Considering data from the U.S., where the average business loses 15% of its customers every year, acquiring a new consumer costs 16 times more than retaining an existing one, and 68% of Millenials say they need a loyalty program to keep buying a particular brand, the development of loyalty programs is not threatened. However, over the years we have managed to accumulate a dozen or so cards in our wallets, give our consent to receive e-mails from dozens of partners, but what about their daily use? Does registering in a given programme and their promotional tools really motivate us to follow the offer, buy more often and become attached to a given brand? The dynamic growth of both penetration and the average number of programmes in which the user participates (60% penetration and 8.6 programmes per user, respectively, in 2019) is a derivative of the replacement of plastic cards with mobile applications launched by successive large players mainly from the food and drugstore market. The enhanced functionalities of the apps encourage both easy downloading of more and greater user engagement after downloading.
Where is the application displacing traditional cards?
The slogan Mobile first is definitely the basis for the strategy of new loyalty programmes, in which the application becomes a contact tool, a promotion channel, a “newspaper” with offers, a platform for counting user activity and proper gratification and a warranty card. Extended functionalities combined with intuitive operation made it a success in the case of LIDL Plus (ca. 320k installations per month).
The advantages of the application were also discovered by loyalty programs with an established position on the market, which successively replace plastic cards with mobile versions, such as Rossman, Superpharm or Payback. The more benefits of the application, the smoother the transition. Rossman and Superharm drugstores or Carrefour market owe the rapid growth in the number of installations largely to the fact that there is no need to use the existing membership card, it is enough to scan the code from the phone at the checkout. “My Carrefour” has gone even further in the functionality of its app and in providing convenient solutions to its users, who, thanks to the Scan &Go service, can scan items themselves while putting them in the basket. In the future the smartphone will certainly replace the cash register as well.
Use of smartphones increases engagement
The smartphone has become an aggregator for loyalty programmes, which users use more often and more actively. When comparing the level of engagement of a loyalty programme participant, the mobile versions are definitely better. According to the “Loyalty Insight” study prepared by H2H.tech agency, the LIDL Plus (84%) and Rossman Club (84%) applications are the leaders in the ranking determining the level of engagement in the loyalty programme on the basis of users’ knowledge of their current points balance, current promotions, bonuses available and frequency of use.
Whether we will actually use the programme after registering depends primarily on whether it suits our preferences. Thanks to the advanced functionalities of app personalisation, each user can receive offers precisely tailored to his or her behavioural profile, which increases both the frequency of purchases and the satisfaction of contact with the brand. This personalisation is a key factor in the further development of loyalty programmes.
A personalised approach to the user, functionalities focused on enhancing the shopping experience (e.g. scanning the product barcode in-store to see if the size/colour you are looking for is available online), or well-curated promotions are also key factors of the most popular loyalty programme apps in the US.
From installation to engagement
Still the most important motivator to be a loyalty club member is the savings in the form of discounts, special promotions, rewards or cashback. These benefits are most often used at the checkout in traditional shops, where it is easy to compare how much we could save by being a member of a community. In this way, installations (and thus registrations) among shoppers in such shops as LIDL and Rossman increased rapidly.
However, the success of the application measured by the number of installations cannot be fully translated into return on this investment. The most important is the already mentioned level of user engagement. This depends on a good idea for the functionality of the application itself, and preferably additional distinction and benefits for the user of the programme – earlier access to sales, extension of warranty, better prices and higher discounts, more convenient service, etc. Following this path, Superharm added a functionality to its “Lifestyle Club” programme to its application, which allows users to donate the points they earn while shopping to charities.
The commitment of a loyalty programme participant is also derived from the frequency of purchases, which is different in each industry. This is why we often use plastic loyalty cards when filling up the car, but we forget about their existence in the case of many clothing brands. Most often the activity in traditional programmes is secondary, we use it while shopping. Therefore, an important task of the application is to motivate the user to purchase and increase the level of loyalty.
The benefits of behavioural data
Advanced capabilities of the application make it possible to precisely combine the offline and online worlds, which can be effectively used to communicate with the user in the right place and at the right time. In addition, advanced AI and machine learning capabilities allow you to precisely match the offer to users’ expectations and behaviour. Promotional communication on the application not only adjusts to the user’s preferences, but can also motivate and inspire the user.