By leveraging mobile, companies can help boost their loyalty programs, Mario Shilanski, group head, e-commerce development for MasterCard Worldwide told an audience at the 5th Mobile Contactless Payments Innovations Conference in Chicago on Wednesday.
According to Shilanski, the average consumer participates in 18 rewards programs, yet 85 percent have never heard from any particular rewards plan after the day they joined, meaning the program providers aren’t making full use of the programs. Additionally, of the 15 percent who have communicated with their members, only 36 percent have delivered a reward/payment.
“That shows that the current way that we deliver loyalty and rewards is not working,” Shilanski said. Yet the opportunity is there. That is why venture capital companies have been active in the market. In the last few months, various venture capital firms have invested in Square, Capillary Technologies and Edo Interactive, just to name a few.
“That should tell you something,” Shilanski said. “Yet retailers are finding it increasingly frustrating to having these diminishing [loyalty program] numbers.”
According to Shilanski, companies are accepting sub-1 percent returns on e-mail offers and small returns on loyalty programs as good results. Those types of returns shouldn’t be considered acceptable.
Improved success in loyalty programs will depend on participation of retailers, payments providers like MasterCard and technology firms like platform providers, which all need to work together, Shilanski said.
Retailers also have to recognize the movement to mobile. U.S. retailers spent less than 1 percent of their $220 million in advertising on mobile in 2011, yet 70 percent of retailers say that mobile is a major part of their strategy, an obvious disconnect, Shilanski added.
The need to better focus on mobile and loyalty programs have driven some of MasterCard’s recent business transactions and will continue to do so in the future, Shilanski said, pointing out the company’s acquisition of Truaxis, a Silicon Valley, Calif.-based provider of relevant credit and debit card-linked offers to consumers through merchants and financial institutions. MasterCard will seek other “best-in-class” loyalty-related opportunities in the future.
Loyalty rewards are expected to grow to a $43 billion business by 2016, Shilanksi said. Large companies and quick service restaurants are already starting to capitalize on these opportunities, but other firms have done very little.
Mobile technology will provide a primary way to build on these opportunities, but the technology itself will do little if companies fail to fix any business processes and strategies first, Shilanski said.