can technology make customers more loyal?

Technology has disrupted many businesses over the past 15 years – music, film and books, to name a few. In spite of these upheavals, the customer loyalty business has remained relatively static. Thanks to a combination of cloud functionality and innovation in the mobile space, that is about to change.

Loyalty360, a think tank for the loyalty industry, found that companies are boxing themselves in with their loyalty programs by failing to take advantage of new technologies.

The company’s research showed that engagement is one of the biggest challenges facing companies with customer loyalty campaigns. It ranked second, along with profitability and revenue.

Technology channels such as mobile apps and personalized rewards can be significant engagement aids, but companies aren’t innovating. Almost 60% of respondents to its survey said that none of the tactics in their loyalty programs would be considered innovative. Mobile apps, mobile payment systems, and analytics barely registered.

“There is an opportunity to maximize customer loyalty,” says Mark Johnson, CEO of Loyalty360. “But brands are really struggling to keep up with these disparate technologies.”

how mobile is changing the game

Smart companies are putting mobile apps at the center of their loyalty program strategy. Companies that use mobile apps as the basis for their loyalty programs can experience significant benefits, especially when they make them as functional as possible, suggests Jeff Berry, senior director of research and development at LoyaltyOne.

“Mobile in particular is the single biggest game changer in loyalty since the advent of the data warehouse,” he says. “Mobile creates the opportunity to understand more about your customer and engage with them in a way that’s contextually relevant.”

Starbucks includes loyalty rewards for people using its mobile app, which also includes easy payment functionality by enabling the user to ‘charge up’ the app with funds from their credit card.

The result: 11% of the firm’s sales volume now comes from mobile app customers.

faster rewards

The Starbucks app provides instant rewards, which Loyalty360 highlighted as an important requirement among customers. Mobile is a key enabler here, says Berry. “In the old days you could deliver something based on something that the customer did that happened six weeks after they actually did it,” he says. “Now, there are heightened expectations among consumers.”

Retailers feel particular pressure here, with Loyalty360’s research showing 29% of customers wanting faster rewards.

There are challenges for companies implementing mobile apps, however, and one of the biggest is branding. Even high-resolution phablets, with their large displays, only have so much screen real estate, making it difficult to keep a loyalty app in front of a user.

While Starbucks may make it to a user’s home screen, lesser-known brands may find it more difficult. LoyaltyOne’s own research showed that the average consumer downloaded 25 mobile loyalty apps, but only used five on a regular basis.

potential for aggregation

Consequently, some mobile loyalty players are taking a different approach. They are concentrating on aggregation, using a single brand that allows customers to use the same app across different businesses.

Loyalty card and app system Belly works with a variety of businesses across North America. It lets customers scan personalized barcodes displayed by their mobile apps to accrue loyalty points with Belly’s varied client companies. These can then track metrics and create highly targeted email campaigns based on customer activity.

Others use the wallet and card technologies already built into smartphones, on the basis that the phones offer the best branding of all. Virtual Next creates custom loyalty cards for business clients which it then places in Apple’s PassBook card management app, for example.

The biggest barrier to the adoption of these technologies is inertia, and budgetary issues can be a contributing factor there, says Bijan Shahrokhi, CEO at Virtual Next.

“There currently isn’t a separate budget for mobile technology adoption that focuses on improving the in-store experience,” he warns. “This can slow down the firm’s decision making process.”

pushing forward

But while some companies mull the possibilities for mobile loyalty apps, others are accelerating the pace of change. Apple’s iBeacon is a good case in point. The technology, already adopted by heavy hitters such as Macy’s in the US, provides in-store communication with compatible smartphone apps. This enables retailers to offer deals and rewards to customers based on, say, which product displays they’re standing at, and what their purchasing history is.

All of this is leading to an unprecedented disruption of the loyalty program space which will bleed over into shopping practices.

“The way we will shop in five years will be completely different than the way we shop today,” says Shahrokhi. “Retailers will be able to offer richer customer experiences and better targeted loyalty and promotion programs based on the customers’ purchasing habits and even their location in the store.”

While retail is perhaps the most obvious innovation point, these multi-channel experiences will also empower loyalty program managers in other consumer-facing verticals from travel to finance. Things are about to get real in the loyalty business.

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