The solution, according to the recently published report "Omnichannel Loyalty: Cracking the Code," resides in shifting from loyalty systems that were largely designed in a single-channel environment dominated by one that seizes the opportunity to engage customers and cultivate loyalty through a fully integrated omnichannel approach.
Retailers began to use technology for loyalty marketing in the late 1980s as grocery chains like Ukrop’s and Vons (now part of Safeway) introduced loyalty-card (frequent shopper) programs. The concept quickly caught on, and today three-quarters of U.S. households are enrolled in at least one frequent customer account, such as airline miles, hotel points and grocery cards, according to McKinsey & Co. Colloquy, a loyalty organization and consultancy practice, put the number of U.S. loyalty program memberships in 2012 at 2.65 billion.
However, just 44% of these memberships were active, according to Colloquy. So while technology-based loyalty programs have become ubiquitous, their utility and appeal to shoppers are not automatic.
The problem with many loyalty programs, blogged Forrester analyst Emily Collins, is that they “largely revolve around financial incentives that drive spikes in short-term behavior but don’t necessarily establish deeper or long-term customer relationships.” This leads to a sea of sameness among loyalty programs and undifferentiated appeal.
Omnichannel Loyalty Tip 1.: Develop creative strategies from the voluminous shopper data collected via the loyalty programs. Loyalty data has long been viewed as the key to unlocking shoppers’ hidden wants and needs, especially when the emphasis is placed on high-value and high-potential shoppers who could be engaged through personalized offers tailored to their preferences.
Omnichannel Loyalty Tip 2.: Expand use of digital options – websites, social media and smartphones – to recognize and reward loyal shoppers beyond the POS or direct mail. Shoppers can now be contacted via text, e-mail, social media and mobile apps, among a growing number of digital touchpoints. The variety of offers retailers can deliver through digital media is much richer than ever before and it offers retailers the ability to rachet up important customer services.
Omnichannel Loyalty Tip 3.: Focus on mobile analytics. Consumers increasingly rely on mobile devices as companions to their interactions with a brand and generate behavioral, transactional and location data in the process. Since mobile channels are highly trackable, loyalty programs that collect mobile information can create deep customer insights that drive personalized communications, experiences and offers. For example, a retailer might use geolocation data combined with preference and transaction history to recognize and remind a top-tier loyalty member that she has “points to burn” when she enters a store, suggests Collins. Or shoppers can receive offers on their smartphones as they are returning from work and thinking about what to have for dinner.
Omnichannel Loyalty Tip 4.: Focus on social media to expand loyalty from a transactional to a more emotional type of engagement. use social media to engage and bond with customers in a truly personalized, relevant and emotional way and do it at scale. Actively engage shoppers who are influential in the social world so they become a net promoter who blogs about a retailer’s products and services. Social recognition can also enables retailers to tap into the powerful competitive nature of their customers by using a badges-and-benefits approach that yields a data bonanza.
Omnichannel Loyalty Tip 5.: The omnichannel world of data represents a quantum leap in the complexity of loyalty marketing potential. Shopper databases, which used to be limited to what was collected at the POS in the physical store, have exploded with new information from a wide variety of Web and mobile sources. Retailers realize that this data offers unprecedented insights into their shoppers, and thus greater potential to turn more of them into loyal customers.
Omnichannel Loyalty Leaders
Among the retailers who have been able to create a successful omnichannel loyalty program, Seattle-based Starbucks has been one of the leaders. The coffee purveyor became the first national retailer to offer its own mobile payment technology combined with its My Starbucks Rewards program, and the company now generates over three million mobile transactions each week in the U.S., accounting for approximately 10% of total U.S. sales.
Stop & Shop, based in Quincy, Massachusetts, has been a pioneer in merging loyalty with mobile applications. For example, the chain offers loyalty-card shoppers an in-store scanner device dubbed Scan It! that they use to scan products as they shop, expediting checkout at the front-end. The devices also display offers tailored to the shopper’s purchase history and based on her location in the store. Last year, Stop & Shop ported the functionality to a mobile app, enabling shoppers to scan and receive offers on their smartphones.
Kohl's also stepped up its omnichannel loyalty efforts this year, revamping its e-commerce platform and mobile technologies to support its loyalty program. The program has been tested in Texas and is being expanded into 300 stores in California, with a decision to implement it chainwide coming next year.
Smartphones and tablets will play an increasingly important role in Kohl’s customer engagement efforts, according to CEO Kevin Mansell, adding that “the program continues to provide significant insight into how our customer shops, and more importantly, how we are better able to influence her shopping behavior."
Multichannel apparel retailer Coldwater Creek is enhancing its loyalty program by combining it with new private label credit cards. “We believe that the best way to strengthen brand loyalty and provide an improved shopping experience across all of our channels is to offer our customers a choice of credit card options, both of which will be fully implemented with our rewards program,” says Coldwater Creek president and CEO Jill Dean.
For more detail and complete analysis on this important topic download the comprehensive report "Omnichannel Loyalty" Cracking the Code."