How the Mobile Channel Can Enhance Loyalty

Loyalty schemes have been around for a while now. We've all got, or at know someone who's got, a Tesco Clubcard, Nectar card or something similar. So how can the mobile channel improve on this type of loyalty scheme? I'll hopefully answer that for you in a second, but for first here's my definition of Mobile Loyalty so we're all on the same page...

Mobile Loyalty is the use of the mobile device (phone, pda, smartcard etc) to encourage loyalty to a particular brand, retail chain or group of like minded retailers. It's also a way of tracking shopping habits for use in future targeted marketing, product development and enhancing customer satisfaction. It includes the distribution and redemption of vouchers (such as BOGOF, discount or trial offers). Vouchers could take the form of a numerical code sent in a SMS text message, a digital voucher in the form of a graphical barcode or, in the not too distant future, an NFC tag (more on that later).

So why is mobile so much better than the card based loyalty schemes currently offered. Here's a list of, non exhaustive, reasons:

1. Paper based coupons have notoriously low redemption rates (1.5% being common, 5% being on the high side). Mobile Digital Vouchers tend to have much higher redemption rates with 20% being common and even as high as 75% was recorded in some trials.
2. Timeliness of campaigns. This could be behind the high redemption rates for mobile vouchers. Campaigns are quick to set up, modify or halt due to the easy distribution via SMS, WAP or MMS messaging. With paper coupons you had to decide the offer weeks, maybe months in advance to allow for design, printing and distribution of the voucher. By then the latest "trend" or "compelling event" may have passed or just happened slightly differently than anticipated. Your competitors may have countered your offer with their own campaign. With mobile vouchers, you can set up a campaign within hours actively monitor the success of the campaign and modify it (or pull it) to reflect the changing environment. So maybe your offer was too good and your product is rapidly disappearing off the shelves. You can instantly change the discount offered, for example, to limit or increase the demand. Maybe you have some perishable stock you want to move. You can quickly run a targeted campaign at the store level and stop the campaign as soon as the stock levels are back to a certain threshold.
3. Costs can be effectively monitored and managed. SMS is generally a much cheaper distribution method than paper. There are no printing costs, no design costs, no physical distribution and storage costs and no cost of materials (paper and ink). Ineffective campaigns can be stopped with little sunk costs - you can't "un-print" the paper coupons!
4. The green factor. By sending a voucher via SMS you are enhancing your carbon footprint. There are no trees to be felled, no lorries to ship paper here and there and no wastage. What currently happens to the 99% of paper coupons that aren't redeemed?
5. Upsell opportunity. Once customers have registered their mobile phone number with you, you have an extremely valuable channel in which to communicate with them. Analysts suggest that a mobile phone number is worth about £70 per number per annum to a retailer or brand owner. The validity of this claim is open for question, but as there are over 3bn mobile phones in circulation worldwide, I'll let you do the math...
6. Uses existing EPOS technologies. Barcode digital coupons can be read by existing hand held scanners like any other barcode. Alternatively, codes can be entered into the Chip & Pin machine or the Paypoint or similar top-up network used to redeem vouchers. NFC will allow contactless communication at the checkout in future - as per the Barclaycard advert, problem here is that there aren't enough phones with NFC chips in circulation (see my previous blog).
7. Viral Marketing. Vouchers can be easily forwarded between phones creating a powerful viral marketing channel. On the other hand, simple security measures in the application can limit vouchers to single use only if a viral approach is not desired.
8. Can be integrated into existing CRM systems to provide a wealth of consumer behaviour data.

These are just a few reasons why brand owners, retailers and marketeers should be seriously considering having a mobile channel for loyalty. For the consumer there are other perks including:

1. They get the offers they're most likely to need when they need them.
2. Less likely to forget they have the coupon if its on their phone and always with them (could even set a reminder!).
3. They can consolidate vouchers into a single voucher speeding up scan time at the checkout and negating the need to search through purses and wallets for multiple vouchers.
4. Rewards may include the much sought after Mobile Credits to give free calls, texts or downloads. In a small survey I did myself, 75% said they'd prefer mobile credit over any other type of reward!

This is by no means a complete list of benefits. There are many more advantages to making consumer loyalty schemes mobile. Visit my website or contact me if you need advice on how to be an innovator and exploit this new channel...