I began my career in retail marketing in 1992. I remember that even back then I was already interested in the concept of capturing customer data, segmenting customers according to their value to the company, and developing relationships with customers on the top tier segments. In short, I was already experimenting with what would become the future paradigm of the Loyalty Program, as we know it today.
In the early 90s, we began with a simple experiment. We took all the raffle coupons that were filled-up in a raffle promotion we had undertaken. We hired encoders to encode all the information in those raffle coupons. Each unique name would then be tagged with the number of raffle entries. The logic being that the more raffle entries a unique name had, the more that customer spent as each raffle coupon represented a minimum purchase requirement. After all the data had been encoded in FoxPro database (note Excel did not yet exist at this time), a report was printed out that grouped customers in descending order (from the most number of raffle coupon entries to the least). This database was subsequently segmented according to high value, medium value, and low value customers. We would send mailers to the high and mid-value customers inviting them to special events and informing them of our various promotions. Though imperfect, this method illustrates the early attempts in the use of technology to enhance customer loyalty.
Fast forward to 2016, we find that loyalty programs have proliferated. But the loyalty concept has remained the same. Companies continue to strive to acquire and retain customers, and to forge a relationship with them to increase the likelihood of continued patronage in the future. While the principles of loyalty remain the same, the practices of loyalty programs have become more sophisticated and complex. Think of Amazon and how they are able to customize their offerings according to your buying history, even though you are one of millions of customers. Think of how even supermarkets and department stores, who have a massive customer base, segregate and offer a higher level shopping experience to its top customers through exclusive check-out lanes, lounges, exclusive discounts and sales, and exclusive shopping events. All these are possible with the onset of high technology, which allows companies to treat customers as individuals rather than one undifferentiated mass. Let's now look at some of the more popular technologies that are aiding the cause of customer loyalty:
1) Identifying Token. The identifying token is some form of I.D. that is presented to participate in a loyalty program. In the past, this would be a cardboard card or a laminated I.D. card. Then we saw the introduction of the plastic cards that have a magnetic stripe, a smart chip, or a QR code that can be read at the point-of-sale.
The latest technology in this area is the use of mobile phones as the identifying token. A card is no longer necessary since the phone functions as the identifying token. This makes sense as people are burdened with too many cards in their wallets. The use of the phone allows for more convenience on the part of the customer, as the mobile phone is the one thing that consumers will never leave home without.
2) Rewards. Rewards for loyalty programs are usually obtained after reaching a certain threshold of spending, after which the customer is given some form of reward or discount. Tracking of purchases in the past was done manually through stamps on a cardboard card. Later on the plastic cards were used and swiped in order to capture customer purchase data that could be stored in a smart chip or a back-end system.
Lately, real-time technology is leading to the growth of mobile rewards. The growth of wireless-enabled devices has allowed loyalty card programs to deliver offers and coupons directly to the consumer in real-time in the form of mobile coupons. This has been made possible by the use of online and real-time technologies such as radio frequency identification (RFID), near field communication (NFC), and real-time point-of-sale (POS).
3) Experience. The customer experience has also evolved with the onset of technology. We are now seeing the rise of mobile apps to enhance the customer experience. Customers use retail apps in-store for a number of reasons, including redeeming in-store discounts, comparing prices, viewing product ratings and reviews, and to find products. The use of apps increases the possibilities of customer engagement, which can be a big driver of sales and loyalty. Mobile apps are a critical part of engagement in today’s tech world, and their popularity is only going to grow.
Here in the Philippines, we see Family Mart with its Snap App that enables customers to participate in raffle promotions through their mobile apps. The Petron App not only provides customers with a list of gas stations and partner establishments by location, but even provides traffic and weather updates. Abroad, the Starwoods Preferred Guest Program allows a customer to do everything with his or her phone, including opening the hotel room door in place of a key card. Most retailers abroad have some form of app that allows customers to browse items in-store, receive alerts on promotions, scan items in-store and do self check-out, among others.
The continuing evolution of technology will play a key role in the quest for customer loyalty. Technology, however, is not THE answer to customer loyalty. It is an enabler. Technology can be leveraged to blend innovative loyalty mechanics into a loyalty philosophy. However, the most sophisticated technology without the marketing competency can be likened to a Ferrari at the hands of an inexperienced driver.
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About the Author
Frances Yu is the former Chief Retail Strategist of Mansmith and Fielders, Inc. For more information, please email firstname.lastname@example.org.