It has been well over twenty years since the first “electronic” card based loyalty programs entered the retail scene. Supermarkets led the way, given their propensity to offer coupons and deals, coupled with seeing their customers more once a week. Loyalty programs seemed to be a good fit for their business model. Furthermore, most supermarket retailers understood that about 20% of their shoppers were delivering about 80% of their sales. For many, it made good economic sense to focus on building further rapport with the most valuable shoppers and promote less often or differently to those outside that group.
From the early fanfare of these programs, it wasn’t long before the reality set in. Retailers discovered that creating a separate marketing strategy with offer banks full of meaningful, special deals for targeted shoppers was problematic. With the limited technology of the day, it was often too expensive to target shoppers. CPG brands, while appreciating the concept of targeting, were of little help with content given they often held different targeting objectives than their retail customers.
For those and other reasons most card-marketing retailers, quickly gave up on building relationships with their top shoppers despite having mounds of customer data to smartly do so. Frustrated and mired in the day-to-day struggle for “comp sales” and gross margin growth, they simply reverted to using the card as a new prerequisite for shoppers to get the deals they were already getting before the program launched.
Shoppers for the most part played along. However, over time these programs became very milquetoast and provided little or no point of advantage for retailers. With rare exceptions, the early promise of loyalty marketing went unfulfilled. Consequently, a number of good retailers have abandoned their programs, while other successful retailers felt vindicated by staying away from electronic card marketing.
Fast forward to present day.
Shopping technology is exploding. Shopping Apps are abundant. Some would even argue apps are too abundant and present so many options and functions that shoppers are overwhelmed with choice. Apps with “geo-fencing” capabilities like Shop Kick (www.shopkick) and Ping4 (www.ping4.com) alert shoppers when they are in geographic proximity of the store. Still other Apps, like Aisle 411 (www.aisle411.com) use iBeacon® or similar technology to sense the shopper is in a particular area or standing in front of a certain display in the store. Still, others are focusing on the collection of deals across many stores. Couple that with every major retailer having their own proprietary app, each with their own version of loyalty points or rewards.
New technology adaptation is also changing the shopper and their expectations. Upwards of seventy percent of shoppers now carry a smart phone with them while they shop. Some are even using it to help them find items, download coupons and explore nutritional content. On an increasing basis, shoppers are deciding where they shop based upon the presence of shopping technology. Said another way, retailers must innovate and adapt popular technologies or risk losing market share and shopper relevance.
Techno-Loyalty is here to stay.
In my view, loyalty programs must be communicated and executed through technology to remain relevant. Shoppers want automation, simplicity and consolidation of the many offers and rewards from each retailer, both on-line and in the physical store. Consequently, while loyalty cards live on, they are gradually giving way to shopping apps, wireless chips and other technologies that identify the shopper both on-line and in the store.
Further, options are emerging for shoppers to manage their own loyalty. Shopping sites such as Retail-Me-Not, (www.retailmenot.com) , All You, (www.allyou.com) , Savings.com (www.savings.com) and a host of others have aggregated offers from multiple retailers for the shopper to access in one consolidated place. While these sites are growing in popularity they often lack full retailer participation, meaning they work independently from the retailer’s own website or shopping app. This separation often requires the savvy shopper to visit both websites to insure they have the complete offering from each retailer.
In an effort to create the ultimate level of consolidation, solutions like LOC (www.locenterprisesllc.com) enlists the retailers to participate both in-store and on-line to extend the reach of their current loyalty program, by creating a consolidated on-line “shopping mall” where shoppers can access the full compliment of their favorite retailer’s offers and rewards, on one website. In-store, the LOC card or app either replaces or augments the retailer’s own mechanism of shopper identification. Shoppers naturally love the idea, while retailers, who are deeply vested in their own websites apps, appear to be gradually understanding shoppers will ultimate dictate the manner and place in which they interface with the retailer.
Looking Forward, the Retailer Must Take a Holistic View of the Shopper
The future is now defined as “next week or next month”, not “next year or the next five years”. The rapid development of shopping technology has accelerated the shopper’s expectations and has put the onus directly on retailers to elevate their loyalty game. The first step in that process is to first acknowledgement that each retailer, no matter how big, is just one piece of the shopper’s loyalty environment, not the alpha and the omega of the shopper’s needs as many have viewed it in the past.
Concurrently, technology companies understand that working with (not around) the retailer is optimal, as it provides the most holistic shopper solution. On the other hand, if retailers remain guarded and over protective of their programs ignoring the increasingly loud voices of their customers to become more holistic in their approach to building relationships, even their best efforts of offering stand-alone loyalty will miss the mark with the shopper.
After two decades of struggle, technology has finally arrived to deliver on the promised returns of loyalty marketing. It is now up to the retailer to either embrace a new model of holistic, technology-based loyalty or run the risk of being rendered irrelevant, even to their most loyal shoppers.