More memberships, more problems.
That’s among the takeaways of a new report that explores six events that are reinventing loyalty, especially for retailers. Among the surprising stats in the report, by LoyaltyOne Global Solutions: Retail loyalty memberships represent 42% of all loyalty memberships in the U.S. — about 1.6 billion. That’s about five retail reward programs for every man, woman and child in the country.
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Needless to say, those numbers don’t make practical sense, which is why more than half — 54% — of all reward programs are inactive.
Retail programs likely suffer the same odds. Often, members enroll for a special signup offer and then never use the program again. Such practices extend beyond loss-leader territory and into potentially serious problems, in terms of justifying the expense of the program and the root causes of the shoppers’ failure to engage.
But the flip side of every challenge is opportunity, and the report makes a good case for retailers. Using examples from Amazon, Ralph Lauren, Alibaba and others, it illustrates how merchants are meeting shoppers’ raised expectations through data insights that help them understand their customers better.
These brands reach their shoppers through personalization, but how do retailers get it right? Artificial intelligence and machine learning are producing shiny new ways to interact with shoppers, but if those communications fail to hit their mark, or are creepy, the shopper will write them off as a retail fail, and likely move on.
Getting Interactive, Trusting Insights
Put another way, shoppers have the controls, regardless of the technologies available to retailers. Among the report’s data points:
- More than 50% of North American consumers said they are likely to purchase if stores offer interactive technologies.
- Only a third of retailers are confident in their ability to consistently leverage customer insights to develop strategies and decisions across the organization.
- Nearly two-thirds of North American retail loyalty program members like having the option to earn with one program and redeem with another as part of a loyalty program.
Act Like a Valued Friend
As the report puts it, customers expect brands to be quiet when they don’t need them and present when they do. Kind of like a spouse, or valued friend.
Retail presence, like many relationships, can exist in many forms. Here’s how a variety of retailers use shopper insights, either from traditional loyalty programs or other interactive features, to shape the technologies and communications they use to engage.
Amazon Prime Wardrobe addresses shopper concerns about ordering clothes online by enabling members to order up to eight items of clothing and accessories, try them on, and keep those they want. Shipping is free all around, so items they do not want can be returned at no cost, eliminating a key barrier to online apparel shopping. This Warby Parker approach to apparel shopping generates important insights regarding shopper preferences, which Amazon can use in its future recommendations and to entice shoppers back.
Fashion designer and retailer Ralph Lauren entices shoppers by acting like a digital personal assistant in the dressing room. At its flagship shop in Manhattan, smart mirrors use RFID technology to recognize the items shoppers carry in and suggest other available colors as well as complementary items. Lighting can be adjusted to the shopper’s liking and salespeople can be called in with the push of a button. In the dressing room, these mirrors add a “wow” factor and incorporate ease while behind the scenes they help Ralph Lauren make more relevant merchandising decisions.
At Alibaba’s Hema cashier-free grocery store in China, the shopping trip is the customer’s choice as it combines in-store and web shopping. Its shoppers can order their groceries from home or work using a mobile app, or they can hand-select their food at the supermarket and have it cooked right there for carryout. If the shopper is hungry in the store, she can “graze and pay” using Alipay, Alibaba’s digital payment system. Hema puts the shopper in control, and in doing so gives her free reign to teach it what it needs to know, in real time, about her preferences.
Each of these examples has one feature in common: They encourage more shopper collaboration, which should build understanding and trust. Based on these principles, the report offers these takeaways for loyalty program operators:
- Look beyond retail. Merchants can learn and borrow from loyalty practices in compatible industries, including hospitality, entertainment and even financial institutions. A retailer could, for example, get pointers on payment-streamlining practices.
- Know your value. Retailers that make a point to know why their loyalty members choose their brands, and regularly check in with customers to ensure they are beating expectations on those fronts and others, are more likely to retain loyalty members. Also, while reinforcing good practices, they should identify and address weak spots.
- Remember the data is shared. Shopper data is a currency and when shoppers trust a brand enough to share it they expect an experience of equal value in return. If the retailer fails to send relevant promotions or communications, the member will stop participating. Dead stop.
Lastly, the report suggests that the most visionary retailers are competing not just with rivals but with themselves as they are today. This requires constant experimentation, self-challenge and testing. And it will likely involve a few missteps. Overcoming challenges isn’t easy, but if success involves retaining members, it’s a good problem to have.