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Mobile influences retailers’ shift to loyalty programs, forgetting traditional coupons

After years of being a coupon-cutter’s dream, Bed, Bath & Beyond announced earlier this month that it would drop coupons in favor of a subscription loyalty-based system called Beyond+, which gives a permanent 20 percent discount.

The move suggests a larger shift in the retail world away from one-time coupons and brand interactions to more long term relationships as mobile keeps consumers increasingly connected to other brands. Bed, Bath & Beyond is following this trend to keep customers on their side.

“Retailers are learning how to better serve their customers and how to motivate them outside of discounts,” said Sarah Engel, SVP of global marketing at DynamicAction. “By connecting their customer data with marketing and merchandising, retailers will be able to get to break the cycle of endless discounts, increase profits and provide amazing customer experiences.”

Cutting the coupon
Coupons have long been a staple of the retail process. Anyone old enough to remember shopping before the Internet age and in its early days can remember cutting coupons from a catalogue.

Once mobile began to take over as the dominant digital channel, those coupons began showing up in the digital world with companies such as Groupon.

But as the years have gone on, tides have shifted. In a time when consumers are overloaded with choices and options, they are moving away from one-time interactions with brands in favor of long-term relationships through loyalty apps.

Bed, Bath & Beyond is capitalizing on that movement with its new subscription service, keeping customers engaged for a long-term relationship with a guarantee of rewards.

Coupons could often be frustrating in the way that consumers were always uncertain of what deals would be available and retailers had to hope that whatever coupons they produced would not be undercut by ones from another brand.

Brands are now removing that sense of uncertainty and offering a standard permanent discount in exchange for a subscription, guaranteeing a baseline price reduction and letting users make their shopping decisions more easily.

While the move is definitely consumer-friendly, it is also motivated by decreasing profit margins and a growing movement towards loyalty programs.

“Based on our analysis here at DynamicAction, 62 percent of orders sold January-September 2016 were sold at a discount, which has resulted in a hit to retailers’ bottom lines,” Ms. Engel said. “Bed, Bath & Beyond will encourage more shoppers to become loyal with guaranteed benefits instead of the hope that the item they want is included in this week’s coupon specials.

“We’ve seen customer loyalty increase 2.4 percent this year compared to last year, and with retailers shifting to true loyalty programs instead of one-off coupons or pure buy-to-receive programs, that number is looking promising to rise. Another benefit of evolving loyalty programs is that retailers can more easily understand what their customers are looking at, buying and purchasing alongside other products, and market accordingly.

“Then the key is to keep the right products in stock that customers are actually viewing. We’ve seen that balance of stock levels and customer interest improve 5 percent this year compared to 2015.”

Personalization
Loyalty programs are an especially potent form of consumer engagement, particularly in their way of keeping customers coming back and getting them to make purchases they might not otherwise make.

With coupons, the idea is to try and provide the most enticing value that changes constantly and is in competition with coupons from other retailers. By offering a universal discount in exchange for loyalty, brands will only have to make the initial hook a draw for consumers.

Once they are subscribed, not only does it make it easier for them to make purchases, brands can also show users more personalized and relevant information, recommendations and products.

“While Bed, Bath & Beyond’s 20 percent off coupons are a current customer favorite, their new pay-to-play loyalty program is laying the groundwork for them to be able to provide way more value to their customers,” said Alexis Clarfield-Henry, director of marketing and communications at Unata. “Not only will the company cut costs on advertising and printing by shifting away from print coupons, but a loyalty program will allow them to track their customers as they shop, be it in-store or online, and use that shopper data to offer a personalized digital shopping experience.

“This could include 1-to-1 recommendations, messages, offers and promotions, creating a tailored experience for each individual that, in effect, keeps these shoppers coming back again and again, taking loyalty to the next level. While shoppers might miss their 20% off coupons to start, they’ll soon realize the extended benefits this new loyalty program has the potential to provide.”