Article

Six ways mobile payments can increase customer loyalty

Mobile payment is a channel that opens up huge loyalty opportunities for companies that do it right.

September 5, 2012

By Fred Thompson, contributing editor at COLLOQUY

Last month, it was reported that Walmart Stores Inc. and Target Corp., along with about two dozen other retailers, are at work on a mobile payments system. That's the sort of thing those of us in the customer loyalty industry pay attention to.

Mobile payment is a channel that's not only immediate and intimate, but that also opens up huge loyalty opportunities for companies that do it right. A move by two giants such as Walmart and Target will surely hasten some of the trends predicted for years, expediting customer adoption in a way that will ripple through the loyalty industry and drive more marketers to develop loyalty offerings that provide instantaneous benefits and recognition.

The draw and attractions are straightforward. For consumers, mobile payments create a less-harried checkout experience and easier expense tracking. For retailers, they provide the economics of increased operational efficiencies and interchange costs.

But we see opportunities well beyond increasing checkout efficiency.

Mobile technologies offer myriad roles for loyalty marketers. The loyalty roles for smartphones include:

Membership ID that replaces the traditional card or keychain tag.
Points redeemer, an instant program update channel with news and "close to" reward announcements.
High-impact communications device for location-specific services.
Delivery channel for rewards from coupons to games to events to content.
Replacement for cards and cash, of course.

The loyalty challenge is making the channel relevant enough that people overcome their bias about receiving promotional and loyalty messaging within it. A 2011 Cross-Cultural Study by COLLOQUY, a LoyaltyOne research group, showed that while 65 percent of U.S. consumers prefer to receive permission-based promotional messages via email, only 4 percent preferred text messages. Those numbers should start changing as more people get email through their smartphones, making the two channels more fluid. Loyalty marketers absolutely can help shift this preference, but the value has to be there. And that means engaging customers with loyalty, experience and service messaging as a gateway to open the channel wider for promotional messages.

Mobile payment has the potential to increase customer loyalty by giving customers what they want, when they want it and how they want it. There are big reasons for large scale retailers to engage because investments in mobile payments can be better optimized when coupled with efforts to identify, recognize and reward customers.

Six ways in which mobile payments can increase loyalty:

More information sharing.Mobile payment customers will provide key information related to their payments, accounts or purchases overall. Interestingly, there will also be a residual effect of allowing shoppers to pay cash in stores for online purchases — Walmart stands to gain not only sales from this move, but also data on a segment of customers for whom data is often difficult to find. In both cash-for-online-purchase and mobile payments, Walmart will provide a benefit to the consumer. The consumer meanwhile, with or without recognizing it, will also provide a benefit to the company.

Increased reasons to visit the stores.The rewards for using mobile payment allow the customer to jump a line at a crowded retail venue; alert her personal shopper that she has arrived; or, receive recognition at a local coffee shop for the seventh visit in a week. Such rewards, of course, will result in even more visits. A recent ABI Research survey found that 45 percent of smartphone users with a retailer-branded app visit the retailer's store more often.

Greater relevance in communications and offers.Once customers have signed up for mobile payments, retailers have access to a more highly engaged customer through a channel that offers greater immediacy and intimacy. Because mobile payments are so highly relevant to customers, subsequent offerings and messaging also need to be crystal-clear in their value proposition and timing, alerting the customer when a purchase has earned enough points for a reward.

Increased use of mobile coupons."People are increasingly using their mobile device to find incentives and offers and ways to save money and get product information," said Bruce Pryor, vice president of marketing at Zavers. "Over half of a shopper's decisions are made in the store ... Mobile is the technology that enables retailers and manufacturers to influence that at the point of decision."

Simultaneous capturing, tracking and redemption for loyalty currency.The use of loyalty points as currency can be facilitated on mobile platforms and stored value cards will enable the use of loyalty currencies at the point of sale system. One benefit of signing up for mobile payments certainly has to be that the customer can use loyalty currencies as cash. There are thousands of programs that already have a cash conversion / cash-out element to their schemes, such as American Express points at Amazon. An offering such as this through smartphones would be wildly convenient for consumers. As exchange rates are developed between programs and retailers, a new utility will also develop for the $16 billion in unclaimed rewards (estimated in "Buried Treasure: The 2011 Forecast of U.S. Consumer Loyalty Program Points Value," published as a collaboration between COLLOQUY and SWIFT EXCHANGE).

Growth of location-based marketing.With proper opt-in, restaurants will be able to send offers to members who have been at the movies for several hours; drug stores can offer front-store coupons to members waiting in the pharmacy; and, gas stations can offer convenience store coupons to members filling up at the pumps. The future of loyalty marketing to smartphone users is in location-based offerings.

Walmart and Target will be entering a crowded space. We've already seen Google Wallet, the Isis venture and offerings from individual retailers using smartphones to help on-the-go consumers with easier payment options.

The great news is that Target and Walmart are both large enough to drive significant revenue through investment in this area. If their payment offerings produce clear value, simple customer control and personalization, their movement into this area has exciting implications for consumers and loyalty marketers alike.

(Photo by Yutaka Tsutano)