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Comment: Are retailers missing a trick with loyalty & couponing?

Merchants, retailers and brands are constantly looking to differentiate themselves, increase the size of their customer base and create deeper and stronger relationships with existing customers that will enable them to cross-sell and up-sell additional products and services. However, while loyalty and couponing programmes are a priority for many retailers, the question remains, are retailers making the most of mobile when it comes to building up customer loyalty?

Merchants and retailers have been using loyalty programmes for decades (the average consumer has 26 loyalty cards!). Generally the programmes are designed to engage the consumer in a long-term engagement in which customers are incentivised to remain loyal to a specific merchant or brand through making frequent purchases. Incentives might take the form of discounts, special offers, rebates, points or prizes. It's well known that loyalty is not just about loyalty, it's about understanding your customer and being able to build that relationship that creates a trusted environment whilst utilising data to better target their likes and trends. But just how valuable are couponing and loyalty schemes and where does mobile fit into the puzzle?

Merchants can leverage the use of mobile technologies and services to both attract and retain customers.  Specifically, by using data collected through mobile apps and geolocation capabilities retailers have the opportunity to engage with consumers like never before. They can learn who their customers are and what they like and also provide highly targeted and relevant coupons and offers.

In-store, merchants can use mobile contactless technologies, such as near-field communication (NFC) technology or BLE, to facilitate the award of loyalty points and the validation of coupons. Moreover, merchants and brands alike can use mobile technologies and services to determine the effectiveness of specific marketing campaigns in real-time, while also reducing coupon-related fraud and closing the coupon clearance loop digitally.

But loyalty programmes also have another purpose. Importantly, they are a way to enable merchants and brands to obtain knowledge about both individual customer behaviour and aggregate customer behaviour. They can use that knowledge to engage with individuals in context through email, social networks, websites or mobile applications.

A supermarket might send a customer who regularly buys red wine on a Friday evening a voucher offering a 20% discount on cheese an hour before the customer typically arrives at the till. A merchant can also use the aggregate data collected by loyalty programmes to gain insights into consumer behaviour, such as how frequently individuals buy a specific product.

A number of smaller merchants who don't have the systems to support it, may take a simpler approach, by stamping a card each time the consumer buys a product or a service. In this case, the merchant isn't collecting much data on the consumer and the purpose is simply to incentivise consumers to come back with rewards for remaining loyal to a particular merchant.

In a bricks and mortar context, most merchants' loyalty programmes require the customer to present a loyalty number at the point of sale. This step enables the consumer to collect loyalty points and the merchant to collect transactional, location and ancillary data for that customer. In a growing number of cases, these loyalty numbers are being supplemented by mobile applications, which can use contactless technologies, such as NFC or a QR code, to enable the consumer to both accumulate and redeem points at point of sale.

For example, German customers of mobile network operator Base, can now make payments, use store membership cards and redeem coupons with their NFC phone. Giesecke & Devrient is providing Base with the SkySIM CX SIM cards used to offer customers the ability to store a digital Maestro card on their NFC phone.

What's next?

We have been talking about the value that mobile loyalty and couponing could bring to retailers for a number of years. Retailers have seen many presentations on how smartphones will replace stuffed wallets filled with payment and loyalty cards and how customers will be alerted to personalised, real-time offers as they shop.

The efficiency, security and immediacy of paperless loyalty remains very attractive, as does the ability to use new location technologies to understand and serve customers better wherever they are. But still, we have yet to see a mass rollout of loyalty programmes across retail.

If retailers and merchants really want to kick-start efforts in mobile coupons and loyalty, they should consider working to bring consistency across their footfall and therefore should consider a close partnership with mobile operators, who cross consumers, but also have potentially a larger reach when the operators are combined. A partnership approach is the key to delivering programmes which clearly demonstrate the commercial benefits across businesses. To be successful these programmes will need to acknowledge the complexity of existing systems, cost and time constraints and then work within those boundaries before they can start to deliver on their promise.

Paul Crutchley, strategic engagement director at mobile operators association, the GSMA, will be writing a regular Essential Retail column on mobile technology's influence on retail, over the coming months.

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