Many of us have a loyalty card for a favourite store or coffee shop, but a growing number of brands are now using mobile phones as a way to hold on to customers.
Phone companies who operate in a fiercely competitive market have been doing so for some time and, given their mobile marketing expertise, that is hardly surprising. Orange's pioneering Orange Wednesdays two-for-one cinema ticket promotion has proved hugely successful, and rival mobile phone operator O2 has also launched a loyalty scheme, offering users the chance to buy tickets to concerts and music festivals before they go on general sale. Those programmes were initially designed to reduce "churn rates" in an industry where customers were notoriously promiscuous, swapping providers on the basis of cost, but now that prices have come down across the board, they are also being used to build brand awareness.
In the UK, 73% of people are members of at least one loyalty scheme, according to research carried out by Analysys Mason for Buongiorno, a global provider of mobile internet, loyalty and marketing solutions. Many other industries are now following the mobile phone companies' example by using mobiles to attract, retain and sometimes even to regain customers. Gambling company Ladbrokes has launched its "odds on" mobile loyalty scheme, which offers customers who haven't placed a bet for some time a free or reduced-price bet. It also regularly contacts others who frequently gamble on certain events or teams when a specific event is coming up, so for instance football fans who have often backed Manchester United might have received offers ahead of last month's Champions League final, which the team contested.
As customers can be won through targeted advertising and marketing campaigns aimed at a particular demographic, mobile phone companies have an inherent advantage at this early stage. This is partly because of the amount of information held about their customers. Experts point out that the click through rate [from an online ad] is three times higher on a mobile phone than it is on a PC or laptop.
But it is after those customers are on board that mobile marketing can come in to its own through effective customer relationship management. The growth of mobile commerce means purchases can often be tracked, and customers can be sent offers they are more likely to respond to favourably or encouraged to "upscale" to other product categories. Timely offers – like a sporting bet on an upcoming event – can also be targeted at the right people.
Adhish Kulkarni, head of telecoms loyalty and product solutions at Buongiorno, says: "Mobile has always been a perfect loyalty channel for connecting with people – it's always in their pocket and it's a two-way channel – but until now it hasn't lived up to its promise for brands. However, this is changing now and we are using our experience from the telecoms world, running programmes like Orange Wednesdays and the Top-Up Surprises at O2 to bring mobile and app-based loyalty mechanics to the retail environment. Retailers are much more open to using digital coupons today as the industry overcomes cost and technology barriers."
Ryan Lawson, mobile marketing and smartphone lead at 2ergo, says mobile loyalty schemes are now becoming more popular, thanks in a large part to the prevalence of location-based applications and websites, such as Foursquare.
Real-time communication
There are obvious marketing and advertising opportunities for companies who want to reach customers in their area – from offers on supermarket food to restaurant deals and cinema tickets. But there are other advantages too. "We are effectively communicating in real time," Lawson says, "and getting instant responses from customers." He adds that: "The redemption rates compared with physical [loyalty schemes] are massive. It's hitting customers on the move and hitting them with the right message."
However, now that many mobiles have become mini-PCs, some people are worried about the security risks that might arise from responding to marketing campaigns. Lawson says: "You are dealing with people's mobile numbers, which is quite a personal thing." But he argues that customers who don't respond to offers are not normally targeted again, which means few people are contacted repeatedly. "They are not deluged by offers," he says. Unlike those of us who live close enough to a takeaway to find our hallways carpeted with junkmail.
Loyalty schemes - Italian style
Upmarket Italian clothing retailer Patrizia Pepe, founded in Florence in 1993, has more than 1,200 shops around the world and generated revenues of €138m (£121.5m) in 2010. Just more than 10% of that figure came from e-commerce so when the company decided to launch a mobile loyalty scheme, it did so in the knowledge that getting it right can be a profitable exercise.
The company launched a new iPhone app, but it wanted to create an active and loyal community around it to ensure it didn't become a short-lived fad. Users could also join the scheme by filling in a form on the company's website.
Loyalty points that can be redeemed in store (or online) are not acquired solely by buying goods, as they often are with traditional loyalty cards. Using the website to upload photos or post comments also wins participants points, and so too can surfing other websites which the company suggests they visit.
The strategy was designed to encourage the creation of an online community of users, rather than a simple e-commerce platform, and that is an aspiration other companies would be well advised to share. Shopping online or in Patrizia Pepe's stores enables users to collect loyalty points, too, of course, in the traditional fashion.
Launched in April this year, Patrizia Pepe's loyalty programme iPhone app, which was designed and managed by B!Digital, the mobile marketing arm of Buongiorno, won more than 3,000 new subscribers in Italy alone in just four days and it was downloaded more than 8,000 times in the same period.
