There’s no escaping the power that smartphones have placed in the hands of consumers. The ability to price check products at the scan of a barcode, or access vouchers and redemption offers has left marketers scrambling to ensure their brand has a mobile presence. For many, however, the rush to get mobile has been to the detriment of a longer-term, multichannel strategy for the business. While a basic app may tick the ‘mobile’ box, the platform offers so much more in terms of customer loyalty and retention.

The opportunities presented by GPS location services, instant engagement and targeted, relevant promotions based on purchasing customer history or while browsing in-store are all under-utilised. And more concerning is the trend that bigger and better offers will translate into long-term loyalty. Recent developments in customer buying power such as group purchasing websites, have quickly demonstrated that this cannot be the case. As such, marketers need to consider how they can secure ‘true’ loyalty, before they embark on their mobile proposition.

The loyalty landscape

Defining loyalty is difficult but in our view, customer loyalty is creating brand advocates, who will happily refer friends to your brand, shop frequently and profitably. And it’s the latter that is crucial: For most retail businesses, 20% of customers account for 80% of the business, therefore maintaining the margin from these customers is vital in a tough economy.

Most UK adults are used to having a wallet full of various retail loyalty schemes, but it’s fair to say that not all are used as effectively as they could be. While 85% of UK households have loyalty cards, over a quarter of loyalty cardholders ‘rarely’ or ‘never’ redeem their points, with men less likely to redeem than women.

Equally, the current reliance on physical cards can often cause more annoyance if a shopper forgets to use them, or leaves them at home. Our own consumer research, conducted in conjunction with YouGov revealed that 28% of UK shoppers never know how many points they have on each loyalty scheme they are part of, and almost one in four (24%) get annoyed if they miss out on potential rewards if they leave their card at home.

Despite this, the research also highlighted that 42% of shoppers are often pleased with the rewards available through loyalty schemes. Therefore, the schemes and attributed rewards are not the issue – retailers have to look at the logistics that support their loyalty schemes, and consider how to make them more customer-friendly. If most frustrations come from not having the right card, coupon or offer to hand, then a channel such as mobile, which most of us have on us at all times is certainly one way to solve this issue immediately.

A growing appetite for mobile loyalty

The viability of switching to a mobile platform for loyalty activities will depend wholly on consumers’ acceptance of the channel. And our research gave a strong indication that the appetite for mobile loyalty schemes is already there. Over half of smartphone users (56%) would use a loyalty scheme via their phone. And what’s more, one in four (26%) believe they would purchase more from a retailer that offered a proactive loyalty scheme with a mobile presence.

Despite this clear indication that UK shoppers are ready for a mobile loyalty scheme, just 6% of High Street retailers currently offer access to their loyalty scheme via mobile or smartphone, and just one retailer in our research pool offers mobile couponing.

So why does this disconnect exist? Quite simply, we’ve never seen such a steep adopter curve as we have for mobile. The traditional barriers for browsing, offer redemption and purchasing via a mobile such as lack of speed, functionality, security and data protection are quickly being eradicated as shoppers’ reliance on smartphones increases and improved operating systems make them quick and easier to use on the move.

An addition to discounting?

In a bid, perhaps to counter this incredible growth in smartphone adoption and usage across the UK, some have linked the ability to discount to their long-term loyalty strategy. Rewarding customers for regular or repeat purchases is an important part of establishing loyalty, but cannot be the whole story.

From a reward perspective, it’s important to understand who to incentivise. In recent times, brands have been turning to coupon services like Groupon to generate business, hoping that customers will be attracted to their stores and then subsequently repeat shop. However, in reality this isn’t the case. Customers who are attracted through discounts alone are loyal to the discount, and not to the brand.

Couponing does not equal loyalty. In this vein, it’s important to link loyalty to profitability. Brands need to own and run their own loyalty programmes to understand this, and not rely on discount offer aggregators to bring in short lived, unprofitable customers.

2012: changing the face of mobile loyalty

Over the next twelve months, organisations that fail to embrace a comprehensive multichannel marketing strategy that includes intelligence-based mobile loyalty strategies will soon find themselves becoming the barrier. Brand loyalty will be eroded as shoppers switch to those competitors who seem to understand their needs and engage them with the right offer, via the right platform, at the right time.

When planning a 2012 mobile marketing strategy, brands need to remember that no customer loyalty exercise is really worth it unless they are able to collect and use the data. To get the most out of a loyalty initiative, it’s important for retailers to collect as much data as possible. This insight can then be stored within a unified data warehouse with the ability to segment customers by profile, allowing the business to identify their most profitable customers. Going through this exercise may take longer, but will reap larger rewards for businesses to focus on and drive profitability in a tough market.

In these tough economic times, it’s also important to consider what a mobile loyalty scheme can bring, not only to consumers, but also to a retailer’s customer insight. In addition to simple location based services, mobiles can also be used to provide customers with unique personalised experiences in store. With mobile check-in services, customers can be rewarded for entering stores. Whilst in store, the same technology can be used to enhance customer service, from scanning products via the mobile and browsing product reviews, to price comparison, and also to self-checkout without even visiting the tills, helping customers to beat the queues. Making it easier for customers has proven to be a great way to retain them (ref. Harvard Business Review – Increasing Customer Loyalty).

Location based services aren’t just designed to help customers. Mobiles can also be used to help store assistants – customers who have checked in can opt to provide their personal details electronically in store, enabling the assistants to provide personalised customer experiences. Again helping to improve service levels, this in turn can help retain customers.

The power of mobile marketing grows with every smartphone sale and, with the predicted rise in ownership, brands have to revise their mobile strategy to ensure customers continue to shop profitably and drive maximum value.

Collin McCaffery

Collin McCaffery


Collin McCaffery is the Product and Technology Director at 2ergo.