Customer Loyalty Programs Sweeten the Mobile Payment Value Proposition

Every retailer knows that loyalty programs are an excellent way to build their brand and encourage customer engagement. And customers enjoy earning points, redeeming rewards, and taking advantage of special deals from their favorite stores. Today, m-commerce is taking loyalty programs to the next level. Companies are learning how to leverage them to drive better business results—and enhance their customers’ shopping experience—through integrated mobile payment technology.

B2C Loyalty Goes Mobile

Boston Retail Partners’ report, Loyalty Programs – Rewarding the Customer Experience, reveals that 73% of retailers surveyed do not currently offer their customers mobile access to the features of their loyalty programs. Yet they’re seemingly optimistic: 62% are planning to spend more on their loyalty programs and supporting technologies this year, and 56% plan to participate in mobile loyalty applications in the near future.

Here are the mobile CRM/Loyalty capabilities respondents say they’ve implemented or plan to implement within the next 5 years:

• Track point balance: 33% implemented (37% plan to implement within 2-5 years)
• Redeem rewards: 29% implemented (46% within 2-5 years)
• Alert when customer is near a reward threshold: 29% implemented (50% within 2-5 years)
• Offer special promotions: 25% implemented (55% within 2-5 years)
• Participate in mobile loyalty app such as Shopkick: 12% implemented (44% within 2-5 years)
• Integrate loyalty program with a mobile payment app: 11% implemented (60% within 2-5 years)

Retailers who haven’t launched a mobile strategy or explored the potential for loyalty via mobile may be in the process of developing the their infrastructure or simply waiting to see what best practices come from the experiences of early adopters. They may also be considering consumer demand for mobile payment and mobile-based loyalty program functionality.

Brand Loyalty’s 2015 Loyalty Report shows that while 48% of consumers would like to engage with loyalty programs through their mobile device, only 12% have downloaded a program app. Of those who use a mobile loyalty app, 62% are satisfied with the program, compared with 45% of loyalty program members without the app. What’s more, 61% of smartphone owners are not aware whether or not their program offers a mobile app.

Consumers Seeking Value Prop

Not every smartphone-toting, loyalty program shopper has transitioned to making mobile payments. They’re satisfied with the traditional methods of cash and credit, and they’re probably still scanning their loyalty cards at the point-of purchase. These consumers likely don’t find the value in making a mobile transaction. Mobile access to their retail reward programs, however, provides a compelling reason to adopt mobile payments.

Consider this excerpt from the Consumers and Mobile Financial Services 2014 report from the Federal Reserve:

The significant number of mobile users who reported an interest in using their phones to receive discounts, coupons, and promotions or to track rewards and loyalty points suggests that tying these services to a mobile payment service would increase the attractiveness of mobile phones as a means of payment.

Aligning Opportunity with Potential

Consumers’ preferences are changing as they become more aware of the things they can do on their smartphones, from paying for groceries to tracking merchant reward points. Their adoption of new mobile technology, through retailers’ proprietary apps or third-party m-commerce platforms, is expected to follow.

That explains why retailers who are pursuing a competitive edge in today’s m-commerce marketplace are carefully monitoring the convergence of consumers’ readiness for mobile payments/loyalty program access and the availability of the technology to support it. As the research has shown, more businesses are paying attention to innovations in the mobile payments space and are planning on taking action—if they haven’t invested in it already.

Consumers’ behavior at the cash register has always been a hot topic, but with mobile building up steam, it’s getting hotter than ever. The industry is forging ahead quickly, and new, exciting trends are coming into view—so stay tuned for more insights into the mobile payments landscape.