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Retailers: Is Your Loyalty Program Ready for the AI Revolution?

Retailers have experienced a significant transformation in their capacity to connect with customers, and the emergence of artificial intelligence (AI)-driven recommendations is poised to usher in an even swifter evolution. Yet, numerous retailers in the Asia-Pacific (APAC) region continue to grapple with the challenges of adaptation. In fact, research reveals that while nearly half of retailers in North America (52%) and Europe (49%) personalise a significant majority of the shopper journey, only 23 per cent of APAC retailers are meeting that goal. 

In a cutthroat landscape where rising inflation and mortgage rates are making consumers become more conscious of their spending, the pressure is on for retailers to get personalisation right. Research commissioned by Google Cloud found that 75 per cent of shoppers prefer brands that personalise interactions and outreach to them, and 86 per cent want a brand that understands their interests and preferences. 

At a recent Google event, I joined a panel with Cédric Chéreau, CEO and Co-Founder of Untie Nots and Sameer Dhingra, Director of Retail and Consumer at Google Cloud APAC, to share how digital technology can transform retailers’ approach to customer engagement. We unpack everything from one-to-one marketing capabilities, marketing in the moment and how AI and real-time technology are helping modern retailers get in on next-gen loyalty.

Becoming Proactive with Technology

The shopper journey has undergone a significant transformation. By the time the customer goes through discovery, awareness, consideration, purchase, the decision to buy from which outlet in which platform and which channel is purely a matter of convenience and choice, Dhingra explains. 

Knowing this, the question then becomes: how do you get shoppers into your store? And if they are in your store, how can you then increase engagement conversions, basket value, basket size, etc. in an efficient manner while balancing cost, risk and growth aspirations?

“Last year, we looked at the shopper journey and the retailers’ focus was largely on retention towards the end of the cycle. It was a bit reactive. Now, it’s shifted to real-time personalisation at the point of engagement – a more proactive way of engaging customers,” says Dhingra.

“This shift is causing retailers to look at where their innovation dollars are going. They want to know where they can spend to get the biggest bang for their buck. It’s interesting because technology is no longer the biggest obstacle to transformation – adoption and buy-in are. 

“Innovation in hyper-personalisation and loyalty programs is spreading across the retail ecosystem. Retailers are becoming more proactive and less reactive thanks to advancements in technology.”

The Power of Personalisation: Beyond a Buzzword 

More than a buzzword, personalisation is now a critical component of a retailer’s long-term success. Personalised offers have the potential to transform the way retailers engage with customers. In fact, McKinsey research shows that 71 per cent of consumers expect companies to deliver personalised interactions – and 76 per cent get frustrated when this doesn’t happen.

When it comes to building a loyal customer base, personalisation plays a crucial role in creating a meaningful and lasting connection with individual customers. It tailors the shopping experience to each customer’s unique preferences, interests and past behaviours. By offering personalised product recommendations, relevant offers and content that aligns with their preferences, customers feel valued and understood. 

This heightened level of customer experience fosters a sense of loyalty – happy customers are more likely to return to a retailer that understands and caters to their unique needs. Satisfied, loyal customers are also more likely to become brand advocates and recommend the retailer to family and friends. Positive word-of-mouth advocacy leads to new customer acquisition and reinforces loyalty among existing customers.

Loyalty’s Golden Rules

Tim Mason, Eagle Eye CEO, has a remarkable background as the former CMO of Tesco, where he played a key role in establishing the Tesco ClubCard. In the book “Omnichannel Retail,” which he co-authored with Sarah Jarvis, Mason reflects on his experiences during that time and imparts three significant marketing lessons he learned.

Three ‘Golden Rules’ of Loyalty:

  1. Treat others as they’d like to be treated: When you’re designing your program, don’t treat people as you’d love them to be, treat them how they like to be treated.
  2. Reward behaviour you desire: Become clear in understanding the behaviour that makes a real difference to your goals and incentivise customers accordingly.
  3. Think “DIAL” for continuous improvement: When you have a loyalty program, you are privy to a significant amount of customer Data, which provides Insight. But the key is to then turn those Insights into Action – something that makes a difference and sparks customer Loyalty. 

AI-Powered Loyalty

Despite the passage of time, Mason’s fundamentals remain practically unchanged. What does change, however, is technology. Advancements in AI and real-time cloud platforms are revolutionising the loyalty landscape. And they feed off of data. 

In retail, there’s nothing that generates as much data about customers as a loyalty program. There is a tremendous opportunity in the next few years to start using AI on the data generated by loyalty programs. For example, Eagle Eye together with Google Cloud gives retailers the ability to connect their customer data to a real-time platform in the cloud. This goes back to the DIAL methodology – enabling retailers to execute data-based insights in real-time to drive customer loyalty.

Currently, the majority of retailers are following a weekly cycle when it comes to issuing personalised offers to customers, but this can and will start to shift to a real-time model. Imagine customers walking near a Starbucks. Utilising real-time data, their favourite drink preference and the current weather conditions, the store can instantly create an offer tailored to the customers’ preferences to drive them into store. 

This ability to execute real-time personalisation when a customer is most primed to make a purchasing decision is going to be a game-changer for retail, and is something we call “marketing in the moment”. Marketing in the moment takes historical customer understanding and blends that with real-time contextual data to determine the right content/message to send a customer at that exact moment in time. This, we believe, is the future of retail marketing. 

Woolworths: The One to Watch

Some retailers around the world are headed towards real-time loyalty. And Australian supermarket chain Woolworths is one of them. This popular grocery retailer has been at the forefront of customer loyalty, continuously pushing boundaries and setting the standard for others to emulate. 

At Eagle Eye, we’ve been working with Woolworths, together with Google, to support its real-time loyalty program “Everyday Rewards” – a new offer and loyalty management system that enables connected, personalised and seamless experiences for all 14 million and counting members. 

Woolworths’ customers can now receive a more personalised experience that reflects their unique preferences, both before and during the shop, all delivered through the retailer’s market-leading Everyday Rewards App. It’s been live for a year and already experiencing great results, including recently receiving global recognition at the International Loyalty Awards. 

“Ten years ago, loyalty programs were based on plastic cards and paper vouchers – they were cumbersome to use for customers and our business,” said Glenn Baker, Woolworths general manager of Everyday Rewards. “The technology that Eagle Eye provides has helped transform how we can reward and recognise our customers in real time.” 

In the past, when Woolworths sent customers offers to boost rewards points on about 12 items each week, shoppers would need to wait up to two hours once they had boosted the items to earn bonus points when they shopped. Customers can now boost items in the app while browsing in the supermarket and earn points towards discounts as soon as they pay at the checkout. Woolworths’ in-store point-of-sale system connects in real-time to its new loyalty platform, which assesses the shopping basket before payment is finalised.

The platform enables customers to track their points earning and redeeming as it happens, rather than waiting hours or days. It also enables Woolworths to test the success of offers and campaigns faster and, theoretically, send offers in response to weather and events.

“We have even had members earn points in Woolworths and then redeem immediately next door at Big W or BWS,” said Baker.

The Silver Lining

Rolling out real-time loyalty is a massive effort for many retailers to achieve. And we recognise that not every retailer has the resources Woolworths has. But we get excited about challenges because if you’re looking to get started on the journey, particularly around using AI and advanced technologies, there are ready-made solutions that you can roll out in practically weeks or months that are ready to go. 

Harvard Business Review recently shared an article about the best ways to adopt AI in an organisation. The advice was to pick a process you’re already doing and then improve it. That way you’re not creating anything new, so it’s easier. For retailers, that looks like improving the promotion cycle.

Shifting from mass promotions to personalised promotions is something worth investing in. According to BCG, reallocating just 25 per cent of the budget from mass promotions to personalised offers could increase retailers’ return on investment by a significant 200 per cent. However, this has been, historically, quite challenging for retailers, Chéreau points out.

Mission Possible: Personalisation at Scale

Personalised offers have been challenging to scale for retailers and CPGs, Chéreau points out. “Traditionally, there have been two ways of doing personalised promotions. The first is the old targeting way. Say a brand is launching a product, it would target its competitor’s customers, incentivising them to choose its product. However, that breaks golden rule number one; you’re asking customers to do what they’re not willing to do – change their brand to something else. That’s why this method has a very small return rate,” Chéreau explains.

“And that’s why promotional funds are still quite limited because suppliers are not really happy to participate in that kind of approach unless we can guarantee incrementality, ensuring that every offer we put on the market is incremental by design. Now we have the tools and the tech to do this. We have all the data science and the IT infrastructure to make sure that we can run personalised promotions at scale.”

Untie Nots, a personalised promotions business acquired by Eagle Eye in January 2023, has developed a suite of algorithms to tackle the shift from mass promotion to personalised promotions. By analysing customer behaviour and preferences, Untie Nots can precisely identify the right products for individual customers. 

With its diverse algorithm family, including the: 

  • People Pleaser: The data science algorithm ensuring that we can identify the right products for each customer individually, looking at what they bought in the past
  • Influencer: The algorithm identifying products that customers are not buying yet by using ‘look alikes’: customers that are very similar to them who are buying certain products
  • Chef: The algorithm that is building the right mix between a product that the customer is already buying and a product that he/she should be interested in
  • Diviner: The algorithm predicting how much money a customer would spend on a certain group of products over a period of time
  • Coach: The algorithm motivating the customer to spend a little bit more to become more loyal to the retailer
  • Moderator: The algorithm making sure that the coach is not asking too much out of the customer, ensuring that we define the right level of stretch in every offer put on the market
  • Motivator: The algorithm at the end, ensuring that the retailer offers the right reward

Untie Nots can deliver precisely targeted offers that customers are genuinely interested in. The result? A highly rewarding ROI, with every dollar distributed as a reward generating at least AUD$7 in incremental sales for the retailer.

“For the CPG, that figure is just slightly lower because the retailers benefit from what we call the ‘halo effect’ where you’re in-store buying the whole basket,” Chéreau says. “The entire solution is completely automated in the cloud. It doesn’t need a huge army of analysts to do that level of personalisation, and it’s very customer-centric. This is where the market is moving.”

The Future of Retail is Here

Significant disruptions have entirely transformed the retail industry, necessitating retailers to adopt more efficient, customer-centric and resilient approaches. Despite uncertainty, the retail industry has enormous opportunity. 

The future belongs to those who address today’s critical in-store and online challenges with the latest technological advancements. These cutting-edge tools offer a pathway to significantly boost customer engagement and loyalty, paving the way for a successful future in retail. Importantly, you don’t need an all-or-nothing approach. Start small and enhance your current processes. The future of next-gen loyalty is already within reach, so take that first step today.

Jonathan Reeve
Author: Jonathan Reeve

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