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Insight: Does Walmart Pay need loyalty?

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By: RickFerguson |

Posted on August 30, 2016

After Walmart Services SVP Daniel Eckert revealed at the CONNECT Mobile Innovation Summit that Walmart Pay has exceeded the company's expectations, Mobile Payments Today's Will Hernandez asks the obvious question: If Walmart Pay is doing so well, what does Walmart need with a loyalty programme?

Eckert answered the loyalty question during the Q&A following his keynote address at CONNECT. Here's what Eckert had to say about the possibility of integrating a loyalty programme into the retailer's payment app:

"We're all about engaging consumers and not based on any loyalty scheme. Time is a currency in our customers' lives. Saving the customer time is just as valuable as [giving them a discount]. We saw the value [in Walmart Pay] with time and convenience versus a loyalty scheme."

Eckert knows his business, and there's certainly legitimacy in his argument that time can be just as valuable a reward for customers as points or discounts. It's also true that Walmart has long thrived without a loyalty programme because its fundamental everyday low price (EDLP) business model means that the retailer must exert every ounce of operational effort providing the lowest possible prices for every shopper who walks through its doors. Essentially, EDLP is the retailer's default loyalty value proposition. There's little that a points programme could add to that value proposition, even if Walmart wanted to divert margin to reward its customers with deferred discounts.

Eckert's comments made an impression on Hernandez, who now finds himself questioning the importance of loyalty to the mobile payments ecosystem. Money quote:

"Eckert's answer is in some ways the complete opposite of what you'll hear most industry observers say about loyalty schemes baked into mobile wallets. Even I have championed such an approach on multiple occasions throughout the years. But Eckert has a valid point and that's made me question loyalty's importance with mobile wallets. His statement shows us there's no one-size-fits-all approach at the moment for mobile loyalty, payments and wallets."

As Hernandez himself notes, other retailers such as CVS and Walgreens have made loyalty a centrepiece of their mobile payment efforts. And Starbucks, of course, has enjoyed groundbreaking success in integrating loyalty with mobile. Hernandez also reminds us that, absent an additional incentive to switch, there isn't really a lot of reason for consumers to choose mobile payments over the plastic credit and debit cards already in their wallets. Tender switch remains one of the primary reasons to integrate loyalty with mobile payments.

But there's another reason to do so, one which neither Eckert nor Hernandez mentions and which one could use to argue that Walmart is leaving money on the table by not integrating loyalty with Walmart Pay. That reason: the ability of loyalty programmes to change behavior- to encourage shoppers to visit more frequently, to spend more, and to shift spend from the competition.

Walmart customers may love Walmart Pay - but is Walmart's investment in the mobile app encouraging them to behave any differently? Absent loyalty, Walmart is effectively amortizing its investment in Walmart Pay across its entire user base, from the most valuable to its least valuable users. Will Walmart leverage the app to deliver a personalised and relevant message to an individual shopper? Will a user shop one more time per month, or increase her basket size, because of the app's ability to save that user time at the checkout line? If so, can Walmart measure that incremental spend and attribute it to the app?

Maybe so, or maybe not; time will tell. But we know from experience that a loyalty programme can do all of those things. A loyalty programme integrated seamlessly with mobile payment can both save shoppers time and reward and recognise them for their loyalty - resulting in increased lift, retention, and share of customer. You don't necessarily need a points programme to accomplish these goals - but you do need a value proposition beyond the convenience factor. Walmart Pay may do fine without a loyalty programme - as Hernandez says, there's no one-size-fits-all approach to encouraging the shift to mobile payments - but for many retailers, combining loyalty with payment will remain an essential component of a successful customer strategy.

Read Hernandez's article here.

·  Rick Ferguson

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