The Homa Files

TakeAway: Panera Bread investors are hoping the company’s new loyalty program and additional menu items will lead the way for continued sales and traffic growth.  The loyalty program, MyPanera cards, is a way for the company to build deeper relationships with people who are already engaged with the brand.

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Excerpted from WSJ, “Panera Bread Sees Loyalty, Innovation Bringing in the Dough” By Annie Gasparro, February 11, 2011

On the heels of launching its customer-loyalty program, Panera is bringing in steak as new protein for its sandwiches, which, bolstered by extra marketing, are expected to help continue the trend of increasing sales, especially in the dinner and catering businesses.

The move to add steak to the menu comes at a time when beef prices are at all-time highs and rising, putting additional commodity pressure on Panera. But the company remains confident.

Panera’s loyalty program, MyPanera cards, is expected to be a key driver in future traffic growth, as it allows the company to track what its customers are buying, when they buy it and how much they spend. The free program was launched in the fourth quarter and presents members with “soft rewards,” like complimentary items, that match their buying habits.

This kind of insight can be used to make marketing substantially more effective, analysts point out. By giving a free bakery item to a customer who normally buys just coffee, Panera could create a higher-check customer long-term. In the same way, it could bring breakfast frequenters, for instance, in more regularly for lunch or dinner as well.

Panera isn’t afraid of raising prices coming out of the recession. The bakery chain says its overall commodity costs, about 80% of which are locked in for the year, will be up about 3% this year, causing the company to raise prices 2%.  Panera’s bottom line improved through much of the recession, having increased every quarter in nearly three years largely due to customer loyalty. While competitors discounted to lure customers during a slump in dining demand, Panera’s aversion to price cuts succeeded among its base of mostly upper-middle-class customers and revenue growth never reversed.

Edit by AMW

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This entry was posted on March 21, 2011 at 6:16 am and is filed under Food & Drink, Mktg - Loyalty Programs. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.