Pop quiz—what is the best type of customer? Although “rich” might be the easiest go-to answer, “loyal” is perhaps a better answer because, over the life of a business, a loyal customer who buys often and recommends the establishment to others is more valuable than a high-asset customer who comes in and spends a lot once.
A business cannot build loyal customers in a lab (though we’re sure Walmart is trying) but technology can be part of the solution for creating customer loyalty, if merchants can use it—particularly mobile tech – to build programs that will actually encourage and foster an on-going relationship.
Unfortunately, the marketplace just isn’t there yet, YoYo co-founder Michael Rolph told LevelUp’s Chief Ninja Seth Priebatsch and Jingit’s Head of Product Chris Ohlsen during PYMNTS Retail Reinvention Week panel on loyalty and rewards. As of today, most businesses aren’t leveraging tech against these programs very well, leading Rolph to define “Loyalty” in a sentence as “onerous as consumers and anonymous for retailers.”
Rolph’s definition focused on where rewards are today, though both Priebatsch and Ohlsen chose to define a the space more aspirationally as “Giving the customer the reward that they want when they want it” and “respectful ongoing relationships” respectively – but all three essentially agreed on the downfall of loyalty and rewards programs as they are currently done—they are generic and one-size fits all.
“Take loyalty back to 1876 – when the phone really was invented,” Priebatsch noted, “it was done so much better in the past with fewer customers and merchants where they could do loyalty and rewards better at a hyper personal level.”
Priebatsch is not campaigning for a title change to LevelUp’s Chief Luddite. He is not calling for a return to the antiquated systems of the past, but thinks there is a lesson to be learned in imitating the basic simplicity and effectiveness in how businesses used to reward their customers.
“With all the tech, it’s easy for us to forget what respect is – you wanted to give your customer discounts in exchange for their patronage,” Ohlsen noted. That is a good idea he notes, but those rewards need to actually regard the customer and regard their preferences, especially the ones around how data is gathered from them.
Because data, all the panelists agreed, is in some sense the purpose and the backbone of loyalty and a rewards plan. By using the suite of tools available though mobile and digital payments, merchants find ways to really build things that meaningfully reach their customers.
“Its down to us (as consumers) to remember how we signed up for the rewards and, if we forget, then we suffer by not receiving those awards,” Rolph noted of the current system where customers sort of collect and then have to personally manage their rewards programs. “Some of the larger companies have CRM, but they are still treating all customers more or less the same.”
The channel that mobile opens up between consumers and retailers, Rolph notes, has potential to really change that, if it is managed correctly.
That can be a big “if” however because using customer data to reach out to customers to bring them into a business walks a fine line between helpful and being “creepy,” according to Ohlsen. A lot of it comes down to how customers are asked to give-up data, and the easiest and best solution for all involved is just to be upfront in the asking and clear about the intention as no one likes to feel like their information is being harvested from them.
“The ones who are doing it well are giving the consumers more control and are asking for the data upfront – there’s transparency and they can assert some control,” he noted.
There is also value in using personalization with how customers are reached out to – since raining rewards down on consumers eventually just turns them off. Priebatsch referenced LevelUp’s “Make it Rain” campaign where merchants are encouraged to push rewards on raining days when turnout at restaurants tends to go down. Just blanketing one’s consumer base with offers every time it rains is not a great idea notes Priebatsch, because it can be seen as invasive—and instead the program focuses on those who are actually likely to want to go to a coffee shop, even if it is raining.
The future of loyalty will not be an overnight change—all three panelists were in locked agreement on that, because the mobile programs that support it are still evolving. Tying the reward to the payment is something that in the future may become just another part of the currency in a transaction – but that development is going to be over time.
Building better incentives is part of that future – since initial discounts or freebies may draw someone in the door the first time, but it won’t keep them there. Stronger rewards programs function on a “spend x, get y” because they incent continued interaction, not just showing up. Rewards programs that payout once a year have a similar effect on promoting participation from consumer, the panelists noted.
However, the panel did diverge on one notable point regarding the future of rewards programs. Both Rolph and Ohlsen felt that future of loyalty and rewards is in some sense still waiting on merchants seeing a clear needs for the programs.
“When major players are involved and when brands are getting enough value out of it – much more of an ecosystem play and brands like iPay will force the issue,” noted Ohlsen.
“(When) the majority have a fear of losing out and see not participating as a competitive disadvantage,” noted Rolph.
Priebatsch differed from his panel-mates on this point, saying that while loyalty does have a long way to go and a lot of development to endure—the issue is implementation, not interest on the part of merchants.
“ I think we’re already there. Most businesses have conceptualized that they need to be taking mobile seriously and they need to be creating loyalty within that.”