In 2024, Chipotle plans to continue enhancing personalized experiences through its rewards program, leveraging research and customer data to deliver relevant experiences in a fun way that inspires future purchases, according to Jason Scoggins, senior director of customer activation at the burrito chain.

Chipotle is not alone. Recently, more restaurant chains have launched or completely revamped rewards programs, aiming to provide precise incentives to loyal members.

Stephen Zagor, principal of Steve Zagor & Associates and adjunct professor of business at Columbia Business School, noted that building loyalty is crucial in the current environment. Technology has "de-emotionalized" the customer engagement process, and competition for spending is fierce. Loyalty programs offer companies a huge opportunity to connect and build relationships with customers under pressure.

"Loyalty programs are good at expressing a company's care and appreciation," Zagor wrote in an email. "They make customers feel 'I matter,' like joining a club."

However, not all rewards programs should be one-size-fits-all. Rick Camac, executive director of industry relations at the Institute of Culinary Education, said that if brands do not measure the emotional connection built with members and stick to the same rewards, they will ultimately lose value and customers.

In 2024, restaurant companies need to understand their customer demographics more deeply and offer targeted rewards.

"You have to figure out what customers will respond to," Camac said. "How do you make guests feel desired, understood, and valued?"

Chipotle, for example, uses a personalized decision engine to determine the free items members can get in "Freepotle" — a rewards benefit launched in early 2023 that offers members in the U.S. and Canada 10 "free food drops" per year, including drinks, guacamole, double protein, or chips.

Scoggins revealed that the company has also introduced multiple real-time interactions and enhanced gamification elements, including earnable achievement badges, to deepen diner engagement.

Chipotle's rewards program grew nearly 14% in 2023, with total members exceeding 36 million. This followed a 20% increase in membership in 2022, reaching 31.6 million.

"The rapid growth of Chipotle Rewards shows that consumers see great value in participating in the program, and we have been able to increase purchase frequency among our user base in the process," Scoggins said.

Customized experiences can deepen engagement

Loyalty programs have become an increasingly important strategic element for full-service restaurants, coffee shops, and fast-casual chains.

Currently, customer brand affinity continues to decline, making winning loyalty critical for businesses. According to a recent Salesforce survey, the percentage of customers with an emotional connection to brands fell from 62% in 2022 to 54% in 2023.

Cracker Barrel launched a rewards program in September to boost stagnant traffic and sales. Through the platform, customers earn one "peg" (point) for every dollar spent, which can be redeemed for prepared take-home meals, sides, desserts, or retail discounts.

Sweetgreen launched a two-tier loyalty program in April, allowing diners to choose between free or paid subscriptions. Paid members enjoy benefits such as a $3 discount on orders daily. The company later allowed members to redeem rewards on in-store orders.

In most cases, loyal customers account for less than half of a restaurant's overall customer base — meaning about half of customers are not swayed by the benefits offered by most programs, Camac wrote in an email. He noted that Starbucks has one of the most successful programs, with loyal customers contributing nearly 60% of the coffee chain's total revenue (data released in November).

Zagor said that despite this, cultivating loyalty can still increase member spending at a moderate cost.

These programs also generate massive amounts of customer data, providing strategic information for future product decisions, as well as "ultra-premium targeting based on AI-driven personalization," he added.

The Salesforce survey showed that brands offering exclusive, personalized experiences at every touchpoint are appreciated by consumers. Companies like Starbucks that successfully implement personalized experiences use real-time customer data and AI to drive their programs, making it easier for consumers to engage with the business, thereby improving acquisition, retention, and lifetime value.

Camac pointed out that the success of different loyalty program approaches depends on their target segments. For example, what works for Starbucks may not work for Landry's or Ruth's Chris Steak House.

He suggested that companies should tie their programs to customer interests. For instance, an upscale steakhouse could offer VIPs exclusive wine tastings.

"Free coffee may not work at a steakhouse," he said.

Rewards programs are evolving with diner needs

While new programs are being launched, other companies are revising existing ones.

To keep attracting loyal customers amid rising menu prices, companies have increased the discount value of points redemption models. Meanwhile, to strengthen customer retention, brands are improving rewards programs through various approaches, ranging from NFT digital tokens to palm payment tools.

Pizza chain Pieology in November allowed its Pie Life Rewards members to receive daily benefits when purchasing custom pizzas, such as side salads, cookies, and drinks. Similar daily benefits have been adopted by chains like Noodles & Company over the past year.

In response to market changes and operating costs, Chick-fil-A adjusted its popular loyalty program, Chick-fil-A One, last spring, adding redeemable items and increasing the point value of some rewards. These moves echo actions by Dunkin' and Starbucks, which revised their points redemption systems in 2022 and 2023, respectively.

However, not all changes have been well received. After Dunkin' increased points accrual rates and raised the points needed to redeem drinks in 2022, it faced backlash from fans and regulars, with some customers vowing to switch to other brands. The change placed more emphasis on food, raising the cost of drink redemptions.

The company said these complaints do not represent the attitude of the majority of loyal customers. But continuously monitoring and adjusting to consumer interests is crucial.

Camac noted that inflationary pressures may, to some extent, change the types of rewards people are interested in.

"When money matters more, interest shifts toward saving dollars rather than other rewards," he said.

The Salesforce survey shows that many companies have not yet shifted transaction-based loyalty programs to personalized models because creating such programs required significant resources in the past. The survey found that 54% of retail loyalty programs still offer points-based rewards.

Rebuilding, phasing out, or adjusting the requirements and rewards of points-based programs can be a daunting task.

Camac believes that most companies' loyalty programs are heading in the wrong direction — sticking with the same tier structures for so long that most diners take rewards for granted rather than as an extra benefit.

"Getting a free coffee after buying 10 is hardly exciting, but I'll still take the free one," Camac said.