Kobie Quarterly: Retail Services Edition January 2015

january 2015 • kobie.com
QUARTERLY REVIEW

contents
GO FOR LAUNCH
Don’t Make
These 3 Mistakes
When Launching
a Retail Loyalty
Program
02
TRENDING
Retail Trends
& Insights:
Q&A with Erica
Thompson
Moran
06
INVESTMENT
Retail Loyalty
Readiness
Worksheet
14
SALES
Measuring
Loyalty ROI in
Retail
10
ENGAGEMENT
iBeacon’s
Potential to
Merge Online
and Offline
Experience
with Contextual
Marketing
22
MOBILE
Will Apple Pay
Finally Make
Mobile Payments
a Reality for
Retail?
26
WELCOME
From the
President,
Michael Hemsey
01
BON APPÉTIT
Key Ingredients
of a Successful
Restaurant
Loyalty Program
20
TECH
Augmented
Reality for
Loyalty
Programs: Real
Potential or
Passing Fad?
24
02
24
14
QUARTERLY REVIEW JANUARY 2015

KOBIE QUARTERLY REVIEW 3
I
n a world where the best deal is only a Google search away,
retailers are struggling to keep customers coming back. This
is especially true for brick-and-mortars that have taken a hit
from the rise of ecommerce and practices like showrooming.
And yet Amazon opened a physical store last year, along with
several other successful ecommerce brands like Warby Parker and
Birchbox. Would anyone be able to predict this just a few years ago
when ecommerce was hailed as the end of brick-and-mortars?
Online retailers moving toward offline stores tells us not only that
the in-store experience still matters, but more importantly retailers
are ditching the one-channel mindset for an omnichannel approach.
Retailers now recognize the need to connect with customers at all
touchpoints in relevant, meaningful ways.
We’re seeing brands experiment with how to deliver more contex-
tual, highly personalized customer experiences by using emerging
technology like beacons and augmented reality. Thanks to Apple
Pay’s launch last fall, mobile wallets may finally make a real impact
on retail. In this issue we explore how these technologies can be
integrated with loyalty.
We also look at defining and measuring loyalty ROI in retail, which
is key for getting buy in from your organization. We’ve included a
Retail Loyalty Readiness Worksheet to guide you through costing
out the initial capital investment and ongoing costs of launching a
loyalty program.
We hope the Kobie Quarterly: Retail Edition helps inspire and inform
your loyalty strategy for 2015 and beyond. No matter where the
retail industry is headed, our primary focus should remain the same:
rewarding customers in ways specific to their wants and needs. That
will always be in style.
fromthepresident
MICHAEL HEMSEY
President
1

S
adly, we are now many years into
retail loyalty marketing programs
and as a consumer, I still don’t
see much that’s new, engaging
or innovative. However, as a retail loyalty
marketing professional I can imagine
the board room conversations that lead
to these uninspired programs. From
challenges in demonstrating clear ROI
to lack of alignment with goals, there’s
a reason the retail industry has so many
lackluster loyalty programs.
DON’T MAKE THESE
3 MISTAKES
WHEN LAUNCHING A RETAIL
LOYALTY PROGRAM
3

I
t doesn’t have to be this way.
By creating strategies to avoid
common pitfalls either pre-launch
or as the program is phased
to the next level, retail brands can
make loyalty programs far more
compelling to consumers as well as
more profitable for the company. The
most common mistakes I see retail
marketing organizations make as they
enter into loyalty programs fall into
three buckets.
1
Treating loyalty as a marketing
or IT initiative rather than an
enterprise wide effort. This
approach limits the scope of
where customer data can be leveraged
and does not ensure true buy in with
key partners like store ops, IT, finance
and merchandising. Because loyalty
and CRM can require a significant
investment of energy and resources,
company-wide buy in is critical to
success. Successful programs are
a core company priority, not a side
project competing for attention.
2
Not having clearly defined
and agreed upon success
metrics. Don’t assume having
customer data and a tool will
automatically lead to success. Before
investing company resources into a
loyalty initiative, you need to agree
on a clear ROI that takes into account
time, money and opportunity costs.
3
Viewing loyalty as a project
that can be completed
in a short period of time.
Any good loyalty program
will constantly evolve and require
organizational patience. By its very
nature, customer data is iterative. The
more a company learns, the more they
tend to want to know. Early stage
loyalty/CRM programs can often feel
like drinking from a data fire hose. The
organization needs to think of loyalty
as a journey, not a destination.
SO HOW CAN BRANDS
AVOID THESE PITFALLS?
1
Partner with key teams during
the beginning stages of the
program. The launch of a loyalty
program has an impact on every
facet of your brand. Store associates
will have to be genuinely engaged
and trained. POS and internal systems
will need significant modifications.
The IT department, which likely
already has too many projects, will
be stretched into new capabilities.
Merchants will have to think differently
about everything from pricing to
promotions. The finance team will
need to help with a P&L, KPIs, and
constantly proving the ROI of the
program. Once you consider how the
program depends on and affects other
teams, it’s obvious why their input
cannot happen at the end of the cycle.
Collaborating with these departments
from the beginning lets them develop
clear ownership and accountability for
the program’s success.
2
Make the finance team
a co-owner on loyalty
profitability. As much as
you believe in halo effects,
customer engagement and brand
loyalty, your finance team wants to
hear about the bottom line. Show
that you care about it, will commit
to it, and will help track against it
by establishing easily proved ways
to predict and measure profitability.
Examples of this include increases
in incremental sales from direct
marketing using newly acquired
customer data, average basket size
increase, and year over year customer
counts. The key is to keep it simple
and measurable.
3
Never stop communicating
and re-communicating what
the roadmap is and where
you are on it. The Loyalty
Leader in marketing has to also be the
Customer Loyalty Evangelist charged
with educating the organization on
both new programs and ones that
have been around for a while. Keep
other teams in the loop by attending
departmental staff meetings,
presenting on outcomes at company-
wide meetings, and creating quarterly
updates for senior management.
As trust and engagement are
built around the loyalty program over
time, it will be far easier to continue
evolving the program and developing
more engaging consumer benefits.
4

NEVER STOP
AND WHERE YOU ARE ON IT
COMMUNICATING
AND RE-COMMUNICATING WHAT
THE ROADMAP IS
”
“
5

As a retail industry expert, what
is your take on the current state
of the marketplace?
Retail is definitely struggling
right now as an industry. According
to ShopperTrak, retail foot traffic
is significantly declining and most
retailers are contracting their store
footprints. The 80s and 90s brought an
oversaturation of big box retail square
footage and the consumer demand
simply isn’t there for that much space.
While there is plenty of talk about
an economic recovery, it’s not clear
that consumers are back to their pre-
recession spending ways. Retailers
find themselves in an increasingly
competitive and promotional
environment to get close to positive
comp sales which adds significant
margin pressure.
Lastly, consumers are shifting their
shopping behaviors from traditional
department stores and malls to the
Internet, discounters, and dollar stores.
It will likely be a challenging holiday
season for mall-based retailers.
What trends are you seeing in the
retail industry from a customer
loyalty, customer experience,
and customer engagement
perspective?
After years of more talk than
action, I feel that we are finally seeing
brick & mortar retailers embracing the
omnichannel experience. Traditional
retailers like Macy’s and Walmart have
significantly invested in integrating their
store, mobile, and online experiences.
Walmart’s Savings Catcher is a
really interesting new take on loyalty.
It’s basically a price matching tool
that compares prices in local markets
and returns savings to consumers. Of
course, the consumer has to share
their information to get the savings,
allowing Walmart to potentially create
an enormous database of customer
information. It remains to be seen what
they will do with all of that shopper
data, but it could be interesting.
We’re seeing more retailers looking
for tender neutral loyalty programs
versus just credit card driven ones to be
more inclusive and track more customer
behavior. Express and Bloomingdale’s
launched tender neutral programs in
2012 and Kohl’s introduced its Yes2You
program toward the end of 2014.
The recent high publicity retail data
breaches pose a challenge for loyalty
programs going forward. Retailers are
going to have to offer up much more
compelling benefits to get consumers
to share their personal information.
And they will likely need to invest
significantly more in keeping that
information safe.
Mobile wallets have been around
for a while but have yet to achieve
widespread consumer acceptance. Two
new products may change that. Apple
Pay launched in October and has the
support of major retailers and banks.
MCX is preparing to launch CurrentC, a
competing mobile wallet which has the
backing of major retailers like CVS and
Best Buy.
2015 should be an interesting year
for beacon technology as well, which
enables real-time targeting to mobile
devices. While Apple launched this
technology in 2013, it was too late to
impact holiday shopping. It is estimated
that half of the top 100 retailers in the
U.S. tested beacons in 2014. Retailers
will need to be careful with this
technology, however, as it can seem
“creepy” or invasive to consumers.
What are the biggest or most
persistent challenges you see for
retailers?
Consumers are becoming
increasingly fickle and are often just
looking for the best deal or promotion.
They have unlimited access to
Q&A WITH
ERICA
THOMPSON
MORAN
Erica recently joined
Kobie Marketing as
a Retail Advisory
Consultant. We sat
down with her to
discuss her view of
the current insights
and trends in the
retail loyalty space.
7

information wherever they are from their
mobile devices which is eroding brand
loyalty. This is particularly true with
Millennials who tend to be less brand
loyal and who are increasingly switching
to outlets, the web, and dollar stores.
Brick and mortar retailers need to
find ways to differentiate their shopping
experience outside of promotions.
Retailers like PetSmart can do this with
engaging in-store activities like pet
training, grooming or doggie daycare.
Bloomingdale’s Loyallist Program
engages top customers with exclusive
in-store events with designers. All of
these need to be consistently tied to the
online and mobile experience.
What are their biggest needs?
Brick and mortar retailers are
challenged to keep up with the
technology of the Amazons of the
world, but with low margins and
pressure to keep up with comparable
store sales and margins. Often, they
are dealing with antiquated POS and
store systems that cannot integrate
with the online, mobile or loyalty
experience. These retailers need better
tools to prove the ROI of technology
investments.
How would you characterize the
evolution of technology in the
marketplace and retailers using it
correctly to drive engagement?
Mobile is becoming increasingly
more important for retail. The number
of tablets in use in the U.S. is expected
to reach 280 million by 2017. Today,
60% of the time consumers spend on
their phone is spent on mobile apps.
Retailers need to develop compelling
and integrated mobile experiences that
are channel agnostic. The customer
increasingly wants to make a purchase
wherever and whenever is convenient
for her. Retailers should be investing in
mobile apps, wallets and beacons.
What would be your advice
to retailers who are trying to
be customer-centric, but just
haven’t been able to put all the
correct pieces together internally
and form a corporate culture
standpoint?
Customer centricity needs to be
an enterprise wide endeavor. I always
cringe when I see titles like SVP of
Customer Experience. It’s a nice gesture,
but it implies that one person owns the
customer experience. Every facet of the
organization needs to own the customer
experience and feel responsible for
it. Measurements like net promoter
scores need to be put in place and
every department should be measured
against them. The most important three
feet in retail will always be the three
feet between your associates and your
customer. The organization only exists
to empower that relationship.
“BRICK& MORTAR RETAILERS NEED TO FIND WAYS
TO DIFFERENTIATE THEIR SHOPPING EXPERIENCE
OUTSIDE OF PROMOTIONS.”

With real-time and predictive analytics, we can help you understand how members
are behaving, anticipate how they will behave and inspire more loyal behaviors.
We’ll help you make smarter decisions about complex business problems faster
than your competition. Simple.
Call 800-821-7892 or visit www.kobie.com to learn more.
Solve complex problems
before they happen.

LOYALTY ROI
MEASURING
IN RETAIL
I
nvesting in retail loyalty is a major
decision for any company, no matter the
size. Loyalty impacts every facet of the
organization and requires a potentially
massive investment of time and resources.
It is not a one-time project, but an ongoing
commitment that requires constant
nurturing and care.
Sales
Incremental
10

KOBIE QUARTERLY REVIEW 13QUARTERLY REVIEW JANUARY 2015
11

M
ore importantly, a loyalty
program is not something
that an organization can
come in and out of. Once
the commitment is made to a loyalty
program, it will be difficult and costly
to walk away from it. As a result, the
decision to launch and focus on a loyalty
program should not be made lightly.
Making a decision like this requires
significant due diligence, research, and
an organizational belief in a positive ROI
over time. Forecasting and measuring
that ROI is increasingly falling to the
marketing department, but it also must
be created and managed in partnership
with the finance team.
The ROI model needs to be simple,
clear, and measurable. There are three
basic, key components involved in
creating a retail loyalty ROI model:
1. INCREMENTAL SALES DRIVEN
BY THE PROGRAM
2. INCREMENTAL BENEFIT FROM
MORE TARGETED ACTIVITY
(COST REDUCTIONS)
3. ONGOING COSTS OF
DELIVERING THE PROGRAM
We’ll examine incremental sales for
the first part of this series and address
the two other components in the Retail
Loyalty Readiness Worksheet.
Incremental customer behaviors
driven by loyalty programs include
increased trips, bigger basket size,
increased cross-channel shopping, etc.
All of these behaviors drive towards
one key metric – incremental sales per
customer in the program versus those
not in the program.
Forecasting and measuring
incremental sales from retail loyalty
programs is perhaps the most
challenging and debated component
of calculating a loyalty program’s ROI.
Marketing folks tend to inherently
believe that loyalty programs drive long
term “customer engagement,” “brand
halo effects,” and “inherent value,” but
the finance team cringes at every one
of those expressions. Further, they are
acutely aware of any real costs in terms
of outlays of cash today and liability
in the future. They want to see a clear,
measurable way to calculate the direct
incremental sales driven from the
investment in loyalty. Simply being able
to demonstrate a break even can be
effective for getting everyone’s buy in.
The rest can be proved over time.
Methods of Pre-Launch Testing
In the ideal scenario, incremental
customer behaviors are carefully tested
and measured before a full chain-wide
launch. There are several ways to do
this, with pros and cons to each.
First, the program can be direct
marketed only to a sub-section of
customers and incremental sales can be
measured versus non-loyalty customers
who have similar profiles over a period
of time. This is somewhat limiting as
you are not able to easily measure the
potential incremental impact of mass
and store marketing. However, if you can
prove a break even without it – all the
easier to sell internally.
A second way to test incremental
sales pre-launch is by isolating a market
and only launching the program in that
market. Over a period of time, ideally
at least 6 months, you can measure
incremental sales against a “like” market.
The challenge here is in identifying
the like markets and truly isolating the
variable of the impact of the loyalty
Incremental
driven by loyalty programs include
increased cross-channel shopping, etc.
CUSTOMER BEHAVIORS
BIGGER
basket
size,
INCREASED TRIPS,“
”
12

program. But again, if you can prove
enough incremental sales to at least
drive a break even, you stand a chance
of getting a full launch approved. Both
scenarios carry an inherent risk of
frustrating customers not included in
the test, but that can be managed.
Methods of Post-Launch Testing
What if you are trying to measure
the impact of a program that
has already launched without an
agreed upon ROI? Or what if senior
management does not have the time or
patience for a lengthy test to prove it
out? It gets a bit messier but there are a
few ways to approach this scenario.
The easiest way is to simply take the
number of new contactable customers
attributable to the loyalty program
and add up their incremental sales
directly measured from direct marketing
programs like email and direct mail. This
works well for retailers that already had
a solid CRM program in place before
loyalty.
For example, imagine a retailer
was sending 5 million direct mail
pieces and 50 million emails per year
before loyalty. Let’s say they were
measuring incremental sales per
customer contacted of $1 per direct
mail campaign and $0.20 per email
campaign (measured by test versus
control). The retailer then launched a
loyalty program and added 2 million
contactable direct mail households and
20 million emails. Assuming the new
names performed the same (and they
should, perhaps even better since they
self-selected), you can expect $2 million
more in incremental sales from direct
mail and $400,000 more from email
campaigns per year. Again, you know
there are significantly more financial
benefits to loyalty than this, but this
is a simple, quick way to convince the
finance team that you can at least break
even.
If CRM is not an already well-
developed function at the retailer,
another way to measure incremental
sales from loyalty is to “force” a control
group. Basically, you look back in time
for “like” customers before launching
loyalty. “Like” will be defined by
whatever you have in the database –
trips, sales, categories, basket, or even
demographics. You can then measure
pre versus post behavior of those who
joined the loyalty program and those
who did not, taking credit for any
incremental sales.
It’s not ideal as it doesn’t totally
isolate loyalty – customers who sign up
for the program might have been about
to become more loyal anyway – but
again, it provides directional incremental
sales. This methodology requires the
retailer to have a customer database
pre-loyalty launch, but these days most
do.
Keep in mind that all methodologies
for measuring incremental sales are
attempting to truly only attribute
revenue driven by the loyalty program
and therefore need some way to isolate
for that versus all other factors that
may drive sales. None of the above
approaches are perfect, but they can
provide a starting point to get to a
common ground for defining how to
measure incremental sales and getting
your finance team on board.
Lastly, forecasting incremental
sales is only the first step. Once the
forecast has been set, develop KPIs
against it and share results broadly and
regularly. Once the loyalty program is
up and running, many other incremental
behaviors can be reported on that will
increase support for the program (such
as engagement, net promoter scores,
cross-channel behaviors, etc.). However,
these metrics should never take away
from reporting on the core incremental
sales model that proved out the
investment in the first place.
“The easiest way is to simply take the number of new contactable customers attributable to the loyalty program
and add up their incremental sales directly measured from direct marketing programs like email and direct mail.”
13

RETAIL
WORKSHEET
Loyalty Readiness
CAPITAL INVESTMENT
Ongoing Expenses
14

In the previous article, we discussed
how to establish and measure KPIs for
loyalty incremental sales. The next step is
calculating how much you can spend to
set up and maintain the program in order
to break even or achieve an agreed upon
profitability goal. This worksheet can help
guide you through costing out everything
from the initial investment to the ongoing
expenses.
15

The upfront capital investment in
loyalty can be significant, especially
from an IT perspective, depending
on the state of existing systems. The
depreciation cost of this investment can
be expensed against the program for a
number of years.
KEY CONSIDERATIONS:
1. Is there an existing customer
database that integrates all channels
into a 360 degree customer view that
could easily accommodate a loyalty
feed? If not, creating this will likely be
the costliest component of launching
loyalty.
2. Is there an existing CRM program
in place? If so, spend will be lower since
you can leverage existing campaign
management and reporting tools.
3. Are significant POS changes
required to accept loyalty at checkout
and close the loop back into reporting?
If so, this will likely require IT capital and
resources.
4. Are major changes in the
website’s online checkout necessary to
accept and track loyalty? If the website
is outsourced to a good vendor, this
may not be a big deal, but if hosted
internally it will require IT capital and
resources.
5. Will you need online account
management? Will it be within an
existing site or a new site? Online
account management is a great feature
for consumers, but it can be costly and
complex to sync with existing customer
data.
6. Are you planning to outsource the
development of the program or do you
have the capacity to take it on in house?
While outsourcing may initially look
expensive, it actually can save money in
the long run if you can leverage existing
loyalty experience and infrastructure.
Upfront
Capital
Investment
16

Expenses will start hitting the loyalty
program the day you start working on it.
Some costs will occur one time upfront
while others will be annual.
CONSIDERATIONS OF UPFRONT
EXPENSE CALCULATIONS:
1. Do you need to hire industry
experts to assist in program
development? If there is limited loyalty
experience in-house, this is highly
recommended since it will actually save
costs by creating efficiencies in the long
run.
2. Do you need to hire contractors
for incremental IT work and project
management? Budgeting for
contractors can ensure you’ll have
dedicated resources instead of making
this someone’s part time job internally.
3. How much research needs to
be done either on loyalty programs in
general or competitor programs? Do
you have the resources for research or
do you need to outsource? This needs
to be included in your budget.
4. Do you need customer research
to test program concepts and benefits?
This is highly recommended as it
will help create incremental revenue
assumptions.
5. Are you going to test the loyalty
program in a pilot program or go
straight to full roll-out in all stores and
online? It is always ideal to test and pilot
to validate assumptions and get any
technical bugs out but is not always
feasible in the fast-paced world of retail.
6. How will we market the launch?
What materials are needed? Will
there be a physical card (this can get
expensive)? If so, how many do we need
at launch? Again, testing will help with
these decisions.
7. What is the plan for training
store associates and call center
reps on the program? Is the training
incremental or hooked into an existing
training program? While it can be very
expensive, dedicated training on loyalty
with materials and role play activities
helps ensure a successful launch.
8. How are we planning to take
loyalty data? Will there be a need for
data entry from printed forms? Ideally,
enrollment would happen at POS, but if
that’s not possible (and it isn’t at a lot of
retailers), paper forms may have to be
used. A data entry system and ongoing
resources will need to be included in the
budget.
Upfront &
Ongoing
Expenses
17

Ongoing
Annual
Espense
Considerations
9. How quickly can we ramp up any
needed dedicated internal resources?
Will there be a loyalty team or can it be
absorbed into existing resources? Having
dedicated resources will better ensure
program success, but they don’t all need to
start pre-launch.
All of the business and IT decisions that
have been made to the point of launching
the loyalty program will impact ongoing
expenses.
KEY CONSIDERATIONS:
1. How much of the ongoing
management of the program is outsourced
versus managed in-house? Either option
can be costly depending on the complexity
of the program.
2. Are loyalty marketing campaigns
totally separate or is loyalty baked into
existing marketing plans? Ideally, it
should be done both ways as that creates
dedicated marketing but also leverages
existing campaigns.
3. How are we marketing loyalty for
acquisition and retention? Targeted?
Mass? In-store? What’s your annual
communication plan? This should be
clearly laid out and accounted for up-front,
but there should also be room for constant
testing and learning.
4. How many incremental new FTEs
are required in marketing and IT to run the
ongoing program? Some retailers treat
loyalty like a one-time project and don’t
properly nurture the program post-launch.
Successful loyalty programs plan the
necessary resources to take care of the
program in the future.
5. How often will we add new benefits
and make changes to the program? How
will those changes be communicated to
the customer and associates? It’s important
to have built-in costs to ensure keeping the
program fresh over time.
6. Who is managing the customer
reporting for the loyalty program? Existing
headcount or new? Marketing or finance?
Build a plan into the program to potentially
increase headcount over time – the more
loyalty customer data that is shared, the
more requests for information from the
organization will come in.
7. What enhancements are we planning
to add to the program that might require IT
work? When? Build future capital requests
into depreciation expense.
8. Will the program issue points? How
a program accrues for point liability can
vary widely from company to company
depending on accounting methodologies.
Public companies have much stricter rules
and the liability can cause the program a
lot of expense on the books that can’t be
spent on hard marketing dollars. This is
another reason why testing is important
so that points breakage can be estimated
upfront and liability can be limited.
18

And Finally,
Measuring ROI
Once incremental sales and all upfront
and ongoing costs have been assessed, an
ROI model should be developed. This will
depend on culture and existing financial
practices, how many years the model
should go out, and what the hurdle rate is
to develop a project NPV and IRR. Ideally, it
is easiest to sell loyalty if the program can
at least get to break even NPV by end of
year three. It’s critical that post approval,
the ROI model is a living and breathing
document with regular reporting on results
against what was forecasted.
All of the business and IT decisions that
have been made to the point of launching
the loyalty program will impact
ongoing expenses.”
“
19

key
ingredientsOF A SUCCESSFUL RESTAURANT LOYALTY PROGRAM
A
restaurants identify
and engage loyalty
patrons, drive purchase
behavior such as
INCREASED TICKET SIZE
strengthen
the relationship
with their
existing
customer
&
base.
programs help
WELL DESIGNED
loyalty program
is a source of competitive
differentiation and profit to the restraurant brand.
L
O
YALTY
20

By evaluating transactional data
from the loyalty program, restaurants
can segment users for offers and
promotions tailored to a customer’s
preferences, thus encouraging more
profitable behaviors.
What sets apart the very best
restaurant loyalty programs? Simplified,
personalized customer experiences
that deliver convenience.
Loyalty programs should also
positively impact customer lifetime
value. For example, in one client
program we found:
Members spent an average of 10% more
than non-members, with a 1% increase
upward per year.
Projected customer lifetime value as
a result of loyalty revenue was $500
million over a three-year span. We
were able to calculate this using our
lifetime value methodologies and other
proprietary algorithms.
LOYALTY PROGRAM BENEFITS
FOR RESTAURANT PATRONS
Guests benefit from the enhanced
or customized experience that a loyalty
program enables before, during and
after the visit and across channels
and devices. For example, one of our
clients leverages their members’ profile
and preference data to enhance the
overall customer experience, starting
with the moment they walk up to the
hostess stand. Some restaurants award
currency (such as points or badges)
for social interactions. Mobile apps or
location proximity devices are being
leveraged in fun ways that enhance the
customer experience.
A loyalty program is also a great
source of ongoing engagement
between the restaurant and members.
As a reward member you may receive
additional perks like members-only
offers and coupons, recipes via social
media interactions, a special invite to a
chef demonstration, or advance access
to new menu items or seasonal items
before they are available to the public.
RESTAURANT LOYALTY
INNOVATIONS: WHAT’S
WORKING
Effective loyalty programs provide
lots of ongoing engagement with
members and create an omnichannel
experience by serving a consistent
message across multiple channels.
Some of the most effective
innovations we’ve seen in restaurant
loyalty in the last several years include:
1. Integrating the program across
multiple touch points, such as tablets,
mobile phones and kiosks. This type of
integration enhances the experience
and engages members while lifting
revenue.
2. Encouraging social behavior, such
as checking-in via Facebook, writing
a Yelp review or posting an Instagram
photo. Some brands do this by
rewarding certain social behaviors with
award currency, like badges or points.
3. Using mobile integration at the
POS to speed up the payment process,
collect feedback, deliver coupons, etc.
4. Leveraging digital channels to
tell the brand story, encourage repeat
visits, and test out new menu items.
THE FUTURE OF RESTAURANT
LOYALTY
In the future we’ll see restaurant
brands become even more hyper-
focused on enhancing the customer
experience. New and existing
technology will enable more
personalized experiences even before
the member walks through the front
door.
RESTAURANTS WILL
ENGENDER LOYALTY AND
ENCOURAGE REPEAT
BUSINESS BY:
Allowing new patrons to get a sense
of the ambience before entering the
establishment
Reducing wait times before and after
the meal (pre-order or post-meal
checkout via mobile phone)
Offering customized ordering or
options
Helping members discover new menu
items
Catering to a member’s dining or
seating preferences
Offering branded activities tailored to
families
Providing more information about the
food: whether it was sourced locally
and sustainably, how it was prepared,
and the nutritional content
Placing orders through tablet-enabled
service
Delivering even more relevant offers
Engaging the member in discussion or
in creating menu items
The experience and consistency
with which the program is delivered
coupled with all the ways a brand can
engage with members is the best way
to incentivize members and keep them
coming back for years to come.
21

IMMEDIATE
NEAR
FAR
iBeacon’s Potentialto Merge Online andOffline Experience with
Welcome!
CONTEXTUALMARKETING
Open
Close
22

Loyal customers share a great
deal more with you. Because of this,
loyalty enables insights into customer
wants and needs that the average
customer database does not offer. Yet
a disconnect still exists between the
online and offline customer experience.
Despite having so much customer data
available, loyal customers are hard to
identify in the physical world.
Mobile combined with iBeacon
technology could help bridge this
gap. iBeacon uses a low frequency
Bluetooth signal to communicate
with mobile devices. It registers
devices based on a certain distance
or proximity in the physical world. As
long as location services are turned
on, iBeacons can communicate with
mobile apps even if they aren’t open.
While this sounds similar to other
location-based technologies, what’s
unique about iBeacon is its ability to
determine a device’s distance within a
matter of feet.
Why is iBeacon really worth getting
excited about? It can facilitate truly
contextual communication. If you had
the preferences of loyal consumers on
hand every time they were near or in
your business, you could speak to them
in terms of where they are, who they
are, and what they want.
iBeacon technology also holds a lot
of promise for helping fill in a missing
piece of the marketing puzzle – how
online communication drives real-world
behavior. Using iBeacons, brands could
better track if online marketing, like a
coupon sent via email, lead someone to
visit a brick-and-mortar store.
Below is a look at how iBeacons
can be leveraged to create geo-based,
highly relevant customer experiences
at the right time.
MORE PERSONALIZED IN-STORE
EXPERIENCES
By placing iBeacons at strategic
points, retailers can track when
someone has entered the store and
even track movement through the
store. This presents endless ways to
engage with customers in real time,
both through their mobile devices
and during interactions with store
personnel.
There are many obvious ways to use
iBeacon in retail environments, but the
possibilities aren’t limited to sending a
push notification for a discount on TVs
when a customer walks by that section
of the store. Retailers could pair
someone’s location in the store with
their customer data to take it a step
further. For example:
• In an electronics store, a customer
near the TVs has a purchase history
of buying a lot of CDs. That customer
could be notified that a few aisles over
a new CD from an artist they like is on
sale.
• A high-end clothing boutique’s
store associate is alerted that a high-
value customer is in the store. The
associate can quickly get a sense for
the customer’s taste by looking at
preferences she’s shared on her mobile
app profile. From there she can suggest
clothing items that align with this
customer’s fashion sense.
MORE EXPERIENTIAL REWARDS IN
THE TRAVEL INDUSTRY
iBeacons could enable travel brands
to reduce across-the-board rewards,
like discounts, and increase more
personalized experiential rewards –
which could also mean significant cost
reductions. With iBeacons, travelers
could be followed and engaged
throughout the travel experience: as
they move through the airport, when
they land in another city, when they
retrieve their bags, and when they
arrive at their hotel.
Frontline employees would no
longer need to rely on a check-in
to know that someone is on site.
Furthermore, iBeacons could arm
employees with information about
loyal customers that’s already in the
online database. Coordinating “wow”
experiences on the fly would be easier
since staff would have a wealth of
customer information on hand and
more lead time for preparation.
A few examples of how this could
work:
• Airline employees could be alerted
when a VIP customer is approaching
the gate. They could greet the
customer and offer expedited boarding
or an upgrade to their preferred
seating area. Additionally, they could
have access to more personalized
information, like knowing it’s the
passenger’s birthday or that on this
flight they’re hitting a milestone such
as a million miles traveled with the
airline.
• When someone walks in the
front door of a hotel, the front desk
staff could immediately know who
this person is and their preferences
as a loyal customer before they even
reach the desk. Room service could be
alerted to send a customer’s favorite
drink up to their room within 10
minutes of their arrival.
The cost of sending a drink to
someone’s hotel room is much less
than offering a discount on their
stay, but most people would be more
“wowed” by the former since it’s both
personalized and unique. Experiences
like these can transform a behavioral
loyalty-driven customer into an
emotional loyalty-driven customer,
while costing very little to implement
or execute from an operational
perspective. Experiential rewards
create the type of unbreakable bond
that ensures a customer repeatedly
chooses one brand over the rest.
23

With any emerging technology, it
takes a while to move beyond the fad
phase and show enough user adoption
and traction to drive development.
Augmented reality is an example of
this. Although augmented reality is still
“proving its worth” -- much like mobile
marketing had to do over the last 5
years -- brands are now experimenting
with how it can be leveraged beyond
the “wow” factor to influence
purchasing behavior.
In general, augmented reality
promotions could be an effective part
of loyalty as they allow consumers to
interact with a product in a unique and
personal way. Research proves there
is potential for augmented reality’s
success in terms of brand revenue
generation:
• IN 2013, THE TOTAL GENERATION
OF REVENUE FROM AUGMENTED
REALITY WAS AROUND $300
MILLION.
• NEARLY 30% OF MOBILE
SUBSCRIBERS USED AUGMENTED
REALITY AT LEAST ONE TIME PER
WEEK IN 2014.
• IN 2014, AUGMENTED REALITY
TECHNOLOGY WAS ENABLED IN OVER
864 MILLION SMARTPHONES.
• AUGMENTED REALITY REVENUE
IS EXPECTED TO BE MORE THAN $600
BILLION IN THE NEXT TWO YEARS.
Time will tell how well augmented
reality can impact loyalty, but plenty
of brands are already banking on its
potential. The following are three
recent examples of augmented
reality’s application specific to loyalty
programs:
AUGMENTED REALITY
FOR LOYALTY PROGRAMS
Real Potential or Passing Fad?
1.
Walgreens: Since
June 2014, Walgreens
has been testing an augmented
reality program using Google’s
indoor mapping technology, Project
Tango. Using the Walgreens mobile app,
customers receive help navigating the
store layout with relevant promotions
popping out along the way,
including offers tied to
rewards points.
2.
Century 21:
The New York-based
retailer launched a pilot program
that leverages mobile technology
and augmented reality to increase
memberships. Customers use their
smartphones to scan shopping bags and
spin a virtual wheel full of offers. The
push toward a more immersive in-
store experience is part of Century
21’s goal to increase loyalty
program sign ups by up
to 34%.
3.
Kraft: This past
summer, Kraft launched
an augmented reality campaign
encouraging Walmart shoppers to use
their mobile devices to scan campaign
signage and logos that link to digital
assets connected to a larger campaign and
sweepstakes. One example is “Paisley Points,”
which offers shoppers points redeemable for
autographed Brad Paisley merchandise
when they upload images of Walmart
receipts with proof of a Kraft
purchase.
24

We’re likely to see a lot of brick-
and-mortar retailers follow Walgreens’
lead this year. Most will share common
goals such as increasing frequency,
spend and engagement.
What’s Next for Augmented Reality
and Loyalty
Wearable technology has sparked
renewed buzz around augmented
reality, with lots of potential around
Google Glass and the soon-to-
launch Apple Watch. This may open
up a completely new category for
augmented reality compared to what
we’re used to with respect to simple
smartphone interaction. Wearable
technology can tie consumers into the
real-time data stream where they can
reveal more about their preferences
and behaviors. From there, marketers
can gain more insight into what to
market to them, how to communicate
with them about the things that get
them excited, and filter out unwanted
or irrelevant content – all of which
could lead to greater personalization
and contextual relevance.
Augmented reality stands to
become an increasing component to
the loyalty marketing mix as brands
aim to create more memorable,
personalized experiences. Expect to
see augmented reality tied into more
loyalty strategies if marketers can
prove how it can engage consumers,
draw them into physical locations,
encourage frequency, and build brand
advocacy.
864MILLION
SMART
PHONES
In 2014, AR technology
was enabled in over
$300
MILLION
In 2013, the total
from AR was around
generation of revenue
25

Finally
Make
Mobile
Payments
a Reality
for Retail?
Will
26

KOBIE QUARTERLY REVIEW 29QUARTERLY REVIEW JANUARY 2015
27

U
nless you’ve been living under a rock, you’ve probably heard that Apple’s new mobile wallet, Apple
Pay, launched in October. Apple Pay is an online and mobile wallet that will allow consumers to
upload up to eight credit cards and make payments at both online and brick and mortar retailers.
W
hile Apple Pay will likely have a long
term impact and gain consumer
acceptance over time, the race for
mobile wallet domination is not
over and there are several reasons why it will take a
while to gain widespread acceptance.
First, widespread adoption will be limited since
Apple Pay isn’t available on older iPhone models and
Android phones. Apple Pay will only be available on
the iPhone 6 at the time of its launch and then on
the Apple Watch in 2015 (the only Apple products
that use NFC technology). Plus, it will likely take time
for iPhone 6 and Apple Watch users to adapt to
Apple Pay.
Second, while many retailers are planning to
accept Apple Pay, some notable brands are holding
out for a different solution. Top-tier retailers like
Walmart, Best Buy, and 7-Eleven are putting their
faith in a solution by MCX which will launch this year
and work with debit cards. Lastly, local mom and
pop stores probably can’t afford to install the Apple
Pay software and won’t adopt it anytime soon.
M
obile wallets like Square and Google
Wallet have been around for years
but have never gained widespread
consumer acceptance. So why is there
so much hype around the launch of Apple Pay?
1. Apple Pay has solved some security concerns
that many consumers have around mobile payments
by using NFC technology and a one-time use
encrypted number.
2. Since Apple Pay is an open network that can
be accepted at any retailer that installs the software,
consumers can avoid signing up with multiple wallet
providers. Many of the successful mobile payment
solutions, such as the Starbucks app, only work in a
specific brand’s retail locations.
3. Transitioning to Apple Pay will likely be easy
due to the existing level of consumer trust in Apple.
iTunes already stores more than 800 million credit
cards, which proves that consumers are comfortable
sharing their payment information with Apple.
4. Major retailers have already signed
commitments to install the technology to accept
Apple Pay. Nike, McDonald’s, Target, Whole Foods,
Subway, Walgreens, and Macy’s are among the
retailers who have agreed to install the software and
start accepting Apple Pay starting this fall.
5. Apple Pay is being supported by the big three
credit issuers and major banks. Visa, MasterCard
and American Express have all signed on as have
Bank of America, Capital One, Citi, Chase, US Bank,
and Wells Fargo.
6. Apple Pay can close the loop in terms of
reporting to retailers with iBeacon software. Most
mobile wallets rely solely on Bluetooth, which means
that it needs to be turned on and it is difficult to
track which offer prompted what action. Apple
Pay will be the only wallet to combine Bluetooth,
NFC and iBeacon technology. iBeacon is a signal-
emitting technology that allows retailers to push
real-time, geo-centric offers to consumers in physical
stores. Retailers will be able to send geo-targeted
offers via iPhones and Apple Watches and then track
transactions through Apple Pay.
WHY WIDESPREAD ADOPTION WILL TAKE TIME
APPLY PAY IS POSITIONED TO SUCCEED WHERE OTHERS HAVE FAILED
28

D
espite these obstacles, it is clear that
Apple has the marketing muscle to make
an impact and that in some way, shape or
form, mobile wallets are coming. So what
might this mean for retail loyalty programs? There
are some potential positives:
1. Mobile wallets may enable better tracking of
purchases for loyalty programs. Assuming loyalty
numbers can be loaded into the mobile wallet,
potentially all transactions could be linked to loyalty.
2. Mobile wallets may allow for better integration
between retail credit loyalty programs and tender
neutral programs by integrating them with one
number in the wallet.
3. Mobile wallets may make consumers more
comfortable with sharing their customer data,
knowing it is stored with a trusted third party versus
the retailer.
At this point there is uncertainty around mobile
wallets that could potentially be harmful to retail
loyalty programs. A few unanswered questions:
1. What will the business model look like? The
banks will be sharing the interchange fee with Apple,
but will mobile wallets like Apple Pay charge retailers
for loyalty integration? The answer is likely “yes,” but
time will tell when and how much.
2. How will Apple treat the customer data?
3. If a retailer refuses to pay certain fees, will
Apple push the customer to a competitor?
4. Will Apple choose to launch its own coalition
loyalty program and disenfranchise retailers from
their customers all together?
Despite all of the unknowns surrounding Apple
Pay, there’s a good sign Apple may be zeroing in on
loyalty -- a recent job posting at Apple is seeking a
program manager for loyalty tasked with “shaping
the future of loyalty programs.” I’m sure we’ll all be
keeping a close eye on this in the coming months
and years.
APPLE PAY’S POTENTIAL IMPACT ON RETAIL LOYALTY
29

Kobie Marketing is a global leader in loyalty marketing and an industry pioneer, delivering end-to-end strategy, technology and program
management solutions. Kobie drives results and ROI through Kobie Alchemy®, a best-in-class loyalty marketing technology platform.
W E A R E K O B I E FIND OUT MORE AT INFO@KOBIE.COM
Kobie Marketing, Inc. @Kobie_Marketing Kobie Marketing info@kobie.com

Kobie Quarterly: Retail Services Edition January 2015

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (20)

Ähnlich wie Kobie Quarterly: Retail Services Edition January 2015

Ähnlich wie Kobie Quarterly: Retail Services Edition January 2015 (20)

Kürzlich hochgeladen

Kürzlich hochgeladen (12)

Kobie Quarterly: Retail Services Edition January 2015