Most retailers could be using more up-to-date customer loyalty and promotional platforms, both in-store and on the internet, according to Torex's Doug Hargrove who suggests sending offers by e-mail or SMS instead of printing coupons, or even going wireless to provide on-the-spot offers to customers in-store.
As retailing has progressed, businesses have become increasingly aware of the importance of the relationship between their brand and their customers. Stores can no longer simply lay out stock and wait for shoppers to arrive. Instead, today's retailers have to consider transactions from the customer's point of view and actively drive footfall if they are to remain competitive and profitable.
Loyalty schemes offer an effective way for retailers to improve the recency, frequency and monetary value of customer purchases. By encouraging shoppers to visit a store, and providing incentives for them to purchase more products, through promotional discounts, for example, loyalty schemes can help retailers drive profits and increase their market share.
This is especially important in the current retail climate. Consumer spending is falling as shopping budgets are reined in, profits are being threatened by reduced margins and shopping habits are shifting as consumers look to discounters and online stores for cheaper goods. It is crucial therefore that retailers work to maintain their competitiveness, using modern promotional systems to engage customers with accurate, targeted offers, in the most effective way possible.
The rise of multi-channel retailing makes it even more important for retailers to have an effective loyalty strategy. With a high proportion of customers shifting between brands and often purchasing across channels, stores that offer a compelling promotions scheme at all their different touch points stand the best chance of retaining customers.
"Retailers today should begin to assess whether their current loyalty and promotional systems are up to the challenge of current trading conditions," warned Hargrove. "With internet-equipped shoppers now being able to browse for goods wherever they are in the world, traditional coupon-based systems may not be able to offer the convenience or responsiveness customers now expect."
In fact, shoppers report that they sometimes find coupons difficult to keep track of, and the expensive, time-consuming process of mass-mailing a large quantity of vouchers can seem anachronistic in comparison to modern communication systems. Moreover, customers aren't able to take advantage of these offers until they arrive in the post, leading to lost or delayed sales. And for retailers, coupons can often present a challenge to process, track and measure.
With today's technology, retailers can implement a loyalty system that is responsive to customers' requirements and able to deliver offers conveniently and in a timely manner. In order to implement the most effective loyalty scheme possible, they should therefore aim to integrate their promotions systems with data collected from previous transactions. By building up a picture of a customer's shopping habits, stores can then use this information to accurately predict their future requirements.
This allows them to create individual and personalised offers of maximum appeal to each customer, avoiding the disappointment that shoppers often experience when they receive offers that aren't relevant to their immediate needs. And, by targeting these offers more accurately and in near real-time, retailers can increase the uptake of promotions, driving visits to their stores and boosting incremental sales.
Once the right promotions have been created, retailers need to ensure that they are delivered to the customer in the most effective way possible. Modern communication methods present a low-cost, effective means of achieving this. Instead of printing and mailing thousands of vouchers and flyers, customers can be sent offers via more convenient, more modern methods such as e-mail and text messaging - and these can then be redeemed through whichever touch-point or channel the customer prefers.
Apart from making the promotions system more dynamic and responsive (which allows retailers to react to changes in demand and trading conditions more quickly), paperless communications also provide a cheaper, more reliable, and more effective way of reaching customers with the right offers, at the right time. The figures support this, with trials showing promotions offered by text message enjoying take-up rates of up to 150% higher than traditional paper-based systems.
And, while it is clearly more convenient for a customer to bring a text message stored on their phone into a store, retailers can further streamline the process by integrating their loyalty systems with in-store POS systems. Technology already exists that allows stores to automatically apply offers at the point of sale after a loyalty card has been presented, with the POS system determining and applying only those promotions that have been offered to the individual cardholder. Quite apart from streamlining the transaction process and helping to shorten checkout waiting times, this kind of loyalty system integration - which is seen from the customer's point of view as greater simplicity, transparency, and even fairness (always getting every applicable offer) - helps to improve the retailer's general brand image, as well as overall customer satisfaction and loyalty.
Looking to the future, one of the ways forward for loyalty schemes is a closer, more seamless integration with modern shoppers' lifestyles. For example, loyalty cards can potentially incorporate RFID (Radio Frequency IDentification) chips or NFC (Near Field Communication) chips, although this needs to be explained and handled carefully as many consumers remain suspicious of data technologies that can't actually be seen working (unlike bar code reading and mag-stripe swiping. RFID can allow retailers to detect when a customer enters a store, and even electronically follow them around the aisles. Each customer can then be sent a Bluetooth message or standard SMS to remind them of available offers, as well as details of new products that may appeal to them (based on items they have previously purchased).
A further advantage of an integrated approach to loyalty is the ease with which information about the success of offers and customers' buying habits can be gathered. Unlike the comparatively "blind" results that come from general advertising and mailshots, the uptake of individualised promotions and their consequent impact on sales can be directly measured in real-time, allowing retailers to quickly assess the return on investment gained.
The accuracy and detail provided by this data can then be used by retailers to develop more accurate and more tightly targeted promotions in the future. Additionally, the insights gained into shopper behaviour can be fed back into the product development system, improving the appeal of product ranges and driving cross-sales.
Loyalty schemes therefore do not only enable retailers to manage the relationships they have with customers, but they can also influence customers' shopping behaviour, both directly and indirectly. For example, with the right incentives in place, customers can be encouraged to upgrade to premium brands, bring friends along to a store, or even to visit stores at less busy times.