Jul 5, 2019 8:53:27 AM / by Erika Carmichael
Successful brands are obsessed with their customers, and the best of the best are completely attuned to customer needs. Fortune 500 (or even Fortune 1000) CMOs understand that consumer sentiment is finicky and at any moment the tides can turn; swings in the economy, the latest trends, or ramped-up competition can disrupt forecasted revenue.
Large brands know their best weapon against disruption is to continuously provide two things consumers crave: value and convenience. They leverage a litany of tools to counteract these potential swings in sentiment, from loyalty programs to coupons to free delivery and in-store specials, because together, these factors influence customer retention, which in turn increases lifetime value, reduces acquisition costs, and drives customer evangelism.
History of Loyalty
Loyalty programs have long been one of the most effective tools for retailers and national brands to generate consistency in consumer spending, but the specific tactics used have changed drastically over time. In the early days, loyalty was limited to rewarding and encouraging additional spending. Today’s customers are being rewarded for a variety of actions, and the brands that offer the most diversity within the program are often the most successful.
Starbucks, the most used loyalty rewards app (48% among US chain restaurants), is popular because of its ability to engage in a multitude of ways digitally, be it through convenience (skipping the line), monetary rewards (points earned toward free food and coffee), or supplementary content (music playlists from Spotify).
On a macro level, it is easy for retailers to measure the value of traditional loyalty programs. Loyalty program members on average generate between 12 and 18 percent more revenue than non-members and are far more likely to be repeat customers. CMOs can see the statistics on buying habits of loyalty program members vs. non-loyalty members, and show a correlation between loyalty programs and increased lifetime value through repeat business.
The challenge of traditional loyalty programs is enticement and measurement on the micro level, specifically measuring exactly how much loyalty program incentives are directly influencing specific purchase behavior, and doing so across a wide spectrum of offerings. For example, did a customer choose your store today because of loyalty rewards, or were they just close by? Did they choose a specific item because it was on sale with their membership card, or did they need that item anyway and it just happened to be on special?
While the overall value of loyalty programs is easy to see from the retailer side, the perceived value on the consumer side can be tricky. For the consumer, the savings can sometimes come across as arbitrary; listed at the bottom of the receipt somewhere and passively acknowledged by the cashier, there is no real demonstration of value. Recent studies show almost half of all consumers don’t feel major retailers value their loyalty, arguably because they can’t really see the savings. Supposedly they saved money, but who’s to really know if it would have been the same cost somewhere else?
With card-linked offers, convenience and value take place on both sides of the transaction.
Card-linked offers solve the value conundrum by putting cash back in the pockets of the consumer, and tracking results on a micro level. On the retail side, there is a deep level of detailed analysis by linking offers directly to predetermined purchase behavior, because attribution is built into the product. The credit card used by the customer to obtain the offer is the same that is used for the sale, and retailers can see the benefits directly on the Empyr platform.
Additionally, a card-linked offer might be the perfect lure for new customers to participate in your loyalty program if they were hesitant previously. A card-linked offer may incentivize a visit to the store, providing the opportunity for the store to convert into a loyal customer with in-store experience and competitive prices.
On the consumer side, discounts are deposited directly back into their accounts in an amount that is tangible and real. Real cash is much better for actual and perceived value than an arbitrary savings number, and seeing rewards right in their bank statements is huge for perceived value. Loyalty points-based offers are on the decline, while cash back and fixed-dollar-off programs are gaining in popularity.
Coupon programs — and mobile coupons in particular — are another vital strategy for customer retention. Mobile coupons are so widely used that a recent study suggests mobile coupons will surpass the $1 billion mark and over 90 million Americans will have redeemed a mobile coupon by the end of 2019. Unfortunately, coupon programs are still not as convenient as consumers would like. Take a recent study from Valassis as an example:
"More than half (58%) of Valassis respondents thought coupons should be easier to use. Nearly half (49%) would use more coupons if it was easier to find deals for the items they needed, and 46% said they need to search multiple places to find coupons for desired products."
Here, we have a $1B market full of people wanting value and convenience, frustrated by the lack of either when it comes to mobile coupons. Needless to say, retail CMOs that acknowledge this serious gap in customer satisfaction are positioned to capitalize on a very underserved and passionate segment.
Card-linked offers close this gap by eliminating coupons altogether. The credit card they already use is the coupon, and the offer is automatically applied.
The Bottom Line
Retention drives customer evangelism and reduced acquisition costs.
As the proliferation of both touchpoints accelerates, so, too, should brands focus on adaptation and implementation of new technology in the fight for customer loyalty. Card-linked offers are one of several new tools being utilized. Leaning on current credit card technology and without requiring any changes to consumer buying habits, Empyr’s card-linked offer program is the best of all worlds for providing convenience and value for retailers and consumers alike. Card-linked offers provide a level of insight and attribution that can help supercharge basic loyalty programs, and convenience that consumers and national brands have been craving.
By simply addressing these two factors — value and convenience — card-linked offers’ potential impact on the bottom line is enormous because customer loyalty is a key driver of long-term profitability. Loyal customers spend more money, refer more people, and tend to expand their purchasing into new categories, thereby increasing overall lifetime value metrics (LTV).
In a reality where it costs up to 25 times more to acquire a new customer than it does to keep one, answering the challenge of convenience and value is essential for retail CMOs.
Card-linked offers accomplish this challenge right out of the box, providing an indispensable option for national brands.
Posted in: O2O