Retail Loyalty in the Mobile Age - Using Technology to Build Lasting Customer Relationships
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WHITE PAPER Retail Loyalty in the Mobile Age Using Technology to Build Lasting Customer Relationships
Retail Loyalty in the Mobile Age
Using Technology to Build Lasting
Customer Relationships
Where did the loyalty go?
Anyone remember the good ol’ days? Then, everything changed
In your great-grandmother’s time, retail shopping By mid-century, a retail transformation was
was a highly personalized experience. Most people underway. Self-service had come to the shopping
routinely carried their handwritten wish-lists to a experience, starting with grocery supermarkets
general store, where they would be greeted by and spreading quickly to department and specialty
name. The shopkeeper would look over the list, stores. Shopping carts, bright wide aisles filled with
then begin to pull the order together from the many product options and rows of cash registers
storeroom shelves, measuring and packaging each replaced the old general store counters. At the same
item individually, all the while chatting amiably about time, mass marketing and demographic studies
community news, neighbors and families. began to replace intimate customer relationships.
Yes, a regular shopper might still be greeted by name
Because the proprietor made most of the product and trusted to pay with a personal check, but the old
choices when selecting their stock, comparison familiarity – the routine dialog – was disappearing.
and branding was far less important to a customer
buying decision than availability. That made Retail chains grew and flourished, making the local
customer relationships the key to retail success; store’s owner – and purchasing agent – more likely
the storekeeper who listened carefully knew how to be a corporate entity than a neighbor. Advertised
many local children would need school supplies, specials and coupons became important tools to
who would want extra baking supplies before the attract shoppers into a store and brand loyalty was
church dinner, or who was expecting a better-than- increasingly important to keep them coming back.
average harvest and would be ready to make special Those who made decisions about which products
purchases ... and pay off their tab. Listening to the to stock still talked about “the customer,” but they
customer meant smarter purchasing decisions, now referred to a profile, rather than a person. And
smarter choices about cash flow management and something important was lost – a real, personalized
better chances for long-range business success. connection that let retailers listen to, not simply
market to, their customers.
2 WHITE PAPER: Retail Loyalty in the Mobile Age
Loyalty today: Reestablishing the dialog to
reinvigorate the relationship
The Digital Consumer is Mobilized
What’s in it for me?
2008
There is little question that building loyal customer 2009
relationships can have a dramatic effect on retailer MOBILE INTENSIVE – Growing Fast
success. Some experts suggest that companies can 18-54, >$50K/yr, smartphone users who rely heavily on mobile data
boost profits by almost 100 percent by retaining just
one more customer out of every twenty.1 A dividend
that size is obviously well worth the pursuit.
MOBILE CASUAL – Holding Steady
35-54, $50K/yr, use a mobile phone, but primarily for voice calls
they remain loyal to retailers – something which
was not true as recently as 2008.2 Yet, tempting as
0% 10% 20% 30% 40% 50% 60%
it might be to pursue aggressive pricing and deep Source: InsightExpress Digital Consumer Portrait, March 2010
discounting as a way to curry favor among today’s
cost-conscious consumers, very few retailers have Tapping new technology
the resources to sustain such a strategy long-term. While retailers are trying to better connect with their
So another approach is needed to attract recession- customers, those customers are simultaneously
weary consumers. A loyalty card program? Scanning changing the way they connect with everyone. They
a “club card” at purchase is now so common that it have fallen in love with their mobile devices and that
is seen by customers as a given, not as an attraction relationship is becoming transformative.
or differentiation. They can certainly be useful to the Smartphones are the favorite new device of the
retailer. Most who have implemented such programs decade and are expected to represent one in every
successfully collect data on 80 percent of their sales two mobile devices in use by 2012. InsightExpress
and the most effective capture up to 90 percent. identifies the fastest growth among the digital
However, what retailers do with all that data is often consumer group they call Mobile Intensives, those
much less effective. In most such programs, only who report that checking their mobile device is the
the top 30 percent of customers are actively courted first or second thing they do each day. Members are
and rewarded. Consumers are well aware that loyalty characterized by smartphone ownership (68 percent)
programs track every detail of their buying habits and and a desire to use every capability offered by their
some wonder just what they’re getting in return. As sophisticated new toys, including mobile Internet,
one expert puts it, “The bottom 70 percent aren’t texting, videos and applications. 86 percent fall within
being marketed to, because effectively you can’t the sought-after 18 to 44 year age range and just over
afford to. Those are the people who are most likely half (54 percent) make over $50,000 a year.4
to get bored or disappointed because they say, ‘Hey, Consumers are using their devices to tap the rich
the store has all this information on me but they resources of the Web. Mobile Web pageviews grew
never communicate with me.’”3 110 percent in the U.S. last year and 148 percent
The ideal loyalty program needs to work better both worldwide.5 Web users on a mobile device increased
for the consumer and for the retailer. Consumers 34 percent from July 2008 to July 2009, with
want more convenience, more personalization, women, teens and seniors the fastest growing user
more interactivity and more value. Retailers want segments, up 43 percent, 47 percent and 67 percent
to do farther reaching, more targeted marketing, at respectively.6 Consumers are also downloading
a lower cost and, ultimately, to be more effective in mobile applications for their devices by the boatload
attracting/retaining customers. – projected at just under 6 billion apps in 2010, up
from an estimated 2.4 billion in 2009.7
Clearly, to meet these consumers where they live,
retailers need to go mobile. The question is, how?
1 Frederick F. Reichheld and Thomas Teal, The Loyalty Effect: The
Hidden Force Behind Growth, Profits, and Lasting Value (Harvard
Business Press: 2001) 4 InsightExpress, Digital Consumer Portrait, March 2010
2 COLLOQUY, Retail Loyalty Index, March 2010 5 Quantcast, Mobile Trends, January 2010
3 Interview with Brian Woolf, the Godfather of retail loyalty 6 The Nielsen Company, Women, Teens, and Seniors Help Fuel
marketing, The Wise Marketer, July 2002 34% Mobile Web Spike, September 2009
7 ABI Research, Information Week, April 6, 2010
3 WHITE PAPER: Retail Loyalty in the Mobile AgeThe case for mobile marketing
What is mobile commerce/ Mobile Loyalty Relationships Mature Over Time
mobile marketing? Round 1 Offers Round X Offers
Mobile marketing is an approach that is moving A B C D E U V X Y Z
so quickly that the Mobile Marketing Association,
founded a decade ago, just updated their own
definition in November 2009: “Mobile Marketing
is a set of practices that enables organizations to
communicate and engage with their audience in an
interactive and relevant manner through any mobile
device or network.”8
The key words in that definition, for a retail marketer,
are engage, interactive and relevant. Mobile marketing Early Consumer Relationship Mature Consumer Relationship
is distinguishable from “mass marketing” in that
it is tailored to engage and interact with individual
customers, providing them with the offers they want,
when they are ready to shop, wherever it is convenient
Consumers already shop with their
for them, through a medium that lets them provide
instant feedback on the value they attach to each offer. mobile devices
The aspect of dialog – providing an opportunity for Moving consumers toward a mobile loyalty program
customers to respond and close the communication is easy, since many already use their mobile phones
loop – is critical. while shopping. Motorola research indicates that
mobile shopping technologies exploded in 2009 as
While mobile marketing differs significantly from shoppers turned to their mobile phones for activities
mass marketing, nevertheless a well-designed spanning multi-channel comparison shopping, peer
mobile marketing program maintains many key feedback, product information and couponing.9
benefits of other forms of advertising. The retailer
maintains full control over a centralized message According to Motorola’s 2009 Retail Holiday Season
and campaign structure. The economy of scale for Shopper survey, when shoppers were asked if they
mobile campaigns is similar to mass media, which had used their mobile devices during the previous
translates to low costs. Response can be tracked in two weeks of the holiday season:
real-time, like the shopkeeper interaction of old, but
with modern database interaction to instantly record • 31 percent said they had called to ask someone
and analyze the response. Closing the feedback about a purchase they were considering, 21
loop means messages can be fine-tuned and ROI percent texted someone about a possible
analyzed in near real time. purchase and 16 percent sent a picture of a
possible purchase
For today’s retailer, using mobile marketing to add a
mobile loyalty program to their integrated marketing • 14 percent had accessed the Internet on their
mix is an opportunity to: mobile devices to compare product prices and a
similar number checked on-line product reviews
• Leverage their customers’ existing relationship
with a highly personalized communication • 9 percent used their mobile phones to locate
technology that is ideal for closed loop dialog coupons or special offers on the Internet
• Gain more specific, real-time knowledge about the • 7 percent actually purchased products using their
individual customer mobile phones
• Use that knowledge to cost-effectively tailor offers, Mobile-driven retail activity and commerce will
not to broad market segments, but to individual continue to increase with retailers leveraging new
customers in specific locales mobile-specific technologies to convert browsers
into buyers. Now let’s look at how best to do that.
• Maintain ongoing relationships with individual
customers that mature with experience
8 Press Release, MMA Updates Definition of Mobile Marketing, 9 Motorola, 2009 Retail Holiday Season Shopper Study, Key
November 17, 2009 Findings Report, January 2010
4 WHITE PAPER: Retail Loyalty in the Mobile AgeBuilding a Mobile Loyalty Program
Which technology model? The consumer view of an application-
A loyalty program that runs on a mobile device has based model
three possible models: SMS, Web or application. The figure below outlines how an application-based
Some of the earliest efforts at mobile loyalty have mobile loyalty program works, including what’s
been text based (SMS) programs and they have behind the scenes. Step by step, here’s how it looks
had some success. Ultimately, though, text-based to a consumer.
programs are fairly limited as to the type and depth
1. The application is made available through
of information that can be sent or captured.
multiple channels. Smartphone users can visit
Web-based programs allow richer interactions, traditional application stores, such as iTunes
since they can tap the multimedia capabilities of the Application Store or the Android Market. Or,
Internet to show images and video. However, the both smartphone and non-smartphone users
user must seek out the website, which limits the can text a message to a shortcode to get a
retailer’s ability to maintain an ongoing dialog. download link. New and existing customers self-
identify by opting in, signified by downloading
An application-based approach to mobile loyalty can the application to their mobile device.
offer a rich, highly personalized user experience, as
well as the best opportunity to meet the retailer’s 2. The user signs up using the application. At
goals. Applications are also most attractive to this stage, the retailer captures customer data,
consumers because they are device-specific, in as much detail as desired. The basics might
allowing the interface to be designed for optimal include name, address and zip, but the option
ease of use. Motorola believes that the application exists to collect additional demographic data,
model allows the retailer’s brand to remain top of birthday, brand/product preferences, and so on.
mind and perpetually in the hand of the consumer, Acceptance and acknowledgement is instant and
supporting the desired nature of a loyalty program. automatic, making the process much faster and
more convenient than traditional paper forms.
3. A digitized loyalty card is instantly transmitted.
It includes a unique customer-identifying barcode
An Application-Based Model for Mobile Loyalty which can be used at the register immediately,
just like a traditional loyalty card.
1 User opts-in to 2 New user signup System prepares to 3 System delivers
program and agrees
to receive offers on
acknowledged send application with
optimized card to user’s
application and
digitized loyalty card/
4. Current offers are also immediately available
their mobile phone mobile phone coupons to users’s
mobile phone via the
to the customer for their review and acceptance
Mobile Loyalty System Carrier Network or rejection.
Carrier Network
5. The customer can now take advantage of
Consumer Packaged System sends
membership info to
New Users Offers
Retailer transmits
offers to system
offers right at the register. Any saved coupons
Goods Manufacturers
Retailer database Retailer and associates the
offers with retailer
or discount offers are automatically applied to
Database
POS system
the order right at the register; there’s no fussing
Revenue Retailer with paper coupons or plastic cards. From
Retailer receives revenue downloading the application to usable rewards,
in the form of advertising
funds from CPG companies the process has taken only a few minutes.
to generate offers POS POS POS Carrier Network
Much more than couponing
As the figure shows, the retailer maintains control
Consumer behavior
is stored in retailer POS
POS equipped with
image scanner reads
5 Customer
returns to
4 Customer
opens and
over all mobile loyalty campaigns, using a secure
database to optimize
future marketing
unique mobile loyalty
barcode on the phone,
the store to
redeem offers
reviews
offers
portal to design/distribute targeted offers for specific
campaigns,
operations and
accesses account and
automatically applies
audiences. Those offers are then sent to registered
buying decisions offers to purchases
customers whose preferences indicate potential
interest. While e-coupons are a popular mainstay,
offers are only limited by the retailer’s creativity and
can include:
• Special “insider” sale notices
• New product arrival announcements and reviews
5 WHITE PAPER: Retail Loyalty in the Mobile Age• “Happy birthday” offers Its first planks are particularly worth noting here:
• Friend-and-family circle recommendations (used • Choice and Consent: Provide an on-demand,
when the circle member installs the application), opt-in system
and more
• Customization and Constraint: Offer opt-out
Each individual customer can build a personalized capabilities to protect personal identification
shopping list by reviewing, saving or rejecting offers information10
as they come in. This feedback is instantly shared
You cannot build an effective relationship with
with the retailer and automatically posted to back-
customers without mutual respect. Following these
end CRM systems, giving the retailer a clearer
and other standards are the smart marketing move,
picture of this particular customer’s interests. As
as well as the respectful and ethical position.
each individual relationship matures, offers can be
more and more tightly tailored to the consumer’s
Protect the user information you hold with security
wants and preferences.
best practices
At the same time, this instant feedback loop allows Like night follows day, cybercriminals follow the
the retailer to plan and operate more efficiently. For latest e-commerce trends. So while 2009 saw
example, by integrating responses with inventory the first real explosion in mobile marketing, it also
levels, potential out-of-stock situations can be marked the arrival of the first malicious programs
identified before customers are disappointed. Stock designed to attack the vulnerabilities of mobile
levels can be fine-tuned store by store, according to platforms.11 Mobile loyalty marketers bear a
the level of demand they are generating in a region, particularly high security liability, since any program
facilitating just-in-time faster response. designed to track and capture personal and financial
information is likely to be a target, sooner or later.
The mobile application can also help manage store
traffic by identifying participating retail outlets for The best protection for the data you hold is for
each offer, allowing the retailer to control regional you to be proactive in considering security — from
campaigns. Combined with location-based services, protected portal log on, to data encryption, with the
customers can locate or even navigate to the nearest backing of a secure network infrastructure. Before
participating store, using their mobile device. you launch, be sure you have implemented security
best practices in every aspect of your program’s
Critical considerations operation: its technical design and maintenance, your
administrative procedures and personnel training,
Mobile Loyalty must be relevant to the user and the physical control of data systems and storage.
A customer’s mobile device is not like any other You need to protect both your company and your
messaging medium. The mobile phone is the single customers against all threats, including unauthorized
device that users keep by their sides at all times. use, alteration, disclosure, distribution and access.
It’s there whether they are alone or with friends or
family; it’s with them in the car, on the street and on The future of mobile in retail … is now
the night stand next to their bed at night. In short, it
Dozens of pundits are already declaring 2010 “the
is the most intimate communication channel in their
year of mobile” – you only need to search for the
lives that doesn’t include a pillowcase.
phrase on the Internet to count them all. Of course,
That intimacy means that message relevance is not the number of pundits making the declaration
merely important. It is critical. If offers are not valued doesn’t necessarily make it so, but it does indicate
and relevant, they will be seen as just so much more the level of excitement out there at just how quickly
spam .. and you will be seen as boring at best and the industry is moving.
more intrusive than the most annoying dinnertime
Early starters in mobile loyalty are already beginning
telemarketer at worst.
to build deeper customer profiles and expand their
To be welcomed, you must make your messages understanding of their consumer base. They are
an invitation to converse, not just an invitation to learning by doing, refining their use of the medium
commerce. Complete the feedback circle at every while they strengthen loyalty bonds and capture
opportunity; refine offers to continually enhance their market share.
value. Otherwise, consumers will opt out.
Caution in approaching something totally new can be
wise, but in the case of mobile loyalty, neither the
Respect consumer privacy technology nor the strategy are new or unproven.
The Mobile Marketing Association believes strong Those who wait to see what will happen could
consumer privacy standards are so essential, they be left far behind the curve and may have to be
have created a privacy Global Code of Conduct for exceptionally innovative to regain lost ground and
mobile marketers. recapture early adopter customers who have already
joined with the competition.
10 Mobile Marketing Association, Global Code of Conduct,
mmaglobal.com/policies/code-of-conduct
11 Mobile Marketing Watch, Mobile Phones to Come Under Attack
in 2010?, December 2009
6 WHITE PAPER: Retail Loyalty in the Mobile AgeUse Cases –
Mobile Loyalty in Action
Every loyalty program has four basic goals:
• Shift – Acquire new customers
• Lift – Increase the spending of existing customers
• Retention – Improve the natural churn rate of customers
• Profit mix – Shift spending to higher margin products
These use cases help demonstrate how a mobile loyalty
program can help you meet those goals.
Shift Lift Retention Profit Mix
Single Sam is visiting the home Regular Rita is a voracious Soccer-mom Sandy has twin Phil Flicks is a movie aficionado.
of his friend and proud mother- reader, so naturally she belongs boys who’ll be off to college He belongs to the mobile loyalty
to-be Mandy. As she shows off to the mobile loyalty program at in just two more years, so her club at ElectroCity because he
the new nursery, she mentions Booking Good Bookstores. Over household budget and her buys DVDs there, often and
that she bought the crib with a the past year, BGB has gathered pantry are both under plenty several at a time. He loves that
“10% off items over $250” offer a great deal of information about of pressure. But while other his ElectroCity membership
from her Big Box Home Club the type of books Rita prefers. moms are at home clipping gives him first notice when new
loyalty account. coupons, Sandy is in the stands titles are released, as well as a
One crisp, cool Saturday nice discount as a reward for his
Sam happens to be in the market afternoon, Rita is just leaving the at the soccer field, using the
application for her Local Grocers substantial purchase history.
for a new recliner, so Mandy dry cleaners when she hears
shows him how to join the Big Box her phone alert. A quick glance Preferred Shopping Club. But today, when he checks
Home Club by downloading the shows that she has a new offer She scans the weekly specials, his offers, something new is
app to his phone. Within minutes, from BGB, so she opens the manufacturers coupon and in- included – a sale price on a
his membership is active and application to check it out. store coupon offers, checking off Blu-Ray player that has the
the discount Mandy mentioned items on the built-in shopping capability to up-convert his
It’s an announcement that the DVDs to near hi-def.
appears on his account. There’s new deluxe hardcover boxed set list. With just a few clicks, she
also a special “new customer from one of her favorite authors also adds the few items she He wasn’t really thinking about a
welcome” offer for free home is now in stock at the local BGB. needs that won’t be on special. new player, but with his discount
delivery. Score! He marks both She hadn’t even known it was After the game, she and the and the sale price, this might be
“thumbs up” but gives a thumb’s coming out! boys head to the Local Grocers. too sweet to pass up. He checks
down to the sale on bunk beds Her list is automatically sorted a few reviews, then decides to
and baby’s room furnishings. And there’s another reminder mark it thumbs-up in the app,
as well – she only has to spend according to the store layout,
As he heads home later, so they move quickly through just in case.
another $25 this month to reach
Sam checks the app for store the next reward plateau … the aisles. At the checkout, the Later that week, at ElectroCity,
locations and finds that there is cashier scans her phone and all he pulls up his club account to
a new Big Box store just a few As she gets to the car and lays her coupons are automatically see which DVD titles he had
blocks off his route. He decides the cleaning in the back seat, applied. No clipping needed. marked to purchase. He spots
to stop in. Rita is already planning a slight the offer on the player again, and
change in her afternoon errand As she takes her receipt from
Big Box has the perfect football- the cashier, her phone alerts. decides, since he’s already in
route. A stop at Booking Good the store, maybe he should see
watching chair. As he checks today means a good book to Her $150+ purchase makes
out, he offers his phone to be her eligible for a two-cent per it in action.
curl up with tomorrow – this
scanned and the 10% discount is shaping up to be the perfect gallon discount at the chain’s Twenty minutes later, Phil is
and free delivery offer are stay-at-home weekend. gas station, valid today and picking out his new movies -- in
automatically applied to his tomorrow. While her sons load Blu-Ray format. That new player
purchase. Big Box has a happy the groceries into the minivan, is going to be a great addition to
new customer. Sandy checks the fuel gauge; it his home theatre.
wouldn’t hurt to top it off today.
She pulls up to the pumps.
7 WHITE PAPER: Retail Loyalty in the Mobile AgeThe Motorola Solution
Motorola’s Mobile Loyalty Solution (MLS) is a perfect Motorola MLS Features and Benefits
extension to your existing customer loyalty program, Digitized membership • Located in customer’s mobile phone,
or even a viable solution for retailers who wish to card the digitized loyalty card allows instant
create a new loyalty program. A comprehensive access to offers
managed service that is part of Motorola’s • Reduced costs of printing and
m-commerce platform, Motorola’s MLS is a market- distributing coupons/membership
cards
ready, retail-centric service, enabling retailers
to take full advantage of a closed loop mobile Unique customer barcode • Better data integrity with elimination
for each loyalty member of “ghost cards”
communication platform designed and operated by
an industry leader. • Increased program participation, with
customers more likely to carry mobile
phones to redeem offers
Motorola provides all the technical components
needed in a tailored, nearly turnkey package: Motorola Managed • Allows retailers to focus on customer
Service distributes database and marketing message
mobile loyalty card to the while Motorola optimizes the offer
• Mobile application for most operating systems and
customer’s mobile phone presentation across all major mobile
phone types, including non-smartphones (including operating systems and manages the
but not limited to Android, iPhone, Blackberry, relationship with the wireless carriers
Windows Mobile, Java) Retailer campaign • Online system allows retailers to
manager portal quickly create targeted offers and
• A tailored private portal, enabling you to quickly campaigns to launch at specified time
and easily design and distribute offers to Mobile Loyalty reports • Reports provide information about
members, without special technical expertise consumers’ actions within the Mobile
Loyalty application, allowing the
• POS image scanners optimized for device-based retailer to optimize their promotions
digitized loyalty card scanning On-line or in-store opt in • Convenient and easy membership
initiation with multiple sign-up
• Integration services to connect your MLS program methods
to back-end systems such as CRM, inventory, Automatic redemption • Decreased wait times at point of sale
store directories, and more for faster offer redemption
Environmentally friendly, • Lowers costs/reduces campaign
paper-free program times
Make the Move
Today’s retailers are looking for a way to restart
the personal dialogs that once characterized their
customer relationships. But just at the time retailers
are ready to talk, the traditional “big media”
advertising channels are becoming more disjointed.
Time- and place-shifting is displacing television
advertising, making it virtually impossible to be sure
your ads are viewed. Newspapers are struggling to
survive the onslaught of on-line news. Even local
radio is being challenged by satellite offerings.
In this fractured communication environment, it
makes sense to turn to the one device consumers
never leave home without – their mobile phones.
Mobile Loyalty is a highly targeted and economical
solution that arrives on the most personalized
medium since the love letter. Done right, Mobile
Loyalty can seal your interactions with customers
and deliver long, happy relationships that profit both.
www.motorola.com/business/mobileloyalty
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