge anyone to beat us in terms of complications.”
Easy to love
Loyalty consists of three tenets: simplicity, ease of transactions, and remembering customer preferences. Consequently, customer data has become one of the most important elements of a successful loyalty program. Companies must use it to ensure that their rewards program stays profitable and enjoyable for customers. “Profiling is more important than ever, collecting attitudinal data, and not just transactional data,” says Brierley+Partners’s Barnett. “Programs of today are taking this vast amount of data and insight that a customer gives you permission [to collect], to give you an experience that feels more personal.”
Moreover, Hard Rock’s restaurants missed much of its tracked sales; it wasn’t using data to determine where customers had the best experiences. “The challenge was to work across those complexities,” Barnett says. “Hard Rock needed a program that worked across business units. It’s multinational and wanted a global voice…. [Hard Rock Rewards] was about growing the customer database and working through those complexities to increase sales and visits to its properties.”
This meant that customer information needed to be accessible at any property. Staff—whether they work in the hotel or the restaurant—need to know customer loyalty numbers and how many points each customer has available. And this involved integrating a number of disparate backend solutions, from POS to property management systems.
But as much as Hard Rock wanted to know about its customers, it was also wary about knowing too much. Given its international reach and the strictness of data privacy laws in countries such as Germany, Hard Rock worked with attorneys around the world to go through legal and tax reviews. It needed its loyalty program to be compliant among countries with more rigid privacy laws than the U.S. “We’re not collecting personal, identifiable information,” Matlock says. “No security or credit card information.” The information Hard Rock retains, she says, is mostly about where customers live and how they want to be communicated with.
Employee training
Often overlooked when businesses redesign loyalty programs is the effect the changes will have with frontline employees. “You have to train your associates—servers and clerks,” Barnett says. “All of [Hard Rock’s] customer-facing folks have completely embraced the program and they need to keep channeling that focus so it keeps their excitement. If those customer-facing associates are excited, they’ll continue to enroll customers and keep [the loyalty program] front and center.”
However, during a recent visit to Manhattan’s Hard Rock Café restaurant, employee enthusiasm varied. After my bill arrived I asked my waiter about the new rewards program. I had expected him to pitch it himself. “You sign up in the kiosk outside by the restroom or upstairs,” the waiter said.
“That’s it?” I said.
“Yeah, it’s all done by computer,” he said. “I don’t know much about it. I don’t own a computer myself. I don’t even own a cell phone.”
I went upstairs to the gift shop kiosk, where I had two options: Quick Sign Up or Full Sign Up. I went with Quick.
On my way out I asked a greeter at the Hard Rock store how the new rewards program was going. “It’s a work in progress,” she said. “It doesn’t make as much sense as the All Access program. In All Access, $1 was worth one point. With the new program, it’s 20 or something. Also, sometimes the [wait staff] doesn’t always know how to explain it. And it’s hard to explain to people that don’t speak English.”
I asked her if she expected these issues to smooth out as the program became more established. “Yeah,” she nodded. “I think so.”
And this, ultimately, is Hard Rock’s plan: build a foundation and gradually improve it as the company learns more about its customers. “There’s a hunger for more insight from that data, but we had to get the base system in place first,” Matlock says.
In particular, Hard Rock is working to integrate its casinos into the program. Though Hard Rock’s gaming institutions have robust databases, the technology integration and partner alignment process is more complicated; consequently, the company is targeting casinos as part of the program’s next evolutionary step.
The key is that the loyalty program is finally based on real data. “We know it’s working,” Matlock adds. So far, Hard Rock Rewards is on pace to get one million members by the end of the year, compared to the 715,869 over 10 years it took All Access to accrue.
“It’s not perfect,” Galloway says. “It’s a platform for the future. [Hard Rock Rewards] lets us connect with the Hard Rock community and communicate with them.”
