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Are mobile loyalty programs the next step for retailers?

Accepting mobile payments seems inevitable to retailers that want to stay competitive, but does that imply that these organizations should also support an associated mobile commerce loyalty program?

For a retailer to invest in a loyalty program, it seems intuitive that the return on that investment be justified.  However, the success of any consumer loyalty program must benefit the customer; but not necessarily all customers.   Bargain shoppers aren’t necessarily profitable customers, but research shows that targeted marketing to repeat customers can contribute significantly more to the bottom line. 

‘The Loyalty Effect’, as put forth by Fred Reicheld in 1996, demonstrated that loyalty and retention leads to profitability, but ignoring a loyalty program leads to high customer defections which are very expensive to replace.

The Forrester Q3 2011 Global Loyalty Benchmark Online Survey supports this view.  When asked for their top 3 business objectives for putting together a loyalty program, ‘Customer Retention’ and ‘Profitability/Revenue’ came in as the top two reasons.

Like the bargain shoppers, repeat customers take advantage of the loyalty campaigns (coupons, discounts, points, etc.), but unlike their thrifty counterparts, loyal customers tend to also purchase the higher margin items during that same purchasing experience.

Retailers revitalized Reicheld’s ideas of retention through loyalty when they began taking advantage of the emerging Internet commerce era at the turn of the century.

Now, along comes the great Mobile era.

Getting back to the original question, it should now be easy to see why the exploding growth of mobile commerce (payments PLUS loyalty) generates great opportunity for retailers wishing to grow their bottom line via customer retention.

In this ongoing series on mobile commerce, we will examine how one goes about designing a mobile-based loyalty program that meets the immediate needs of the shopper and differentiates itself from the competitors.  And here’s a hint…it’s not all about price!

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