Retailers focus on integrating POS & loyalty

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By: Wise Marketer Staff |

Posted on March 12, 2008

The integration of point-of-sale (POS) with multi-channel service functions, loyalty programmes, and improved payments have become the top strategic initiatives for improving retail customer satisfaction, according to a survey by Aberdeen Group.

The global survey of 175 retailers found that at least 60% of retailers have POS systems that are older than 5 years and, out of that 60%, 35% currently use POS systems that are older than 10 years. This has created a flaw in the general retail objective of delivering customer satisfaction through multi-channel order management, loyalty programmes, and faster payment options.

Outdated POS processes
Aberdeen's survey showed that the main reason for this flaw is outdated POS process, resulting from a lack of standards-based migration in software, hardware, and peripherals toward next-generation POS systems. However, best-in-class retailers were found to be leading these efforts by actively narrowing the point of service gap.

When aggregated, the three-pronged strategy adopted by 82% of best-in-class retailers for improving POS experience of customers is to integrate POS procedures with cross-channel customer service functions, introduce more loyalty and guided selling programmes, and improve payment processing and acceptance at POS. This strategy has enabled best-in-class companies to convert POS into a single hub - a unified point-of-service that is both customer-responsive and bottom-line driven.

Struggling with quick check-outs
The use of legacy POS system at retail checkout can be a frustrating experience for customers as order management, loyalty programmes, and payment acceptance processes are fraught with delays, the company warned.

Figure 1: POS pressures at the store-front derail customer focus
Source: Aberdeen Group (February 2008)

Key procedures fulfilled at the POS include scanning of products, applying loyalty credits, and promotional offers such as coupons and payment processing. Aberdeen's November 2007 report, 'The Roadmap to Successful Contactless Payment Implementation', showed that the average time taken to complete a transaction from scanning and bagging to payment by best-in-class companies is 1-3 minutes.

However, complex and time-consuming transactions are resulting in longer than average wait times for customers as a result of longer payment processing times, poorly designed POS interfaces, and legacy system malfunctions. These delays cause customer dissatisfaction.

The data shows that 47% of the retailers surveyed have identified complex and time-consuming POS checkout procedures as the major pressure impacting customer POS experience. These results defy a common myth that exists among retailers that "a lack of consistent store execution of POS processes is the reason for dissatisfaction of customers at the point of sale". On the contrary, the major reason for customer dissonance at the POS is an outdated POS infrastructure that lacks any timely replacement or upgrade of POS software, peripherals, and hardware, as well as related customer service processes.

The state of POS technology
POS capabilities and technology go hand-in-hand in building a customer-centric POS environment. The survey's results suggest that any upgrade plan for POS systems has to include a combination of software, hardware, and peripherals.

Indeed, the planned use of POS technology is shifting toward customer-centricity and convenient POS experience. In the area of order management, software with multi-channel feature functions and 2-D barcode scanning technology can make populating and processing of orders, returns, and exchange more simplified.

From a payment standpoint, more mobile POS and universal PIN-entry devices (PED) are likely to find their way into retail stores to broaden the payment form factors and customer checkout choices. While mobile POS should enable faster checkout, universal PEDs can facilitate wider, safer, and easier payment options for customers.

Loyalty and target reward schemes
The third major cog within POS customer process management is comprised of customer loyalty programmes such as rewards and targeted promotions, gift cards, and guided selling, which are also expected to see an uptake in planned use among retailers.

It is important to note that while improvement in order management and payment technology will likely have the greatest impact on customer satisfaction, loyalty-related initiatives hold the maximum potential to directly impact future revenue growth in stores.

Figure 2: Figure 2: POS is enabling the technology landscape
Source: Aberdeen Group (February 2008)

POS technology transition requires a thorough due diligence effort to retro-fit advanced capabilities into retail stores. Customer benefits aside, any major POS transition can be a complex, capital-intensive, and time consuming task. New POS implementations or improvements require a carefully prioritised capital outlay as part of the annual store IT budget, a shift in the corporate culture of the retailer toward customer-oriented operations, and changes to the store front and back-end business processes (e.g. data integration and network management) that are intrinsically tied to the POS system.

Best-in-class retailers are already implementing customer-centric POS improvements as part of the migration planning process in their stores, taking anything from one to four years. The transition from legacy POS technology toward the next generation of customer-friendly POS systems is by no means easy, but it is a necessity that all retailers must consider in order to offer a more convenient, safe, and inviting shopping environment for their customers.

Recommended steps
Despite the challenges, Aberdeen's recommended steps for retailers include:

  1. Improve point of service by focusing on a structured 1-3 year upgrade of POS processes. Transition the POS infrastructure in stores toward faster checkout, better integration of POS with other store applications such as loyalty, promotions, and payments.
  2. Create a performance culture for attaining corporate goals for effective customer management. By establishing POS performance tracking by store, retailers can manage the improvement process better and keep results in line with the company's corporate customer satisfaction and revenue growth objectives. Start by establishing POS performance metrics such as customer satisfaction, checkout time, and transaction size improvements.

A full copy of the report has been made available free to readers of The Wise Marketer until the end of April 2008 - click here (free registration required).

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