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The Cost (and Complications) of Omnichannel Loyalty

Is the (loyalty) juice worth the squeeze? That’s how consumers are sizing up the loyalty benefits offered by retailers – benefits they expect to “wow” them across every channel they use. So, how far are merchants willing to bend their business models in pursuit of that devotion? Stephanie Polen, VP of Client Portfolio Management at Vantiv, sorts it out with MPD CEO Karen Webster.

 

A standout takeaway from the findings in the latest Vantiv Omnicommerce Tracker was retailers’ preoccupation with loyalty programs. In a conversation spun out from that discovery, Stephanie Polen, VP of Client Portfolio Management at Vantiv, and MPD CEO Karen Webster examined the motivations and the methods — some sound, some less so, and some undetermined — that merchants are taking on in the seemingly unending quest for consumer allegiance.

 

KW: Were about to publish the latest Vantiv Omnicommerce Tracker. In putting it together this month, I was taken by how so much of the news and trends that we tracked was really focused on loyalty in particular, trying to address the question of the overall effectiveness (or lack thereof) of loyalty programs. Whats your view? 

SP: It’s definitely a complex environment right now for loyalty. We’re in one where consumers expect to have a loyalty offering from either their financial institution or from the merchant where they shop. At the same time, there are so many people offering these programs, that consumers are starting to become numb to them.

I think the effectiveness of loyalty programs will be determined by their worth relative to the effort that a consumer has to put into them. Our environment is at a unique point in time, with the convergence of loyalty solutions and technology, that gives us a great opportunity to test what consumers really want to see. For each individual merchant, that aspect really depends on the demographics of the people that shop at it.

It’s really an exciting time to be able to try and test new things surrounding those details.

 

KW: I agree with you. I think loyalty has become this blunt instrument that is used as a one-size-fits-all sort of thing not entirely across the board, obviously; some retailers have managed to hone in on identifying those customers that are special and treat them a little differently. 

Is it technology that is making that direction easier today? Or is there more of recognition that the expectations of consumers really are that they want to be treated differently, because in their view at least, they really are good customers? 

SP: I think that activity is very largely consumer-driven. Consumer expectations just continue to increase as we see different merchants come out with offers that are more and more attractive, and experiences that are more and more personalized.

The ability for a merchant to actually execute on that effectively, and to deliver a solid customer experience, is largely tied to their ability to first understand the data about who their customer is. As far as the technology and the way in which it’s delivered go, there are lots of interesting options there. But it all really starts with the data and intelligence about who it is that is frequenting your shop.

 

KW: Is it really just as simple as that, or are there other things that retailers really need to be aware of in order to execute against a strategy that data informs?

SP: A distinguishing feature of data — at least in the sense of how we’re discussing it — is how multidimensional it is. It’s not just the data about what a consumer has done in your store, but it’s the data about the demographics associated with that customer — which would give any number of indications, including how mobile they are, their wealth, et cetera. These are factors that speak more about who they are as an individual and less about the specific purchases that they’ve made at your store.

Essential to that personalization is that it be very relevant to that merchant experience, but it also has to understand that the data represents a person, who has choice…and who is also frequenting other merchants, for whom you might want to acquire that loyalty, as well.

 

KW: Are there examples that come to mind as to who is delivering some of the best practices on that score?

SP: Thinking about it from a consumer perspective, I do business with a number of retailers that deliver personalized experiences in varying degrees of effectiveness.

Sephora is one — and it’s been called out in a number of publications for this — that exhibits the ability to deliver a customized experience based on my past buying history. That’s one that I would definitely hold up as a success in that regard.

The bigger retailers, in general, are all delivering loyalty at various levels of complexity.

But one of the interesting opportunities in this space is going to be around the tools that enable smaller merchants, as well. I kind of expect that a national brand like Macy’s is going to deliver for me a very solid loyalty experience…but perhaps I shop at a locally-owned store, and I want to generate more business there, too.

 

KW: As I think about myself as a consumer and what makes me loyal to a brand, it isnt always because Im getting an incentive in the form of a discount or points. Its merchandise selection, its availability, its convenience a differentiated product.

We sometimes think in terms of data informing program design that delivers points and incentives, but data can also inform other things about merchandising and product selection that are probably just as important in securing a consumers loyalty.

SP: Absolutely. There’s definitely a trend towards more services that create that positive experience, and that could be faster turnaround times for shipping, or the ability to split your bill — it could be any number of services that are less about the product.

I think that will also be a trend as we move forward: looking not just at the delivery, but exploring how to provide a more holistic loyalty experience.

 

KW: One thing I definitely wanted to ask you about is the coalition-loyalty scheme that was launched not long ago by American Express, called Plenti. 

Coalition-loyalty programs have been very popular outside of the U.S., but a little bit of an anomaly within it. Whats your take on those schemes? 

SP: It’s interesting that they’re finally making it to the United States. I think that change speaks in large part to the phenomenon that we were discussing earlier, in that it was driven by consumers.

Plenti and other emerging coalition-loyalty programs are really much more consumer-directed than they are directed by the merchant or the financial institution. Merchants are banding together to say, “our brands can be stronger united,” to generate business amongst this very select peer group. And I think that’s a really interesting trend that benefits consumers.

Those types of coalition marketing experiences should increase loyalty for the partners that are included in them — but, again, the services from the merchant still have to be exceptional. It’s great to, through a coalition-loyalty program, earn points from Macy’s that I can redeem at Rite-Aid, but the program has to know whether or not I shop at Rite-Aid, or if I’m more inclined to go to CVS and I’m going to change behavior as a result of it.

I think the evaluation of effectiveness of marketing becomes that much more complex when it comes to a coalition. It’s already complicated enough to measure the effectiveness of a single loyalty program, let alone at a coalition level where you’re dealing with multiple merchants and integrating behaviors. The complexity of understanding of effectiveness really ratchets up in those conditions.

 

KW: Its almost as though the value of a coalition comes down to the individual brands that are a part of it, and whether or not the particular collection is appealing enough to consumers. The practice is in its early days; it will be interesting to see how things progress. 

Weve talked about the expectation that consumers have that merchants will follow the breadcrumbs that they drop across multiple channels on which they shop. How much pressure does that put on the retailer to change the way theyre thinking about the basic design and administration of loyalty programs?

SP: I think it puts a tremendous amount of pressure on a retailer. Oftentimes their organizations are not even structured to facilitate that kind of experience.

For example, there might be a component of that retailer’s business that is responsible for the online channel, versus the component of the business that’s responsible just for in-store. That’s a lot that has to come together at the very top of a retailer’s organization, to be able to define what the experience is when a consumer is physically in the store and figure out how to translate it into all of the various touch points that the consumer might interact with throughout the retailer’s entire value chain. Whether it’s online, or mobile, and any other environment, there is a ton of coordination required on the part of the individual retailer to tie it all together.

You also have to consider that the retailer has a number of providers in each of those links on the value chain; the orchestration across that is very complex.

 

KW: The reason I asked that question is something interesting that I recently came across: the experiment that Esprit Holdings is implementing to try to stimulate omnichannel across its various franchisees. 

Theyre trying to make the franchisees feel as though accommodating an omnichannel customer doesnt hurt their brick-and-mortar businesses. What theyre doing is offering a financial incentive for sales that come through the online channel, regardless of whether or not the franchisee had anything to do with it provided that the customer enrolls in their loyalty program. I found that to be clever.

Have you seen or heard of things like that within the sphere of clients that you’re talking to?

SP: That really is an interesting concept; it’s very innovative of them to think about rewarding that type of behavior.

It will be interesting to see, from a maturity perspective, if more retailers adopt similar practices. In lieu of the precision and all of the integration that we all hope that we’ll get to (but haven’t yet), I think retailers are going to have to test those kinds of things in order to break down the barriers between their offline and their online interactions.

While I’m not seeing a ton of it in practice, we are having a lot of conversations about figuring out how to affect behavior internally at an organization. People don’t want to jeopardize the goals they’ve set on the retail side of the business while benefiting the online side. The concept of crossing loyalty is very far-reaching.

 

To download the entire podcast, click here.

 

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Latest Insights: 

The Which Apps Do They Want Study analyzes survey data collected from 1,045 American consumers to learn how they use merchant apps to enhance in-store shopping experiences, and their interest in downloading more in the future. Our research covered consumers’ usage of in-app features like loyalty and rewards offerings and in-store navigation, helping to assess how merchants can design apps to distinguish themselves from competitors.

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