Closing the gap between online and in-store loyalty has become vital in modern retail but how should you go about it? Sverre Thurn-Basberg, head of loyalty and merchant insights, merchant services at Nets Group offers some advice
Loyalty is hard won and easily lost. Yet sometimes it is out of retailers’ hands. Securing repeat business was already a major challenge for retailers as cross-border commerce proliferated, and the pandemic then completely removed the ability for consumers to shop in physical stores. Merchants have been forced to rethink how to engage consumers and engender loyalty in a new world.
Nets investigated how COVID-19 has affected the future of retail payments, finding that three out of five European consumers have tried a new shop¬ping behaviour during the pandemic (i.e. changed stores, brands, or the way they shop). Most are likely to continue these new behaviours after the crisis abates. Consumers are increasingly sensitive to price, the need for safety and convenience, and the availability of products. They also want more meaningful and personalised retail experiences.
Merchants must therefore find new ways to engage with consumers through improved value-added services, including loyalty programmes. The significant increase in digital consumers provides an opportunity for merchants to deliver the right targeting, messaging and customer promise through better use of data, monetising these programmes while improving the consumer experience. This should happen online and in-store.
A recent survey on paid loyalty programs shows that consumers are 43% more likely to buy weekly after joining a loyalty programme; 59% more likely to choose the brand affiliated with the loyalty programme; and 62% are more likely to spend more after joining. But traditional “earn and burn” solutions are now only a starting point. Consumers today want more than monetary rewards; they want merchants to make them feel special or recognised. The strongest loyalty solutions will offer a mix of monetary, experiential and relevant rewards, enabling merchants to engage consumers and build emotional connections that cement trust and create loyal customers.
Filling the in-store void in consumer loyalty
Consumers today are more empowered and have high expectations of merchants both large and small. Many merchants are starting to recognise and reward consumers online, but the resurgence in-store shopping has highlighted a huge void in loyalty programme data collection, particularly when mapped against multichannel sales journeys.
The pressure is on merchants to bridge offline and online channels, which are often built on different technologies from multiple providers. Today, merchants are increasingly looking to reduce this high number of vendors and partners, to make value chains simpler and more efficient. This is an attempt to reduce complexity and enable a unified sales journey and in-store customer visibility.
Customers are accustomed seamless data collection
In-store consumer loyalty engagement is difficult, especially as consumers have become so accustomed to seamless, invisible recognition online. There have been multiple attempts to mitigate the void through consumer apps, plastic cards, phone number lookups or payment card IDs, but many of these are highly dependent on in-store staff spending extra time processing this information, which could be better spent upselling to customers. This issue is particularly notable in high-throughput retail, where efficiency is crucial to profit margins. Loyalty providers must ensure that programmes run in the background, automatically, without requiring extra steps for the consumer.
The problem with in-store loyalty today
QR Codes are an example of how complex in-store loyalty can be. Although they have gained popularity since the pandemic, they are not fool-proof, adding steps to the payment process and hindering a seamless, automatic programme. People may be unable, or forget to scan QR Codes, resulting in 'lost' points (and manual, time-consuming processes to remedy afterwards, if even possible). In discussions with merchants, we often hear that they want card-based loyalty to act as a ‘backup / catch-all’ through app ID.
Card- and wallet-based ID solves some of the main consumer and merchant pain-points with in-store loyalty programmes. The technology ensures that the customer is recognised at the time of checkout, without having to take any extra steps, ensuring they easily activate or fill up their loyalty points for each purchase. The system recognises consumers no matter whether they use their phone or a plastic card to pay, adding extra value to the program.
What’s next? Biometrics
In the future we will see customer recognition happen earlier in the sales journey using biometric identification. Undoubtedly, consumers must have trust in the security and privacy protections in place before this is widely implemented in-store. However, a recent survey carried out by Nets shows that in the Nordics, six in ten consumers are willing to use biometric forms of identification for shopping, a significant increase from the same survey carried in 2018. Consumers are warming to the technology, which many of them already use to unlock their smartphones.
The secure storage of biometric data is the key aspect of this form of identification, which is why it is supported by tokenisation. This is the process of replacing a traditional card number (primary account number or ’PAN’) with a unique payment ’token’ that is restricted in how it can be used. No personably identifiable details are transmitted. It is the task of the payment industry to do more educational work here to give consumers confidence in how their data is being handled.
An example of this is ‘Amazon Go’, which has encouraged increased consumer adoption of biometrics. However, consumers must accept the terms on which identification is carried out without any personal negotiation. It requires a high level of one-sided trust and ‘abandoning’ any claim to ownership of data and how they are processed/used. In the future battle for consumer loyalty, the trade-off between anonymity and rewards is very much set to continue.