Two things are of key importance in the retail industry today: margins and customer loyalty. While better sourcing, operational efficiencies and market penetration can check margins, the answers to improving loyalty or even maintaining them are complex.
Retailers are increasingly being forced towards tactical solutions, rewarding customers with “money-off” deals. Much of the concept of loyalty in retail has begun to boil down to “two for the price of one” type offers. The instant reward helps drive the customer’s “buy” decision but hardly results in creating repeat business or long-term loyalty.
Building long-term loyalty requires having a strategic program in place. Customized loyalty programs can be expensive and beyond the budget of retailers; sometimes, retailers may not be able to stitch together a loyalty program that leverages all their brands; and often retailers may not be able to create the team, resources, operations, applications and continuous improvements needed to keep a loyalty program attractive enough for customers.
The solution is to outsource and add a layer of mobile integration to create higher value for the customer. “Create higher value for the customer” and “create a loyalty program to lock in customers to a brand” require retail to adjust their vision to becoming more customer-centric and less brand-centric. Mobile integration can play a pivotal role in driving this renewed vision for retailers.
Outsourcing loyalty programs
Retailers making decisions around outsourcing loyalty programs need to think of three aspects:
Do they have the ability to create the strategy, motivate the team, ensure top-notch customer communication, create loyalty campaigns; develop applications, loyalty channel management and CRM integration; build and consolidate customer databases and manage analytical engines that drive the loyalty program?
In the instance of businesses owning multiple brands, do they have the ability to stitch together a program that cuts across brands, rewarding customers for purchases made against Brand A with offers from Brand B, C, D, etc.? If a reward program is point based, does the customer have the freedom to choose which brand to redeem the points against? In short, can a retailer build innovative applications that can consolidate loyalty programs across brands to become customer centric?
Do they have the ability to leverage rapidly changing mobile technology that customers are adopting?
Customers today are increasingly gravitating towards simplicity. They don’t have the time to provide complex and lengthy personal details. Neither do they have the inclination to provide personal details unless the rewards are commensurate. Introducing a mobile element in the loyalty program can intelligently address the issue.
Advantages of mobile integration
Several retailers have begun to opt for the simplicity of mapping customers and their purchases against their mobile numbers. The advantages of adopting the mobile path are interesting and practical. Let’s consider some of them:
It takes less than 10 seconds to induct a customer into a loyalty program at the POS by simply asking the customer for his/her mobile number. The painless induction assures retailers a larger number of loyalty program customers.
Using a mobile number eliminates the cost of loyalty cards; reduces carbon footprint
No chance of customer misplacing loyalty card or not having it at time of purchase
There is less likelihood of poor database entries using a mobile number. Practically speaking, there are fewer opportunities for spelling mistakes that are pervasive when using customer names.
In the case of loyalty programs of multiple brands being consolidated, a mobile number makes it easier to aggregate a customer’s loyalty accounts simply by looking up the mobile number rather than battle data entry errors created when using customer names.
Using a customer’s granular purchase history (actual goods purchased), payment methods, preferred time of shopping, frequency of shopping and average value of purchases, the retailer can begin to incentivise the customer to offer richer personal details over a mobile.
In case of customer profile data acquisition, retailers can ask customers to fill in personal information (email ID, sex, age, income, household size, education, etc.) in smaller chunks over a period of time iteratively over the mobile channel. Customers can acquire reward points with each increment.
Customer offers can be provided over the mobile based on shopping behavior (preferred time of day and so on) as the immediacy of mobile interactions in this instance is unmatched by other channels.
Mobile communication is more likely to be consumed than email communication (too much clutter).
Based on customer behavior, drive customer towards using richer loyalty solutions such as mobile shopping apps.
Keeping pace with changing mobile technology is not simple. Outsourcing the entire bundle—application development, management and program evolution—along with mobile integration across the business (CRM, marketing, returns management, product/service innovation, service discovery, etc.) is best left to an external technology partner. However, the aim of a business in the long run should be to bring down the per customer cost of the loyalty program as well as increasing average revenue per user (ARPU).
About the Author: Ben Trowbridge is an accomplished Outsourcing Consultant with extensive experience in outsourcing and managed services. As a former EY Partner and CEO of Alsbridge, he built successful practices in Transformational Outsourcing, BPO, IT Outsourcing, and Cybersecurity Managed Services. Throughout his career, Ben has advised a broad range of clients on outsourcing and global business services strategy and transactions. As the current CEO of the Outsourcing Center, he provides valuable insights and guidance to buyers and managed services executives. Contact him at [email protected].