The arena has never been as competitive for companies battling to earn a share of consumers’ dwindling spending cash. As if that was not enough to contend with, the most prolonged squeeze on disposable incomes has taken place against an equally profound shift in how customers are shopping.
The mobile phone has arrived as a powerful weapon in the modern consumer’s armoury, enabling them to buy, check prices and research products on the go. Meanwhile, retailers and other customer-facing companies are looking towards mobile and contactless payments to make transactions as seamless as possible, and to garner more data on customers’ shopping habits.
Loyalty schemes have been duly drafted in at the front line of how many retailers react to this new, price-sensitive environment.
Since the recession took hold, all the major supermarkets have introduced price promises of varying forms, some of them using technologies that would have been inconceivable a few years ago.
Asda’s price guarantee works by customers typing in a code on their receipt on a website which checks their basket of goods against an independent database, calculating whether it would have been more than 10 per cent cheaper. If not, the scheme gives shoppers a refund.
Sainsbury’s, unlike Asda, runs a loyalty programme as part of the Nectar scheme. It has also introduced a more immediate system that gives customers a coupon at the till if the basket of goods they bought would have been cheaper elsewhere.
Loyalty schemes are developing into one of the chief ways of combating “showrooming”, the phenomenon of customers using stores as mere showrooms where they browse and use their mobile phones to find better offers.
In the United States, Walmart’s phone app has an “in-store mode” that gives customers access to that store’s offers. It has found that 12 per cent of purchases on the mobile app are made when customers are in a store.
For Walmart, and its British subsidiary Asda, the mobile app is particularly important because it lacks the richness of data on shopping habits provided by a loyalty scheme. According to Asda’s chief executive Andy Clarke: “This is another opportunity for us, with customers’ permission, to gather data… Every customer has a choice whether they want to accept free wi-fi, so giving us permission to talk to them about the Asda business in-store.”
But there are obstacles for retailers and loyalty schemes to overcome before the full potential of the smartphone revolution can be unlocked.
Martin Hayward, vice president of global digital strategy at Aimia, the company behind the Nectar scheme, says: “It’s fair to say we are still predominantly in an analogue world in loyalty. Nectar has 19 million cardholders, all engaging the benefits scheme and it’s very early days in the migration from analogue to digital world.
“There are too many different technologies, too many stores have different point-of-sale systems, different readers. And we don’t yet have the commonality of standards for this migration to happen incredibly quickly.
“But theoretically we should be on the cusp of a really wonderful period in marketing. All the things we have always wanted to know – who shoppers are, who do they talk to, where do they buy – all these things we always thought we needed to know to serve them well, are now within reach.
“All this new technology should be really powerful to help retailers deepen their relationship with customers.”
Aimia is already building location-based functions into its Nectar smartphone app, while Tesco’s Clubcard also has in-store scanning functions.
The danger, he says, is that mobile phones become “electronic sandwich boards” and risk irritating customers with a blizzard of irrelevant information.
“There is a lot of data in a lot of people’s hands… there’s a danger it all leads to consumers being over-messaged – too many people trying to contact them, and their phone is buzzing and pinging anytime they’re walking past,” says Mr Hayward.
Similarly, mobile wallets are on the agenda for loyalty scheme operators, but the integration of loyalty schemes and contactless payments is not straightforward. Combined payment and loyalty on a mobile phone or contactless card would be a “very compelling offer”, according to Mr Hayward, but the £20 limit for mobile and card contactless payment has proven a stumbling block.
He says: “It’s something we’re keeping a very close eye on and working towards. We need to make sure the consumer is always reminded of the loyalty scheme they’re part of at the time of payment. If you listen to some of the propositions from [telecoms companies], their idea is that every phone will have every loyalty card and it will just automatically accrue points everywhere you go. If that happens the whole point of a loyalty scheme will change.”
Equally, check-in services like Foursquare have provided another avenue through which savvy smartphone shoppers can earn coupons and special offers.
For Aimia’s Mr Hayward, the crux is whether new technologies are creating value for customers and retailers: “Loyalty and offers aren’t the same thing. Anyone can bribe customers to come to your stores, by offering them half price or a free coffee. The trick is how do you get them to come back tomorrow without bribing them? How do you use technology to deepen the relationship with customers?”
