Is Mobile Making Customers More Loyal?

The implementation of mobile loyalty programs has proved to increase customer satisfaction and profitability, making loyalty one of the key reasons why more and more people are adopting mobile.

The Starbucks Card Mobile app

While implementation of mobile loyalty programs is still low in some industries, initial results show that these initiatives are delivering improved customer satisfaction and profitability.

Mobile has been positioned by some as a panacea for loyalty programs because of its ability to reach customers throughout the entire purchase cycle and afterwards. Mobile’s potential to boost loyalty programs is one of the reasons why interest in mobile loyalty is high among retailers, banks, airlines and others.

“Our research shows that loyalty has the second highest interest level from retailers when it comes to implementing a mobile strategy,” said Sahir Anand, vice president and principal analyst for retail with the Aberdeen Group, Boston. “The reason for this is the ability for mobile loyalty programs to make up for lost sales and poorer executions of loyalty store programs.

“Nearly two-thirds of retailers have expressed dissatisfaction with their existing loyalty programs that are positioned in the store,” he said.

Interest levels high
Mobile is playing several key roles for loyalty marketers. Mobile can be used as a loyalty membership ID, points redeemer, instant program update channel and as a way to receive location-specific services and as a delivery channel for rewards through applications, 2D bar codes, coupons and games.

“Clearly, mobile devices offer a promising way to strengthen the two-way relationship between companies and their customers, the very sort of relationships enjoyed by loyalty programs and their members,” said Jim Sullivan, a partner at Colloquy, Cincinnati, OH.

“The idea is to increase customer loyalty by giving customers what they want, when they want it and how they want it – mobile offers an enticing way to do just that,” he said.

Aberdeen’s research shows that four out of 10 retailers are interested in mobile loyalty programs and more than half are interested in mobile giving, which is an element of mobile loyalty.

However, currently only about 11 percent have made some form of move toward mobile loyalty.

Interest is high because mobile addresses many of the concerns retailers have about store-based loyalty programs via enhanced messaging capabilities and the ability to engage customers throughout the shopping experience via offers, bar code scanning, transactions and reward redemption.

Mobile gives customers a way to access loyalty points before, during and after a sales experience, to track a gift card balance, receive coupons and deals and redeem offers.

“There is a form factor advantage with mobile that you don’t have with a plastic card,” Aberdeen Group’s Mr. Anand said. “With a mobile device your relationship with a brand increases over time.”

Mr. Anand points to Starbucks as a good example of a successful mobile loyalty program. In Mexico, Starbucks tested a call to action asking users to text a keyword to a short code in order to receive a coupon that could be redeemed in-store.

That effort had a 60 percent mobile coupon redemption rate, per Mr. Anand.

“There are benefits in terms of improved customer satisfaction and increased customer profitability from mobile loyalty,” Mr. Anand said. “These are the two areas where you can see results from the initial mobile loyalty deployments.”

What a customer wants
Loyalty is one of the key reasons that companies are adopting mobile. This is because not only is the competition doing so, but customers are telling brands they want to interact with them via mobile.

Another reason that companies are looking to drive loyalty via mobile is the belief that, because a mobile phone is such a personal device, consumers who do interact with brands via mobile will be more loyal.

“Consumers who interact with brands via mobile tend to be more loyal,” said David Eads, vice president of product marketing for Kony, Orlando, FL. “Mobile by itself creates loyalty.”

For example, banks often measure the loyalty of customers by whether or not someone signs up to pay bills via an online bill pay service, per Mr. Eads. However, mobile banking is proving to be just as strong an indicator of loyalty.

“Banks consider gold standard customers those who do bill pay because they are more sticky and less likely to leave,” Mr. Eads said.

“By converting customers to mobile banking, they are as sticky as bill pay customers,” he said.

One of the key learnings about mobile loyalty to date is that a fully fleshed out strategy is best.

SMS, mobile applications and a mobile site are all important.

“You can’t just do mobile loyalty halfway,” Mr. Eads said. “When it comes to interacting with brands as it relates to loyalty, you need to be able to reach customers in whatever medium is their preference.”

Because mobile enables companies to collect important data about customers’ purchasing habits, the next generation of mobile loyalty programs could take personalization to a new level.

“Brands are going to have to really personalize the mobile experience, almost like a personal shopping in your pocket,” Mr. Eads said. “The brands that are really good at personalization are going to get more loyalty and will have an opportunity to gain more of the customer’s discretionary spend and have a tighter relationship.”


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