Over the past few years, two factors have significantly influenced the consumer environment – reduced household disposable incomes, and the exponential growth of social media and mobile devices throughout the purchasing process.
The former has led to an increasing use of discounting, couponing and money off commodities, such as petrol, across many loyalty programmes.
The latter has put consumers in control of brand engagement and the purchasing process, online or in-store, through the ability to “like” brands, broadcast the shopping experience, send content viral, compare prices and socialise offers.
Our conversations with US and UK retailers and technology innovators, reflect these developments, and suggest four themes that will determine future loyalty strategies.
1. Lower cost loyalty programmes that differentiate from competitors and enhance emotional engagement with the brand.
2. Deeper engagement with, and relevance to, customers through mobile and social media in-store, on the go, and online.
3. Integration of mobile with legacy point-of-sale systems, other customer relationship management (CRM) and loyalty data platforms.
4. Ownership of customer and transaction data and the means to derive insight and value from that data.
While price matching, couponing, card-linked offers, cash-backs and the likes of Groupon, will remain entrenched features of the customer marketing and loyalty landscape, many brands and retailers will be looking for alternative ways to build customer relationships as we come out of recession. There are two reasons for this.
The first is that discounting and money off has significant gross margin impact, and often does the opposite of creating loyalty.
For example, one of our US companies recently ran a quantitative survey across 10,000 households looking at the effectiveness of supermarket petrol discount loyalty programmes. The survey found that such programmes would fail to secure the loyalty of core customers if they were presented with a more emotionally engaging and more attainable alternative.
The second reason is that digital mobile devices and social media offer a new paradigm for building stronger customer relationships. We can already see examples of this.
In the United States, Catalina Mobile aims to transform the in-store experience by real-time integration of offers and product information with CRM and loyalty databases via hand-held mobile devices. Here in the UK, Asda is trialling something similar with an in-store wireless-based mobile platform.
Mobile media is increasingly purchased by real-time bidding, demand-side platforms that automate advertising placement based on customer response and return on investment.
TV media and programming is also being revolutionised by digital and mobile. The likes of Shazzam and other innovative Silicon Valley start-ups will soon enable consumers to interact and respond to broadcast advertising, offers and entertainment content in real time via second-screen devices that automatically identify what you are watching. Broadcast offers can be captured in digital wallets and prime-time shows commissioned on the basis that they are “made for mobile interactivity”.
In social media, viral content will be developed into subliminal product placement within user-generated content.
These new developments will, subject to customer consent, enable brands to track the customer’s multichannel journey from first awareness through to purchase. As this happens, brands will be able to put the customer first, which is when genuine customer loyalty begins.
However, the realisation of this potential relies on integrating mobile with legacy point-of-sale systems. This is challenging for sophisticated retailers let alone across the highly fragmented systems environment in most developed retail markets. Until this happens, much of the digital and mobile promise, and its implications for customer loyalty, will remain unfulfilled.
Co-founder of KEM Investments, Duncan Stirling was a member of the founding executive team of Loyalty Management UK, owner and operator of the Nectar rewards programme.
