All over the world, consumers are warming up to the idea of shopping locally.
PYMNTS research reveals that 46 percent of all U.K. consumers — 24 million people — say now is the time to shop with the roughly 6 million small- to medium-sized businesses (SMBs) that employ some 60 percent of workers in the U.K. There are already roughly 40 million active loyalty program users throughout the U.K., and 52 percent of U.K. consumers who are already involved in a loyalty program say they would be very or extremely interested in signing up for a small rewards program.
What that data demonstrates is how much momentum there is in the marketplace for SMBs to more fully embrace loyalty offerings for their consumers, Be The Business CEO Anthony Impey noted in a PYMNTS On The Agenda Round Table Discussion along with Tyl by NatWest CEO Mike Elliff and Pollinate Co-Founder Fiona Roach Canning.
“It’s that momentum that we now need to build on it,” Impey said. “It definitely feels like we have a technology moment, particularly amongst small businesses who have very often been slightly relaxed about technology.”
In fact, he said the mandate to adapt brought on by the pandemic has given a lot of SMBs the confidence they needed to use technology as an equalizing effect that allows them to compete against much larger rivals.
But the loyalty programs SMBs offer, the panel agreed, must go beyond the paper punch cards that give consumers a free coffee or sandwich on their 10th visit. Those programs have almost no hold on consumers and contribute to “fat wallets” full of half-punched paper cards that do more to inspire annoyance than loyalty.
What smart merchants are realizing, the panel agreed, is that loyalty is an emerging communication channel that can do more than bring consumers in. With the right partners, these programs can create more opportunities to reach the customer, offer them what they want and need, and expand their successful conversions.
“The opportunity there is really for these small businesses to take the initiative going forward to use technology, to try to lock in these customers, retain them and then continue to grow the businesses from there onwards,” Elliff said.
The New Requirements Of Loyalty
The enhanced potential of loyalty in the digital age is more than a means of delivering basic rewards to try to tempt customers, Roach Canning said. It is a means of opening an entirely new channel of communication. The mathematics of rewards can be a little bit complex. The data indicates that to be persuaded by a cash back offering, the average customer needs to collect about $30 in rewards annually to consider it worth engaging.
Considering how many schemes give rewards back at a rate of 1 percent, that means the customer must spend $3,000 a year to cross the line. It’s not an impossible amount to spend at a particular SMB, she noted, but there isn’t a likelihood that a vast majority of customers will. The value exchange just isn’t there.
But the ability of local merchants to work collectively and have their benefits aggregated among them can change that value, meaning it can make more sense for local merchants to collect under a single banner of a loyalty program created by a natural partner, like for example, a bank.
“You’re not going to get any small businesses now that don’t think they need an online presence,” Canning said. “I think working with banks is great because [SMBs] can have access to so much data that can really help these small businesses understand their customers, understand that business, and [be] able to really compete with these larger companies who maybe invest hundreds of millions running their own loyalty schemes to get that data in way that a small business never could.”
Or even want to, the panel noted. SMB owners are busy people, and they don’t need loyalty solutions that require an extra hour every day to manage and run. They need programs to be incredibly easy and seamless. The solution does need a bank, a community organization or other trusted party that can come in and help SMBs leverage loyalty to their maximum benefit “by allowing them to communicate simply with their customer base, and also manage all of their data in a compliant way,” Eliff said.
A New Superpower
The opportunity that loyalty opens to SMBs, the panel agreed, is ultimately one about accessing consumer data and being able to act on it in more functional and useful ways going forward.
With that data in hand and that communication channel open, Impey noted, SMB operators can do better what they’ve historically excelled at doing in an analog context: knowing their customers and tailoring the shopping experience to their needs specifically.
It goes beyond just recognizing the consumer, but also to understanding their buying behaviors so that SMBs can provide them an even better service whenever they walk through their doors.
“I think this is very much around essentially giving small business owners a new superpower that enables them to serve their customers even better than they already do,” Impey said.