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Removing friction to increase customer participation

Interview with Tom Holt, MD and co-founder, Payment Loyalty

Payment Loyalty redefines loyalty for physical retail businesses. By eliminating all the hurdles to customer engagement, reach is increased by an order of magnitude. With no extra cards, no mobile apps and no requests for customer data, we align in-store loyalty with the frictionless in-store experience customers now expect.

Tom Holt, co-founder and MD, Payment Loyalty

Loyalty Magazine: What is the story behind the creation of the company Payment Loyalty and what is your proposition?

Tom Holt: Payment We set up Payment Loyalty in 2018. Between us, the founding team had many years working in the tier-1 loyalty space and first-hand experience of how friction negatively affects customer engagement in retailer loyalty schemes. User friction is not ideal in any context, but when it comes to engaging in-store customers, a clunky process really impacts the ability to reach a meaningful number of customers.

Friction has always been a challenge, but with the rapid adoption of contactless payments, the implications of additional friction are much more evident. The contactless tap and go is so elegant and clean that customers are much less tolerant of any additional process at the till. For retail staff, persuading customers to use additional cards, download mobile applications or share personal data at the checkout is a growing challenge. The fact is that in-store loyalty has not kept up with the slick process customers are now used to when they pay.

Yet the moment of that in-store transaction is the optimal opportunity to engage customers, so Payment Loyalty set out to find a way to make the most of this moment, while removing any friction or extra process. By leveraging smart payment terminal technology, we have been able to integrate loyalty into the existing payment process. This enables all elements of the loyalty journey – enrolment, progression, reward redemption – to be delivered as part of the normal payment process. The effect this has on engagement is profound, with between 70-90% customer reach typical. Using payment terminals to deliver the solution means retail businesses of all sizes can deploy highly effective loyalty, without the normal overheads.

By smart terminals, do you mean the terminals that retailers use at the point of sale?

Yes, absolutely. Physical retailers need terminals to process card transactions, and this has always been seen as a cost of doing business. Now, payment terminals can deliver real business value for retail businesses – they are no longer just for payments.

Integration at the payment terminal level means we not only deliver frictionless loyalty for the customer, we also provide real-time data to retailers on campaign performance and how customer spend levels and visit frequency is being affected.

Payment Loyalty redefines loyalty for physical retail businesses. By eliminating all the hurdles to customer engagement, reach is increased by an order of magnitude. With no extra cards, no mobile apps and no requests for customer data, we align in-store loyalty with the frictionless in-store experience customers now expect.

Would you say this proposal is unique in loyalty today?

Yes, we are yet to see any in-store solution that does not add some level of friction or process at the checkout. There are some great solutions out there, but our ethos is simple: eliminate friction and reach/effectiveness is maximised. As soon as retailers introduce any hurdles to scheme engagement, reach is hugely impacted. By integrating into the payment process and simply linking payment method as a customer identifier, we avoid any requirement for additional friction or process.

So just to confirm, there is no card, no app, and no signing up process apart from this linking with the payment card?

That’s correct. Using a tokenised ID means we can manage the customer loyalty journey – opt-in, progression, redemption – as part of the payment process. The loyalty engagement happens between the smart terminal and the customer. This is an especially important part of our value proposition; we remove the need for retail staff to sell and administer loyalty, removing a large (and often frustrating) work overhead for staff.

Why is this method of linking to the customer preferable to what is in place today?

Again, it’s down to eliminating friction and the resulting ease of customer participation. By distilling the opt-in process to a simple YES or NO question, the scheme instantly gains much more broad appeal to any given customer base.

Customers are much less tolerant of requests for personal information and less likely to download apps/carry additional cards today, so these conventional methods of recognising and rewarding in-store customers can struggle to deliver meaningful customer volumes.

This is especially evident for lower transaction value businesses, where reward levels are often too low to persuade customers to participate in arduous schemes. These challenges can make loyalty seem out of reach to SME retail businesses.

How have you addressed this?

For a lot of retail businesses, especially SMEs, launching loyalty initiatives can be daunting as the commitment is normally long-term. If a scheme isn’t driving profitable customer behaviour, it can be difficult to withdraw a scheme without annoying engaged customers. We wanted to make loyalty more flexible for our users, so our solution enables retailers to run short-term campaigns and delivers detailed performance data, so they can quickly gain insight into what works.

By running short-term campaigns, retail businesses can create a sense of urgency that helps influence customer behaviour. A coffee shop offering a reward for visiting 8 times in a single month, for example, can very quickly gain insight into how customer behaviour has been influenced during the campaign and adjust their next offer accordingly.

Having this level of control means retailers can run campaigns when they need them, as opposed to all the time. For example, retailers may want to run campaigns during poor trade periods to help reward the great customers who help keep the lights on. This flexibility allows retail businesses to run quick test and learn cycles and approach loyalty more scientifically.

What have your merchants learned so far from using your loyalty POS plugin?

That by removing friction, retailers can optimise campaign reach; that relatively low value rewards can have a higher value when hurdles to earn/redeem are removed; that keeping things simple is the best way achieve engagement in the physical store environment.

It is often argued that loyalty must be long-term to be true loyalty. Would you argue against that?

Our approach gives flexibility for retailers regarding the length of campaigns. The value in running shorter-term campaigns in order to influence customer behaviour is that the time dimension can help bring some more profound changes in visit frequency. The solution can be used to deliver long-term campaigns, but it’s certainly valuable to test different offer mechanics, especially for merchants who may not have run any kind of loyalty in the past.

What happens after the end of the campaign?

Merchants can view simple analytics data to gain insight into how the campaign performed. How customers engaged with the offer, how average spend levels and visit frequency was affected and what proportion of enrolled customers were able to reach redemption. These insights can be fed into the next campaign the retailer runs.

The proof is how many customers are engaging and we are seeing between 70% and 90% which is very high. We are not building a full CRM engine; we are keeping it simple on purpose and it provides surprisingly high-performance returns compared to what SME retailers would get from a traditional loyalty mechanic where they can be lucky to get engagement levels of 10-20%.

Do merchants need a high level of analytics expertise to run the system?

Not at all. The web-based Campaign Portal is very intuitive and because the analytics are real time, they can keep track of campaign performance and reward redemption status on a regular basis. Retailers are time poor. We know that, so everything is kept as simple as possible.

What is your feedback when presenting your proposition to merchants?

A lot of SME retail businesses we target are competing directly with larger chains, who tend to have loyalty schemes in place. We often hear from merchants who increasingly see loyalty as a prerequisite to level the playing field.

Customer loyalty appears to be embarking on a step change. Do you agree?

The big driver in our mind is customer behavioural change; they are rejecting the traditional programs that have not kept up with what people require in terms of experience and satisfaction.

With less willingness to share data, and the expectation of a very fast and frictionless payment experience, if loyalty is not rewarded immediately, it will fail. Customers are less tolerant.

What effect are economic pressures having on loyalty?

So many of the purchases that people previously saw as day to day, such as a sandwich and a coffee, are now moving into luxury status. Customers are taking more care where they spend so loyalty has never been more important. With disposable income under pressure, ensuring customers know they’ll get a reward every now and again is a powerful way to keep great customers loyal. 

Payment Loyalty is a sponsor of the International Loyalty Awards 2023



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