CUSTOMER RELATIONSHIP MANAGEMENT: High-Steaks Loyalty
Palm serves up a well-done retention program
A WELL-MANAGED restaurant might treat a good customer to a meal every now and then. But Palm Management Corp., which runs some two dozen steak houses worldwide, recently provided a free meal to a Washington diner at its restaurant in San Juan, Puerto Rico. And the firm flew both the diner and a companion down there, paying for their accommodations to boot.
Unusual? Perhaps. But this person had racked up 58,000 points, at $1 per point, in a year and a half of participation in the company’s loyalty program, the 837 Club. He had redeemed 30,000 of them for his prize. “[If] somebody spends that kind of money with us, I have no problem sending him on a trip,” says Palm vice president of marketing Jeff Phillips.
Of course, not all 34,000 customers in the club (named after the chain’s original location at 837 Second Ave. in New York) are going to reach that level. Among eight categories of smaller prizes – including retail store gift certificates and private parties – $75 and $120 Palm gift certificates, at 750 and 1,000 points respectively, make up about half of the points redeemed.
The 837 Club was launched in April 1998 at the chain’s Washington restaurant. A nine-month trial period allowed Palm to iron out possible problems, such as what to do when customers leave their membership card at home, or maintaining good service as the wait staff administers the program.
In January 1999 the 837 Club went national, and within a year 6,600 participants were paying $20 to be included (returned to them as a $20 Palm gift certificate).
This wasn’t the first time the chain had attempted to reward its customers. In the early 1990s it started a birthday program that offered high-value diners the chance to sign up for a certificate redeemable for a 3-pound lobster.
“People thought we were crazy,” says Phillips. “We spent $25,000 on lobster.” But analysis showed that these targeted customers spent $2.5 million a year at the restaurant. (This program has since been folded into the 837 Club.)
Each steak house does most of the club’s solicitation. Servers mention the program to their customers, cards are placed on tables in the dining area, and posters offer an additional reminder. The company also did a mailing last May to its 200,000-name database, which has been assembled from reservation lists, comment cards and sweepstakes, inviting customers to join.
The chain’s newsletter, The Palm Reader, is mailed to its entire database. Rather than merely trumpeting the restaurants, the letter offers articles on wine, profiles of chefs and famous customers, informational pieces and tributes to local concierges. “[It’s] an important part of our neighborhood marketing effort,” confides Phillips.
While the whole file occasionally will receive promotional direct mail, such as letters touting the chain’s lunch menu or wine tastings, members of the 837 Club get slightly different pieces, tying participation in each event back to the program through use of bonus points.
According to Phillips, those in the main database get about eight contacts a year, including the newsletter. Members of the 837 Club are hit a few more times with special offers.
“That database is our secret weapon,” says Phillips, who estimates that 95% of the firm’s marketing budget goes to direct mail or pieces designed for use within each restaurant, with the remaining dollars spent on event sponsorships and “advertorial” listings in local media.
File maintenance and hygiene is handled by data management firm Harte-Hanks, which coordinates Palm’s master file. But once a year the restaurant sends a list of each location’s customers to the managers for manual cleaning.
On-site managers, says Phillips, are more likely to know whether a J. Smith and a John Smith at the same address are the same person, and whether a single John Smith has both a home and business address registered. The manual evaluation saves the chain some mailing costs: A 12,000-name file sent to a Palm restaurant in Dallas revealed a 4% to 5% duplication rate.
Oddly enough, Palm’s current menu is a result of early customer relationship management. The restaurant, founded in 1926, originally served Italian food, but the owners soon began buying steaks from a local butcher to satisfy the meat-and-potatoes appetites of reporters from the New York Mirror and the Hearst newspapers who worked nearby.
