Business
The Loyalty Game: Why Merchants Must Play It
Global Banking & Finance Review®
Company
By Alan Irwin, Senior Director of Product, Global Payments
It’s now a rarity for new retail businesses to enjoy success without any digital presence, no matter how large or small they are. Ecommerce has become of paramount importance when tapping into new customer demographics and geographies, and the pandemic drove countless merchants online to sell directly to consumers via their own social platforms or websites. But while ecommerce has revolutionised access to the market, digital spaces have become flooded with similar websites and products. The result for merchants is that driving customer loyalty is becoming increasingly vital in remaining competitive and, in response, online loyalty initiatives have soared. The customers who have benefitted from these online initiatives naturally expect the same recognition and service in-store. As their digital footprints grow, it’s becoming ever easier to recognise loyal customers no matter where they are accessing your products.
An Omnichannel View
As we move towards unified omnichannel commerce, it’s fundamental to identify when and where to introduce loyalty plays. This can be achieved by building out a single view of each customer as well as an understanding of larger demographic behaviours and shopping habits. In order to build this omnichannel view of shoppers, businesses can utilise payment processing data to understand the who, what, when, and where of customer behaviour and activities. Concise dashboards can collate and analyse data on average visits per customer, transaction breakdowns over time, new vs returning customer spend, plus recency analysis to give insights into how long it’s been since a customer visited. Benchmarking analytical tools can help compare performance against competitors that are of a similar value segment, operating in parallel verticals, and located within a set radius. Building this omnichannel understanding of customer behaviour can not only show where loyalty initiatives could make a big difference, but can also inform decision-making to improve operational efficiency and the optimisation of marketing budgets.
Tactical Rewards
Businesses can increasingly bring in capabilities that recognise individual customers, not just online and in-store, but across all of their preferred commerce channels. This can be taken a step further by enabling the business to encourage customers to pay using their preferred payment methods. For example, it typically costs merchants much more to accept card-based payments than it does to accept Open Banking payments. By offering rewards to customers (for example, an increased number of Avios or Nectar points) for paying using that preferred method, merchants can positively reinforce and generously reward specific behaviours while enjoying a lower payment acceptance cost.
Using rewards to encourage ‘good behaviour’ can encompass strategies such as offering discounts when customers become ‘members’ or create an online profile; thus giving additional information to the merchant so they have a more holistic view of the customer. Once a customer has a profile or membership, they can set up recurring, subscription or one-click payments to support seamless repeat transactions; in turn improving their checkout experience every time. This ‘membership’, also provides the customer a single account on which they can collect rewards such as spendable points. For example, many companies now offer memberships that grant customers a single omnichannel profile that can be used both in-bar/restaurant at a point of sale and also online, to avail of real-time discounts, deals, and other compelling membership benefits.
Make It A Game
Another common loyalty tactic is gamifying shopping experiences to encourage customers to keep coming back to win rewards. A good example of this is Pret-A-Manger’s new ‘Pret Perks’. Customers can earn ‘stars’ through in-store and click & collect purchases, encouraging them to create a profile on Pret’s app. Once they collect 10 stars, they are entitled to a ‘perk’ such as a free snack. This builds on Pret’s existing subscription offering where a £20-a-month entitles customers to 5 hot drinks per day.
Data-Driven Opportunities
One of the biggest topics in the UK this year is the rise in cost of living. Consumers are struggling with cash flow and reducing their expenditure, meaning they’re having to choose where to spend their money wisely. The brands they will stick by are the brands they have interacted with the most, meaning it has never been more important for merchants to focus on keeping their loyal customers coming back. Luckily, there is still untapped potential for merchants to differentiate their offerings and boost revenue and contribution per customer, through rewards, offers and discounts. By using smart data insights, memberships and gamification wisely, across all digital channels and in-store, there is still an opportunity for merchants to not only lock in their customer base – but to expand on it.
Customer loyalty refers to the tendency of consumers to continuously purchase one brand's products over another. It is often cultivated through rewards programs and exceptional customer service.
Omnichannel commerce is a sales approach that provides customers with a seamless shopping experience across various channels, including online, mobile, and in-store.
Tactical rewards are incentives offered to customers to encourage specific behaviors, such as using preferred payment methods or signing up for loyalty programs.
Gamification in retail involves applying game-like elements to shopping experiences, such as earning points or rewards, to enhance customer engagement and loyalty.
Data-driven marketing uses customer data and analytics to inform marketing strategies, helping businesses understand customer behavior and preferences.
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