By paying close attention to the needs of brick and mortar stores and their consumers, Punchh Inc. became a world leader in digital marketing products to help businesses increase the lifetime customer value.
Recognizing how revenue growth occurs at every stage of the customer experience, Punchh Inc.’s Co-Founder and CEO, Shyam Rao, has great insight into consumer behaviour and the value of a comprehensive loyalty program.
M.R. Rangaswami: How have customer loyalty programs for brick-and-mortar businesses evolved over the last 5 years?
Shyam Rao: Amazon delivers superior convenience and value online and in-store (for example, via Whole Foods), combines a deep understanding of consumers with Amazon Prime, to drive high customer lifetime value. In effect, Amazon offers one of the most effective customer loyalty programs.
Brick-and-mortar retailer CEO’s have realized that they need to focus on modernizing their customer loyalty programs, to compete with Amazon. Specifically, modern loyalty programs enable retailers to focus on three things:
1. Deliver seamless experiences in-store and online
Customer loyalty starts with making a consumer’s shopping experience fast, easy, and simple regardless of the channel/touchpoint (in-store, online) or point in the lifecycle. A modern loyalty program should work for all customers – whether they’ve registered in a loyalty program or not, or whether they use a mobile app or swipe a credit card etc.
2. Develop a comprehensive understanding of each customer
Retailers should fully understand their customer’s demographics, purchases (across all channels), and preferences (what items they like, which stores they visit (including online), what days/dayparts they typically visit, etc.). It is also critically important that they gain this understanding and act on it in real-time.
3. Personalize and transform loyalty programs from 1-many to 1-1 programs
If a retailer has 10 million consumers, they need to be able to offer 10 million 1-1 loyalty programs tailored to each of their consumers as opposed to a single loyalty program for all 10 million consumers. That’s exactly what a modern loyalty program does. Having this capability allows retailers to score every customer (using Recency, Frequency, and Monetary (RFM) and AI / ML techniques), and then offer an upsell offer to a low-spender, a compression-based offer to an infrequent customer, or trigger a win-back offer to a lapsed customer etc.
M.R.: What are the new technologies that are going to influence customer loyalty in the next few years?
Shyam: Let’s first with what are the must-have technological capabilities for retailers to offer a modern loyalty program to their customers. To deliver seamless, omni-channel experiences, real-time customer insights, tailored offers, and marketing automation for 1-1 loyalty programs, retailers need a single, comprehensive, and modern loyalty platform. Such a platform needs to enable easy integrations to all the relevant systems, with highly verticalized customer data management capabilities, and capable of supporting 1-1 customer journeys.
A modern loyalty platform as outlined above, will future-proof retailers as their customers’ expectations of loyalty evolve. However, in addition, we will see technologies such as facial recognition, artificial intelligence (AI) and machine learning (ML) play a much more central role.
Facial recognition will enable easy identification of consumers and enhance their experience without requiring them to always download apps or log into systems.
AI and ML technologies will enable retailers to radically transform customer experiences by making them truly 1-1. In a way, they will allow retailers to turn back the clock by about fifty years when there were no digital experiences, when every consumer would be greeted by and personally served by the shopkeeper. Using AI and ML technologies, retailers will be able to synthesize unique insights on each consumer in real-time, and predict which consumer is likely to churn, what offer is likely to win them back, what offer would likely to get them to spend more or visit more frequently, etc. They can also tailor offers based on location, weather, and calendar.
M.R.: What are the privacy concerns involved in customer loyalty programs?
Shyam: Privacy and trust are central to retailers, consumers, and regulatory agencies overseeing customer loyalty programs.
There are inherent risks of a data breach, misuse of customer information, or even of a brand acting as “big brother,” and all of these things can and will raise red flags for consumers who have a right to their privacy. There’s a fine line between engaging customers and being “creepy,” and brands need to figure out how to navigate the landscape.
There’s that Target example—a great cautionary tale—where the company knew about a teenager’s pregnancy, thanks to the savvy analyzing of the customer’s purchase data. Target sent coupons for baby products to the household, and the shopper’s father became angry about the “inappropriate marketing.” This incident led the company to be more careful about how it promotes its personalized offers—just in case.
At Punchh, we have incorporated data privacy and security at all levels. From a consumer perspective, they can opt-in and/or opt-out of programs and offers, and also have a “right to be forgotten” in compliance with modern privacy regulations. For retailers, Punchh ensures that they own their consumers’ data and that other retailers cannot market to them. Additionally, because Punchh serves retailers globally, Punchh is also one of the first customer loyalty providers to be GDPR-compliant.
In addition to enabling data privacy, Punchh’s platform offers state-of-the-art security capabilities on top of AWS’s built-in security, and aside from regularly scanning systems for vulnerabilities, Punchh also tests all code for security vulnerabilities before each release and performs third-party security audits.
M.R. Rangaswami is the co-founder of Sand Hill Group and publisher of SandHill.com.