The retail shopping experience is undergoing a transformation as more and more shopping shifts from brick-and-mortar stores to online. Though this trend will continue thanks to emerging mobile technologies and changing consumer preferences, brick-and-mortar locations still have plenty of life in them. This is especially true for apparel retailers because seeing and touching merchandise remains a sought-after part of the shopping experience.
Moving forward, retailers need to concentrate on enticing shoppers into the physical store through a variety of strategies, including a renewed focus on elevating the shopping experience. Customer loyalty programs have long been a vital component of this process but in many cases they are not reaching their full potential.
Are loyalty programs still relevant?
According to a recent study by COLLOQUY Loyalty Census, memberships in loyalty-specific programs are growing at an annual rate of 26.7 percent and more than 2.65 billion exist in the United States. The caveat, however, is that while shoppers are joining loyalty programs, they do not consistently participate in them. The study found that even though the number of loyalty program memberships per household has grown, less than half engaged with their membership in the previous 12 months.
It is clear that the majority of retailers are not executing effective loyalty campaigns. Instead, they continue to rely on an antiquated method of building loyalty: discounting.
Loyalty programs that focus purely on discounts are typically not successful long-term. While reduced prices might increase traffic during promotional periods, too much discounting devalues a brand and attracts "fair weather" shoppers whose only loyalty lies with the lowest price.
Programs that push out irrelevant offers and promotions also struggle. Thanks to technology, today's consumer is accustomed to the more personalized online experience and they expect the same from the physical store. This is especially true of Millennials; the same COLLOQUY survey found 49 percent stopped using a loyalty program after receiving irrelevant communications compared with 37 percent of overall respondents.
Personalization drives sales
When executed properly, loyalty programs can have a positive impact on the bottom line. According to FTI Consulting, the most loyal shoppers — those signed up with loyalty programs — typically comprise 10 percent of a retailer's traffic, yet they account for up to 50 percent of their sales.
Technology can help retailers better leverage loyalty programs to create a more customer-centric shopping experience that increases the chances of getting shoppers back in the store.
More specifically, a tremendous sales opportunity exists in connecting personalized content and location to drive impulse buying while in the store, and brick-and-mortar retailers are uniquely positioned to make this happen. A recent CreditCards.com survey found that 79 percent of impulse purchases take place in the physical store compared to just 6 percent online. Using mobile tools and apps that direct loyal customers to in-store promotions enhance the effectiveness of encouraging such purchases.
New technologies lead to new opportunities
Until recently, online retailers had a distinct advantage when it came to customizing promotions. Thanks to the wealth of data collected each time a visitor browses or buys on their site, they analyze behavior and deliver a more personal shopping experience. Now, new technologies are bringing the same advantages to the physical store, allowing brick-and-mortar retailers to access customer information in real time so they can engage with shoppers not only on the floor but after they leave the store.
Mobile devices will have an enormous impact on loyalty programs, and new apps that help retailers connect with shoppers in a more personalized fashion are on the rise. For instance, apps that combine beacon technologies and analytics enable retailers to directly engage with shoppers throughout their time in the store. Customer insights gained from the technology allow retailers to shift in-store strategies and operations to match shopper interest and behavior, leading to increased customer loyalty. Post-shopping rewards and promotions are based on real-time shopping behavior, making them highly relevant to customers.
Similarly, retailer-specific apps can include a host of capabilities that have the power to transform the shopping experience. By offering geolocation technology, retailers have the ability to track customers throughout the shopping journey and provide a customized experience from start to finish, ultimately delivering promotions and rewards based on actual in-store behavior. Wish lists, in-store mapping and in-store marketing programs also provide retailers with valuable customer data that allows them to personalize customer engagement to drive conversion and increase loyalty.
Wi-Fi is another technology with great potential to elevate loyalty programs but most retailers are not leveraging it to its full potential. Offering free guest Wi-Fi should be more than just a perk for customers. It is an opportunity for retailers to connect with shoppers and direct them to their online channels, helping increase brand awareness and drive sales. It also facilitates the collection of valuable data that can be used to develop personalized loyalty programs where promotions and discounts are directly sent to customers' smartphones, either while they are still shopping or after they have left the store.
Today's retailers are faced with a high fixed cost of merchandise, which means that creating non-price-based differentiation in the marketplace is a key component of profitability. In this environment, loyalty programs are key, and they must go beyond cost cutting and discounts. Instead, they need to tap into new technologies that allow retailers to build meaningful connections with their customers, while emphasizing products, services and brand value.
These strong ties will draw customers into the store where retailers can use operational tactics to drive sales and conversion rates (e.g. optimum staff levels, trained associates and available products). By combining in-store measures with a thoughtful loyalty program, retailers will cultivate brand loyalty that keeps customers coming back for more.
Chetan Ghai is chief product officer of ShopperTrak.