Long the exclusive domain of mobile operators, we are now seeing mobile loyalty programs being adopted by a raft of industries.  

Led by retail, businesses have begun to harness the power of mobile. The goal is commonly to increase the effectiveness of existing customer loyalty programs. Some have even launched stand-alone mobile loyalty programs, with great success.

Despite their popularity, traditional customer loyalty programs have long been struggling with a number of issues. The accumulation of accrued points presents a significant problem for businesses, as the cost of unclaimed rewards have to be carried forward. The production and distribution of glossy customer brochures and direct mailers are cost factors that impact the efficiency of loyalty programs. How many of these brochures end up in the bin, with letters unread and vouchers unclaimed? Ultimately, businesses do not see the return on investment despite various efforts, and sales figures do not necessarily reflect these efforts either.

The mobile channel addresses many of these pain points, and Asia is an ideal location with its rapidly growing mobile penetration rates. For example, according to the Infocomm Development Authority of Singapore, as of December 2009, the country has a mobile penetration rate of 137.4%. This means just about every Singaporean or Singapore resident owns at least one mobile phone or more.

Its ubiquity makes mobile a preferred channel for customer communication in general, and for reward schemes in particular. Some of the key benefits of mobile technology for customer loyalty programs include cost reduction, greater relevance and higher response rates.

Cost of mobile loyalty programs

According to Carlson Marketing Group, a US-based customer research firm, rewards programs cost companies, on average, between 2 per cent and 10 per cent of a customer's total spending at a given store. Because of this cost, many retailers have traditionally focused on the top 20 or 30 per cent of their customers. This has left the majority of their clients frustrated or unable to accrue enough points to benefit from the program.

One of the advantages of mobile loyalty programs is a reduction in cost per customer. SMS is a low cost tool that can replace more expensive media such as direct mail to reach out to more customers more frequently. This also makes mobile a suitable channel for smaller businesses that previously couldn’t afford to launch and maintain a customer loyalty program.

Greater relevance

In many countries in Asia, mobile phones are status symbols, and people tend to be very attached to their personal devices. This means that marketers can identify and personalize marketing messages by the mobile number, increasing the relevance of those messages.

Greater contextual or location relevance is another reason to embrace mobile. Typically we carry our phone in our pocket or handbag whenever we leave the house. This means we can receive information about the customer loyalty program of our choice when we are in the shops, going out for dinner, or visiting an event, possibly allowing us to redeem a voucher straight away.

Higher response rates

From a consumer perspective, it is much easier to redeem a voucher by simply presenting a text message on one’s mobile phone in-store, rather than having to remember to take a letter or leaflet along the day one might be around the shop location.

Due to their convenience and immediacy, anecdotal evidence suggests some mobile voucher campaigns see redemption rates of up to 60 per cent. In comparison, marketers estimate that electronic direct mail yields only a 1 to 30 per cent response rate, and below 3 per cent for direct mail sent through traditional channels such as snail mail.

Together with lower cost and greater relevance, higher response rates make a compelling business case for mobile loyalty programs.

What will happen next?

The mass distribution of text messages, ‘SMS broadcasting’, was an important first step for marketers to adapt to customers’ mobile lifestyle. After all, all mobile phones are SMS enabled, and text messages the lowest common denominator, and hence the most effective mobile marketing tool. But are we really living up to today’s customer expectations? In the long term, will the mass distribution of promotional text messages really increase customer loyalty and reduce attrition?

Much of the today’s SMS broadcast treats SMS like mass media. Messages are not personalized and are often irrelevant to the recipient. Why treat all customers alike when the mobile phone is personal? Why broadcast at a fixed time when different customers are shopping at different times? The key to the long-term brand success lies in a campaign’s level of customization.

The ideal would be to create a one-on-one conversation with each and every customer through the mobile channel. The ultimate goal should be to build a long-term relationship with your customers throughout the product lifecycle.

Imagine the potential of a mobile CRM (mCRM) system integrated with the point-of-sale (POS). Messages would be relevant to that person, and their preferences. Offers and discount coupons can be generated and sent on the fly, avoiding the four to six-week lead time for post.

How to personalize mobile campaigns

The level of personalization comes down to the ability to slice and dice customer data. All mobile campaigns work with an opt-in database. Now imagine if this database provided a greater level of customer detail, including name, date of birth, favourite product or preferred store.

Some experts estimate food retailers traditionally lose up to 40 per cent of their new customers within three months. One of the big benefits of a mobile loyalty program is the ability to reach their customers with relevant promotions when they are in proximity of the retail site.

Take your local sushi shop around the corner. Once you signed up for the loyalty program, you might receive a text message saying, “Buy a bento box today at Sushi-Sue and receive 25% off”. While this is tempting, the call for action would be even stronger if it was personalized based on your favourite meal (taken from purchase data): “Dear Ross, don’t miss out on your favourite Unagi bento box at 25% off for today only at Sushi-Sue.”

Or even better – sending out a text message on a customer’s birthday with a special present to be collected at a branch near his or her office: “Dear Ross, Happy birthday! Sushi-Sue invites you to collect a free sashimi box at our Centrepoint branch today”.

In a nutshell, personalised mobile loyalty programs make customers feel truly valued and special. And we need the hearts and minds of the customers to close the loyalty gap.

By Ross Elmsly, Country Manager, Singapore, Sybase 365