As economic conditions continue to challenge, fashion retailers are looking at promotional activity to increase sales. From press promotions and vouchers to loyalty cards and stored value gift cards, retailers want to use every tool in the armoury to drive more customers in store and online, and then to increase their average spend.
However, an ad-hoc approach to promotions and customer loyalty can quickly lead to a disjointed and incoherent approach. Opting to install several standalone point solutions to address each area not only adds unnecessary cost and clutter at the point of sale, it also fundamentally constrains future loyalty and promotional options.
With an integrated approach that leverages the existing payment systems, pricelist management processes and in store headwear, retailers can evolve from gift cards to true loyalty cards, implement cross-channel promotions, integrated email campaigns, mobile promotions and other innovative promotional offers, argues Sam Jackson, chief executive, Prologic.
Incremental business
After years spent attracting new customers through an ever expanding number of brands and options, fashion retailers are now concentrating on improving relationships with existing customers. Rather than expanding through new brands and fascias, the emphasis has shifted to core brand values and the use of tailored promotional offers to reinforce the product brand and build stronger loyalty in the key customer groups.
This change in emphasis is already resulting in a clear trend toward rationalising the product offering, reducing the overall number of SKUs on offer, and opting out of some markets and categories altogether. But in addition to ensuring the product range matches the demands of core customers, retailers are also looking at the delivery of innovative promotions to maximise value and drive incremental business growth.
Yet fashion retailers are constrained in the delivery of loyalty and promotional initiatives by the cost associated with many of the underpinning systems. For example, to date only the larger retailers are offering loyalty cards and stored value cards, and they have done this by investing heavily in bespoke IT solutions. The mid and lower tier retailers do not have the big IT budgets of tier 1 retailers and are left with a mixture of manually managed in store promotion and at best scannable paper vouchers which fail to provide the tailored loyalty programmes required to reward the most valuable customers.
Gift cards
Used extensively by the large high street chains, stored value plastic gift cards are still perceived in the main as a replacement for traditional gift vouchers. But a well branded card also presents excellent merchandising opportunities, from promotions to credit note replacement. Furthermore, with the right approach, these cards can also become customer loyalty cards. Prompted by the increasing maturity and standardisation of the technology, there is now a growing interest in the use of these cards by medium size and smaller retailers.
Stored value gift cards offer a range of benefits to the retailer. With no value until activation they can be placed in a highly visible location which has been shown to increase take-up over the traditional gift vouchers by about 30%. In addition, when a card is used the spend is typically up to 50% above the value stored on the card.
There is also an average of 6% to 9% breakage on gift voucher and gift card sales, so an overall increase in card sales will generate a proportionate increase in breakage income.
In addition, these cards offer far more flexibility. They can be topped up regularly, allowing parents to use them to provide a clothing allowance, for example. Alternatively, retailers can use the cards as part of a promotion, a free £10 card, for example, with every £100 spent.
Low cost
While the promotional appeal is clear, the lack of funds for big IT projects prevents many of the UK’s middle tier fashion retailers from realising the benefiting of stored value cards and other loyalty options. To be attractive to smaller retailers, the technology has to be out of the box, it has to be simple to use and it must make use of the existing in store investment.
Unfortunately, many existing card payment and till installations are forcing organisations to consider expensive separate systems to support stored value and loyalty cards. These systems not only add cost but also clutter up the point of sale and fundamentally constrain the way in which these cards can be used to drive customer loyalty.
With an integrated system that leverages the existing Chip & PIN and payment authorisation systems, both in store and online, retailers can deliver a range of innovative solutions without incurring a significant cost – the solution is delivered by simply switching on existing incremental functionality.
This approach not only enables rapid adoption of stored value cards but also enables retailers to deliver additional customer services as required. The information swiped at point of sale can now be transferred securely to a range of organisations, from the banks to loyalty card companies and gift card providers. For example:
Information can be sent to a global payment service that automatically enables tourists to the UK to reclaim VAT – rather than undertaking the cumbersome manual reclaim process at the airport.
The gift card provider can store the unique number of each card securely, enabling the retailer to provide customers with a printed statement in store on remaining card value as required.
For overseas customers, dynamic currency conversion messages sent to the bank can be used to ensure the receipt shows exactly how much the goods cost in the customer’s home currency.
Customer loyalty
With customers increasingly looking to reduce the number of cards held, there is a growing resistance to the use of dedicated store cards. Instead, growing numbers of retailers are looking to combine loyalty cards with other cards. Perhaps the greatest value of the approach outlined in this paper is that stored value gift card technology can be evolved into a true customer loyalty card, or the customer’s favourite credit card can double as a loyalty card.
For the fashion retailer, the ability to link customer detail to the unique number on the stored value card or the customer's favourite credit card is compelling. Customers can elect at point of sale or the website to connect their details to a specific card which can then double as an electronic purse and loyalty card, or as a combined credit and loyalty card.
When swiped in store, the card immediately identifies the loyal customer, triggering special promotions, the awarding of points or even the ability to purchase from a special loyal customer pricelist. Furthermore, with an integrated solution that supports both online and in store payments via the same mechanism, customers have the option to both spend and top up stored value cards online, and also benefit from associated promotional offers.
Conclusion
The technology required to deliver innovative promotions that meet customer demands for simplicity is maturing fast. While large retailers have had to invest heavily in IT systems to enable the use of promotional products such as stored value gift cards and loyalty card, it is now possible for mid-tier fashion retailers to improve promotional activity and loyalty at a fraction of the price.
But to succeed this technology has to be simple: it is only by leveraging a common, integrated platform that retailers can begin to explore the potential for improving customer loyalty and trial new promotions that drive incremental sales without incurring higher cost and increased risk.