high fallout rates, has been the delay between purchase/ point accumulation and reward redemption. When customers feel as though their loyalty program only caters to the “big spenders” or to very frequent purchasers, they are far less likely to continue participating. This is the same case for loyalty programs with achievable thresholds, if the redemption process is too complex. Low-threshold customers fall out because they can’t make the numbers; others who do have the purchase/point accumulation still might not redeem if there is a complicated process involved. A number of studies have found that there is a direct relationship between customer loyalty and redemption rates—as customers find more value in loyalty programs, they are more likely to stay enrolled and to redeem their points. Lesson: The longer the delay in redemption, the weaker the
loyalty between the customer and the brand. Cue the mobile device.
The digital revolution and mobilization The advent of digital rewards—downloadable music, videos, games, etc.—has provided a solution to most of the classic problems associated with loyalty programs. Digital content is a low- cost solution to maintain the low- threshold customer: companies now have an affordable solution to keep these customers “burning” points, thus re-engaging them in a program in which they had become idle. In addition, digital rewards have solved
the problems with delayed redemption and cumbersome reward distributions. Because digital rewards are instantly downloadable, the customer is only a few clicks away from receiving his or her reward. Companies can collect customer information upon the download of a song or game, for example, and since that reward is just minutes away for the consumer, they are more likely to fill out a form or contribute to a survey—while they are in the moment. Mobile loyalty complements all of these solutions by providing the customer with access to view rewards from anywhere, with the ability to redeem points as they wish. But while digital rewards have solved most of the
traditional problems with loyalty programs, there is still the issue of discounting to the company’s customer base—and this is one of the areas where mobile loyalty will change the face of loyalty programs.
Raising incremental spending At the beginning of 2011, 85% of U.S. consumers owned mobile phones, of which 31% were smartphones, and by 2015 smartphone ownership is expected to reach 43%. Each of these devices provides unique identification of its user, which, in turn, provides the retailer with a unique identification of its loyal mobile customer. Through mobile loyalty tracking, the retailer can customize the messages and deals that it offers to its already-loyal customers. For example, instead of heavily discounting a product
that the loyal customer routinely buys through an in-store mobile coupon, the retailer can incentivize purchases closely matched, but outside of the customer’s usual buying habits. If a consumer often purchases professional separates, for example, they could be offered a discount on handbags or shoes. If the coupon is redeemed, then an additional coupon can be offered—this time, perhaps for jewelry or outerwear. Customer satisfaction increases, as does the opportunity to have deals go viral and get their own buzz—“pull” marketing at its finest, increasing sales and loyalty, but decreasing marketer outreach effort. Because the customer’s mobile device is directly linked to past purchases and offers, the retailer can instantly adjust offers based on behavior
and history. This is something that no other iteration of loyalty programs has been able to accomplish. The mobile platform has
given retailers the ability to instantly identify customers when they are within reach of a product; to immediately identify past spending behavior; and to instantly
recommend an item that spurs incremental spending. Mobile loyalty is more than just a mobile couponing
platform. It gives loyal customers redemption access from anywhere, at the time of their choosing. But where it really starts to shine is when companies start taking mobile loyalty to the strategic level.
Bryon Morrison is the President of The Marketing Arm’s wireless practice, where he oversees Mobile Strategy. Morrison joined The Marketing Arm in June 2007 from Javelin Direct, an Omnicom agency specializing in interactive and direct marketing, where he served as Vice President of Sales and Marketing since 2004.
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