Regardless of income level, we’re all wary of what things cost and where the best deal can be had, online or in-store.
It’s not too far-fetched to say we’ve become a nation of bargain-hunters.
At a high level, merchants face a conundrum.
There’s a world of difference between deal chasers and customers who will make a favorite brand, be it a bank or retailer, their primary go-to stop to get what they want and need, time and time again.
Merchants are watching where their own dollars go, too — seeking to stretch their marketing dollars to bring in the right customers and lengthen the lifetime value [LTV] of those customers. After all, it costs more money to go out and acquire new customers than it does to keep the ones in place happy and transacting.
As PYMNTS data shows, there are more deal chasers than loyalists out there — in fact, 38.3% of consumers see themselves as individuals in search of the best deal, trailed by 26.2% of respondents who identified themselves as brand loyalists.
Banyan CEO Jehan Luth and Erin Warren, Rakuten’s general manager at Rakuten Card-Linked Offer Network, told Karen Webster that payments-level data could be harnessed to deliver valuable insights to merchants and banks.
The insights can be leveraged to create personalized promotions and offers enticing enough that consumers feel a deep connection with merchants and issuers. Merchants, especially, said Luth, know what drives their LTV by category of goods and services and what levers they need to toggle in order to drive that long-term value.
SKU-level data can also be used to create targeted and effective promotions, Luth and Warren said — and improve item-level profitability, too.
“To the extent that we can use purchase data in a compliant way to fuel these programs and layer on that ability to target at a product level, that can be really beneficial,” noted Luth, who pointed to categories including quick service restaurants and groceries, where enterprises have, in the past, been reserved about using card-linked offers (though that reserve is falling by the wayside).
Asked by Webster where merchants are finding success, “category-level campaigns are interesting,” Luth said, and are more enthusiastically embraced by individuals than gift cards. Card-linked offers can be counted as being among “those instances where it’s a win-win-win, the merchant wins, the issuer wins, and also the consumer wins because it’s not just a specific item. You can buy things within a category and get meaningful rewards,” he explained.
The card-linked offer, he said, “balances” the merchant’s goals with the issuer. By mandating that users log into their banking app to redeem the offer, there’s know-your-customer (KYC) security already in the mix.
The problem of successful targeting becomes especially acute in an environment where merchants struggle to define who exactly is a “lapsed” customer in an omnichannel world and needs to be re-engaged.
Is it an individual who has not visited a brick-and-mortar location in months? Or a consumer who has let a subscription linger without updating their details?
It’s the personalized offer based on transaction history that will make a consumer feel as if the brand knows them on an individual level — fostering a sense of affinity that just can’t be captured with a “25% off any item” promotion or the 30% off offer that arrives the day after a customer’s visited the store.
“Where we’re working with merchants now,” observed Warren, “is around, ‘How do you get customers to be active in both the in-store setting, for an experience, and online, for efficiency?’”
Merchants need to think about customers regardless of the channels in which they’re engaged to approach them with offers that integrate a continuum of interactions. The same data flows in-store and online in terms of purchasing history and can be used in context by the merchant for optimal returns on investment.
Luth noted to Webster that a hotel chain offers a case study on the ways in which LTV can be boosted across all stakeholders and channels, working in concert. Though the goal of any hotel is to drive on-property spend (at the breakfast bar, on room service), a banking partner can offer 10% cash back on spa services if a cardholder elects to stay two nights at a property (and use their card to pay for it all). “Merchants know their customers well,” Luth said, “but giving them different channels to reach their customer — not just in their own app or website — build an ecosystem.”
As Warren noted, through Rakuten’s app, site or extension, a deal chaser can easily see what retailers have the best offers. At the same time, a reward seeker gets additional value from shopping the brands and stores with which they already have a relationship. She also mentioned that both types of customers are well-suited to take advantage of rewards programs — shaped by Rakuten’s own data around members (and where they shop and when), married that with the merchant’s first-party data.
As for what the merchants seek: “Sometimes, retailers want lots of volume. They’ve got a lot of inventory that they’ve got to move. And so they’ll take a deal chaser because that meets their goals. And sometimes they really want to target those loyal customers and get them to build stronger LTV,” she said. “And so we enable merchants to create targeted campaigns based on those goals.” She said cash back holds particular appeal, as money is pushed to customers’ PayPal accounts or via checks.
“It’s money that I can spend somewhere else,” Warren said.
Looking ahead, Luth and Warren said, merchants and banks may need a bit of education to glean the best insights from SKU-level information — and using that granular insight as a tool to craft new promotions — but the payoff can be great.
Issuers and enterprises don’t want to inundate consumers with literally thousands of offers on small-dollar items. Whether they’re a big box retailer or a luxury brand, in this post-COVID, inflationary environment of 2023 and beyond, a crisp promotional strategy will be critical.
“It takes a few fearless early adopters to jump in with us and give it a shot,” Luth said of the push to improve LTV, adding that “once the merchants see the data, the data speaks for itself.”
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