21st Century Loyalty

Rather than looking to quick hits with offers for new shoppers, in times of economic difficulty, retailers are focusing on driving loyalty into their customer base. This is because on average, for most retail businesses, the top 20 per cent of customers not only provide the majority of their profit, but also cover losses incurred in dealing with less loyal customers. Therefore, a mere 5 per cent jump in customer loyalty can boost profits by 25 to 85 per cent.

Using a classic ‘acquire, retain, grow’ methodology for building loyal customer relationships, mobile phones are uniquely placed to add value to each stage of the customer journey, including turning anonymous prospects into long-standing brand advocates. After all, we carry our mobile phone with us at all times and for most of us, it is our primary communication device.

Location-based services
From an acquisition perspective, mobiles have a unique ability to use location-based services to enable retailers to communicate with customers when near a store. Retailers can use simple engagement mechanics (e.g. text in) to sign customers up to membership programmes, and time-sensitive offers to attract customers into store. This is compounded by the fact that a recent comScore survey showed that 49 per cent of smartphone owners use their phones to find the nearest stores.

In addition to simple location-based services, mobiles can also be used to provide customers with unique personalised experiences in store. With mobile check-in services, customers can be rewarded for entering stores. Whilst in store, the same technology can be used to enhance customer service, from scanning products via the mobile and browsing product reviews, to price comparison, and also to self-checkout without even visiting the tills, helping customers to beat the queues. 

As the Harvard Business Review report, Increasing Customer Loyalty, noted, making it easier for customers has proven to be a great way to retain them. This is already happening – a recent survey found that 40 per cent of smartphone users currently compare prices in store whilst shopping for an item, and 30 per cent search for product reviews.

But location-based services aren’t just designed to help customers. Mobiles can also be used to help store assistants – customers who have checked in can opt to provide their personal details electronically in store, enabling the assistants to provide personalised customer experiences. Again, by helping to improve service levels, this in turn can help retain customers.

Mobile transactions and couponing
Transacting using the mobile phone at the point of sale is now also becoming easier. With the introduction of scanners that can read phone screens, and NFC technology, customers can now leave their loyalty cards at home and collect points, redeem offers, and pay for items at the cash tills using only their mobiles. Understanding customer shopping behaviour through these types of activities goes a long way to understand who the top 20 per cent, the most loyal customers, are.

From a reward perspective, it’s important to understand who to incentivise. In recent times, retailers have been turning to coupon services like Groupon to generate business, hoping that customers will be attracted to their stores and then subsequently repeat shop. However, in reality this isn’t the case. Customers who are attracted through discounts alone tend to be loyal to the discount, and not to the brand.

Couponing does not equal loyalty. In this vein, it’s important to link loyalty to profitability. Retailers need to own and run their own loyalty programmes to understand this, and not rely on discount offer aggregators to bring in short lived, unprofitable customers.

Social media
From a post shopping perspective, empowering customers to recommend to a friend has never been easier due to the pervasiveness of social media. A simple click on a mobile app or mobile site can trigger a recommendation to friends, using social media sites such as Facebook and Twitter.

In fact, such a recommendation is one of the best indicators of loyalty, because of the customer’s “sacrifice” in making the recommendation. When customers act as advocates, they do more than indicate that they’ve received good value from a company; they put their own reputation on the line. And they will risk their reputation, only if they feel intense loyalty. Measuring the number of referrals per customer will identify who are the most loyal customers, and hence who to reward.

Brands need to remember that no customer loyalty exercise is really worth it unless they are able to collect and use the data. To get the most out of a loyalty initiative, it’s important for retailers to collect as much data as possible, and for that to be stored within a unified data warehouse, with the ability to segment customers by profile, allowing the business to identify their most profitable customers. Going through this exercise may take longer, but will reap larger rewards for businesses to focus on, and drive profitability in a tough market.
 
Ariya Priyasantha is director of mobile loyalty at 2ergo