McDonald’s to create tiered loyalty program to lure repeat visitors

By Waylon Cunningham

Sept 23 - McDonald’s MCD.N will shift its loyalty program to a new tiered system, chief marketing officer Morgan Flatley said at the chain’s investor day on Wednesday, in a bid to more sharply differentiate between more frequent and casual customers.

The move follows a trend in the restaurant space to adopt tiers and to move away from broad discounting that can hurt profit margins. Starbucks announced a similar change to its loyalty program in January.

McDonald's will seek to attract new loyalty program members and to increase the frequency of purchases by existing members with "highly personalized experiences based on the foods, rituals, and moments that matter most to them,” Flatley said.

Flatley did not say when the tiered revamp would launch, or how many tiers would be in the program, but described three categories of loyalty program members based on how frequently they ate at the chain.

The two most active categories, which total 220 million members worldwide, comprise customers who visit more than once a month as well as those who do so once every 90 days.

The first could be targeted with faster points earnings, early access to limited-time menu items, and invitations to company launch events, she said, while the second could be targeted with online game-like challenges encouraging more visits.

A third group is loyalty members who have not eaten at McDonald’s in a few months, which comprises another 150 million members. “Our goal is to give them a reason to reconsider McDonald's,” she said, saying the company would target them with benefits like a “birthday bonus.”

She said loyalty program members in the United States this year could expect Uber ride credits and subscriptions to the Disney+ streaming service.

CEO Chris Kempczinski said loyalty program members drive about 30% of sales, and that loyalty members tend to eat 2-1/2 times more frequently at the restaurants.

Kate Hogenson, principal consultant at the Mallett Group, a brand-loyalty consulting firm, said McDonald's is smart to try to "move the middle," or to entice occasional diners to eat more frequently.

But "tiers are tough," she said, and the success of it will depend on McDonald's execution. She said at least one sandwich chain that had introduced a tiered program had to pull it back because of a lack of cooperation from franchisees.