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Merchants uncovering how to drive loyalty through coupon apps

With new coupon and deal applications surfacing every day, retailers and merchants are challenged to figure out which best serve their needs, but are now starting to uncover how to better reap the benefits of customers.

Experts say it is inevitable that consolidation takes place in the space to solve the problems of audience fragmentation, but for now, retailers must make smart decisions based on whom they are trying to target. Instead of placing deals in apps including Groupon, LoyalBlocks, RetailMeNot, Ibotta and LivingSocial — and the list goes on—retailers need to be choosy with third-party apps.

“We started using LoyalBlocks mainly as an alternative to an old fashion loyalty punch card,” said Ashley Galloway, community relations manager at Ciao for Now, New York. “We used to use those years ago and liked being able to reward our regulars, which we have a lot of. This seemed like a good opportunity to bring back an old school system while embracing the future and technology at the same time.

“In the past we’ve worked with Groupon and Yelp for one-time deals,” she said. “Those sights give great exposure, but the nice thing about LoyalBlock is it tracks the frequency of how often each customer returns.

“It’s more focused on building relationships. It’s also cool because we can customize promos and change up the rewards as we go along. It also allows us to feature new products.”

So many apps
There are an endless amount of third-party coupon an deal apps in the market right now, and retailers need to select wisely. They need to keep in mind whom they are trying to reach and pick an appropriate method for doing so.

“It all comes down to audience – the type of consumer that each of these apps attracts,” said Nikki Baird, Denver-based managing partner at RSR Research. “Retailers can either be focused on getting in front of a high concentration of target shoppers, or can look to get in front of a high concentration of their competitors’ shoppers in an attempt to steal market share.

“I see consolidation ahead for these,” she said. “It’s all about getting in front of shoppers. If there are too many apps, then the audience gets fragmented and the value diminishes.

“I think that’s why you’re starting to see some consolidation already in the deal-of-the-day space, like Groupon buying Ideeli.”

Joline McGoldrick, director of research at Millward Brown Digital, New York, agrees with Ms. Baird that the most important thing to keep in mind is audience.

“When choosing an app, retailers need to consider targeting/relevance, user experience, and the degree of clutter they will have to break through,” Ms. McGoldrick said. “We know that audiences will only redeem coupons that are personally and geographically relevant, and only when there is a substantial discount.

“Third-party apps that deliver a lot of coupon or discount choices for products that might not be relevant just create clutter and make it more difficult for the personally and geographically-relevant ads to break through,” she said.

“Retailers should ask the following: how many coupons or rebates are you showing along with mine?; what do you know in advance about the audience that might pre-dispose them to my product?; what data can you show me about the amount or type of discount that will be effective for my product on your app?”

However, retailers may not want to put all of their eggs in one basket. If they can afford to, retailers should try to pick a few different avenues for mobile deals.

“Customer segmentation plays a major role in fine-tuning any mobile coupon strategy,” said Mark Tack, vice president of marketing at Vibes, Chicago. “There will always be sub-segments of customers who prefer to receive coupons via third-party apps, via the retailer or brand’s own app, via mobile wallets such as Google Wallet and Passbook, and even some who still prefer off-line coupons.

“Leveraging big data and CRM practices, marketers need to identify how to best reach their most important customer segments based on their preferences,” he said. “In most cases, an ‘either or’ strategy won’t work. The winners will be those who intelligently leverage multiple outlets to maximize the reach of mobile coupon initiatives.”

Is it worth it?
One of the age-old questions that predates mobile is whether or not providing one-time offers will result in loyal, frequent customers. If a café, for example, offers a free beverage via LoyalBlocks, will that consumer return for a paid beverage, or was he just in it for the free drink?

According to Ms. Galloway, LoyalBlocks has resulted in repeat visits for Ciao for Now.

“We have definitely seen repeat business from customers using the app,” Ms. Galloway said. “They are very good about remembering to get their ‘electronic punch’ each time they come in.”

RSR Research’s Ms. Baird believes that these mobile deals work best for a specific type of retailer.

“It seems that the retailers that benefit the most from this model tend towards a service model or a repeat visit model, like restaurants or retail services like workout places and the like,” she said. “And two, retailers tend to benefit when they have a strong ‘rope them in’ model. You spent money to encourage trial – now it’s on you the retailer to turn that trial into repeat and regular price business.”

At the end of the day, it might really make more sense for a retailer to offer deals in a branded app. That way the retailer can have complete access to the consumers taking advantage of offers and reach out to them for future engagement.

On the other hand, though, these third-party apps might give retailers access to new consumers that they would not have been able to reach on their own.

“It depends on the objective,” Ms. Baird said. “If the objective is loyalty, then they should build their own – offer unique deals to their most loyal customers. If their objective is acquisition, then third parties give retailers access to shoppers they might not be able to reach on their own.”

Final Take
Rebecca Borison is editorial assistant on Mobile Commerce Daily, New York