In our latest Topic TBD, Bob Legters, SVP and chief product officer of Global Retail Payments at FIS, told Karen Webster that the big picture of loyalty amid a changing retail landscape is colored by small considerations, calibrations, speed and, of course, data.
Legters told Webster that consumers have more relationships in place than ever before.
There are 3.8 billion loyalty accounts held by U.S. consumers, as estimated in the 2017 COLLOQUY Loyalty Census report. That is up from 3.3 billion last year. That is growth, to be sure, but not at a rate that has been seen in the past, with 15 percent growth in the latest measurement compared to 26 percent growth in 2015 to 2016.
As such, said the executive, the industry is seeing a bit of saturation, as the “loyalty programs that started with payment cards and the hospitality industry have expanded to all the retailers. Over the last 10 years, the consumers have engaged the loyalty programs in places that, before that, they never had,” he said.
Force of habit of shopping at the same gas stations or grocers or other merchants limit the ability for those businesses to generate new signups. Consumers have also become a bit more educated about the programs that matter to them at the expense of signing up for others.
“The growth rate, I would expect that to continue — but from 15 [percent], down slightly more, simply because as we continue to mature our relationships to the retailers and get more targeted … it is going to be harder to get someone into a loyalty program.”
Against a tougher backdrop, Webster asked which is more important: The rewards themselves or the payment method?
Said Legters, “the most rewarding program is going to be tied to the payment card … because you are going to be able to earn the most via [the card].” The retailer rewards programs matter across unique or exclusive events, he continued, noting that with retailers and the cards offered, consumers like the personalized engagement that comes with the offers. Interestingly, there is flexibility at work here too, as Legters stated that “very rarely” does a rewards program demand a certain payments type, as merchants remain focused on keeping aisles and carts full amid the usual drivers such as price and selection.
For the shopper in the rewards program, said Legters, the experience itself becomes faster and easier aided by technology, especially mobile devices — always better than the “fleeting transactions” that are the hallmarks of in-store promotion, which are centered on, for example, free giveaways. The end result and goal should be that the shopper is loyal to the store rather than to the discounts being offered. Too many discounts, said Legters, can be dangerous for a retailer, as they set the price of an item, and the expectations of the consumer, to a level that can be unprofitable.
If speed in shopping is desirable, so is speed in redeeming loyalty points. The COLLOQUY study showed that nearly 60 percent of consumers who leave a loyalty program do so in wake of slowness in, as Webster put it, “getting something meaningful” when it comes to loyalty programs.
The first evaluation of a loyalty program, said Legters, is the likelihood of consumer engagement.
“You can only go to the clothing store so many times a year as an average customer,” said Legters. “If you are rewarding me three to five times a year, based on purchases, it’s going to take me a decade to get [rewards]” that would be considered significant. If additional, and perhaps unnecessary, store visits must be realized in order to gain rewards, consumers will drop out of loyalty programs, he said. Specialized incentives, such as allowing loyalty program-enrolled customers to come in two hours early to a store on Black Friday, can help hurdle those mountains.
Even as they grapple with the risks and rewards of their own retail programs, retailers are also wrestling with the reinvention of the industry itself. That boils down to the shift, of course, from bricks-and-mortar to eCommerce, dominated by large players such as Amazon.
For FIS, said Legters, “the big thing that we see and evaluate is that what technology has done for the last 10 years for consumers … is really increase the way they perceive time.”
That has spurred the firm to focus on convenience and advocacy for the consumer. He noted that consumers by and large shop online, via mobile devices, and then buy in the store. They are well-informed in ways they had not been before, which means that FIS’ business clients need to know what data they can make available for consumers in order to tailor messages.
“A lot of our focus has been on AI access to data and information, ease of use of data for the client to be able to do more targeted and personalized marketing and flexibility around payment types, how they are going to accept payments and process payments.” For financial institutions, said Legters, the biggest challenge might be getting the FI’s card into the consumer’s mobile wallet in the first place.
In a retail environment marked ever-increasingly by mobile research, education buying and in-store pickup, retailers must shift the models that had been based on arranging merchandise in a way that leads to impulse buying.
Now the experience is about streamlining the targeted purchase. Consumers who have done the legwork online and then are in a bricks-and-mortar environment are “laser focused.” And that means “there cannot be enough investment in the POS system” and other technologies “to make sure that you can get information from your consumer” that can lead to better merchandise mix and pricing going forward. The more convenient the experience with the purchase the consumer had originally intended to make, the more likely he or she will make other purchases along the way during that same visit or on a return. By way of example, when a consumer buys a TV, they are likely to need a power strip or HDMI cable. This is adjacency done well, he illustrated.
FIS’ recent link with Cardtronics on mobile ATMs and cardless cash may signal some longer-term trends in retail. Cash is still a strong lure when it comes to payments, said Legters, and he noted that in the U.S., resilient use of cash at the point of sale comes even as there are more payment cards in consumers’ hands than ever before. The ATM is “new for the consumer again,” he said, which ties back in to advocacy and ease for the consumer.