InMarket President Todd Morris joins the Yahoo Finance Live panel to discuss a new report on customer loyalty for quick service restaurants.

Video Transcript

- There's so much competition in the restaurant space these days, so customer loyalty is key. Now there's a new report out by InMarket, which shows which brands are succeeding in this very important category, and what they're doing, right. So let's talk about some of these findings with Todd Morris. He's the president of InMarket. We also have our reporter, Alexandra Canal, joining the conversation.

Todd, it's great to see you. I guess, first, just if we take a step back and talk about customer loyalty. In today's environment, we know competition is obviously more intense than it ever has been. But why, in your words, do you think-- or in your view, do you think customer loyalty is so critical?

TODD MORRIS: Ultimately, it's your most profitable customer and the one that's easiest to influence. And so it is the name of the game, particularly in QSR, where the name of the game is getting people back for more occasions and more meal events.

ALEXANDRA CANAL: And I thought the report was really interesting, because six out of the top 10 chains in customer loyalty are coffee and breakfast. I thought during the pandemic, a lot of people would be cooking at home, making their coffee at home. So what was the common thread there? Why did they come out on top when it came to that customer loyalty?

TODD MORRIS: I think it's just the frequency of the occasion. We all know going out, and perhaps it's an indulgent visit, but across the year, we saw a 9% increase across the top 25 chains. But as you say, the top five really came out strong. So I think it's a different meal occasions. There's been a lot of activity with QSRs introducing their loyalty apps this year, and we thought this sheds some light on who's winning with loyalty.

- When you talk about the loyalty apps-- for instance, there's a McDonald's at one corner and a Taco Bell across the street in my neighborhood. I'm more inclined to the Taco Bell, because I'm a sucker for the bean burrito with guac. But McDonald's just raised their prices, and yet people-- no problem to that. So what are they doing in those apps, those loyalty apps, that are rewarding people we're going to spend more?

TODD MORRIS: You know, I can't-- I can't really comment on the apps. What I can tell you is a consumer behavior that McDonald's, not only were they the number one in customer loyalty, but it's also, they grew that loyalty 15% over the year, really leading the pack with about 2.9 visits per McDonald's customer-- 2.9 repeat visits. So I think that's effectively working.

We saw a lot of increases. You know, Dunkin' Donuts with 15% increase over the course of the year. Starbucks with a nice 14% increase. But surprisingly, Dutch Brothers Coffee, more of a regional chain, really shot ahead of Starbucks with a 21% increase in their shopper loyalty over the period. So ultimately, getting to these consumers, whether it be apps, the assortment, the specials-- consumers are back, and they want to be out and about.

ALEXANDRA CANAL: Hey, I want to follow back to McDonald's, because we just received the news earlier today that Mariah Carey is partnering with the chain to create the new Mariah Menu. Along with that, McDonald's will be giving away a different free menu item each day beginning December 13 for 12 days. McDonald's has done this before with celebrity partnerships, but how important are these types of promotions for fast food chains at large?

TODD MORRIS: Well, ultimately, I think consumers are going to tell us. And that's what InMarket is in the business of doing this-- understanding and engaging consumers in the moments that matter. So we'll be here to see as well.

- Todd, what does the traffic look like when you're comparing some of the numbers that you're seeing now to what we saw pre-pandemic? Are we back to those levels?

TODD MORRIS: It depends on the sector and which part of the business. In certain areas, we're definitely back in terms of that traffic. In others, they've got a way to go. I think we're seeing a really strong, as you mentioned, surgence in top four of the five loyalty factors are coffee and convenience. So yes, we're really seeing a return, and consumers are out, and they're engaging, and they're ready to be happy.

ALEXANDRA CANAL: And overall, real quickly, I'm just curious from the data that you guys polled, what is driving customer loyalty the most? Is it those promotions? Is it the rewards on the apps? What have you seen as sort of that common thread?

TODD MORRIS: You know, we don't go into the causal factors, partly because there are so many of them. What we do focus on is advising these customers about how many of their loyal consumers are defecting and not coming back, and how many are coming back, and how do you influence that behavior. So for example, we can find consumers who have lapsed a given QSR and engage them to drive that return trip. And that's been a very effective strategy, and we're happy a number of our clients are in this winning report.