Opinion — Real-time Promotions a Game-changer for Retailers

This article originally appeared in The Australian Financial Review on January 19, 2023,  Real-time promotions a game-changer for retailers. Reproduced with permission from Copyright Agency, AFR 2023. Copyright 2023, Copyright Agency.

Australian shoppers are a notoriously promiscuous bunch, shopping across multiple retailers for the best price, range, and convenience.

The little loyalty consumers have is being tested as household budgets come under pressure from soaring mortgage costs, rising rents, and higher prices for food and most consumer goods.

Consumers are increasingly shopping on promotion – searching out and stocking up on the best deals and discounts – forcing major retailers to ramp up their loyalty schemes by making personalized, tailored offers to keep existing customers keen.

Dan Murphy's managing director Agi Pfeiffer-Smith wants to make personalised offers to loyalty club members in real time. Credit: The Australian Financial Review

Bricks and mortar retailers have long been at a disadvantage to online retailers, who have a direct line of digital communication to customers through their websites and apps. They can track every purchase and market to customers on a one-to-one basis with offers based on previous spending.

Omnichannel retailers – those who sell in stores and online – are starting to level the playing field by personalizing the experience of customers who shop online.

However, most omnichannel retailers have few ways of communicating one-to-one with customers when they shop in stores.

"The challenge for bricks and mortar retailers is that they do not have one-to-one relationships with customers who may be spending thousands of dollars a year in their stores," said Jonathan Reeve, vice president Asia Pacific of digital marketing and loyalty platform Eagle Eye.

"In fact, if you’re not in the loyalty program, they may not even know your name."

"You’ve got all these retailers with stores that are fighting (online retailers such as) Amazon with one hand tied behind their back because they’re not able to engage with you as an individual," Reeve told Window Shopping.

While most listed retailers have made huge strides developing their e-commerce capabilities, in-store shopping still accounts for the bulk of their sales – more than 92 per cent at Coles’ supermarkets, 90 per cent at Woolworths' supermarkets, 92 per cent across Wesfarmers’ retail businesses, almost 86 per cent at JB Hi-Fi and 83 per cent of revenues at Super Retail Group.

The proportion of in-store sales is likely to rise this year as consumers return to bricks and mortar stores after COVID-19 lockdowns. For example, online spending at JB Hi-Fi fell to 14 per cent of total sales in the December-half after peaking at 22.7 per cent of sales in the previous locked-down period.

Retailers are now exploring ways to "digitize" in-store spending by encouraging customers to download shopping and rewards apps, link their loyalty cards to the apps, and open these apps while shopping in stores.

'Phone out of pocket' activity

"If you can get customers to make shopping a ‘phone out of pocket’ activity and open the app, that gives retailers the opportunity to do one-to-one marketing in the same way the e-commerce players do," Reeve said. "In that way, they can start personalizing their interactions with you."

Woolworths and liquor retailer Endeavour Group, for example, are working with Eagle Eye to offer personalized promotions and member pricing to loyalty program members in real-time.

"Ten years ago, loyalty programs were based on plastic cards and paper vouchers – they were cumbersome to use for customers and our business," said Glenn Baker, Woolworths general manager of Everyday Rewards, which has 13.9 million members.

"The technology that Eagle Eye provides has helped transform how we can reward and recognize our customers in real-time."

In the past, when Woolworths sent customers offers to boost rewards points on about 12 items each week, shoppers would need to wait up to two hours once they had boosted the items to earn bonus points when they shopped.

Customers can now boost items in the app while browsing in the supermarket and earn points towards discounts as soon as they pay at the checkout. Woolworths' in-store point-of-sale system connects in real-time to its new loyalty platform, which assesses the shopping basket before payment is finalized.

The new platform, which launched in September, enables customers to track their points earning and redeeming as it happens, rather than waiting hours or days. It also enables Woolworths to test the success of offers and campaigns faster and, theoretically, send offers in response to weather and events.

"We have even had members earn points in Woolworths and then redeem immediately next door at Big W or BWS," said Baker.

Endeavour Group’s Dan Murphy's big-box liquor chain has a well-established loyalty scheme, My Dan’s, which has 4.8 million active members who receive member-only pricing in stores and online.

Dan Murphy’s is working with Eagle Eye towards making personalized offers to My Dan’s members in real-time, through the app and through push notifications, when they are stocking up in-store for parties, buying gifts, or browsing for a bottle of wine for dinner.

Dan Murphy’s managing director Agi Pfeiffer-Smith said the retailer wanted to become more relevant to customers by making real-time personalised offers and suggestions, "not just pushing out messages when it suits us".

"That’s about getting to a point where we’re able to market in the moment and do things at a time and a place and in a context that’s really relevant to the customer and the social occasion they’re actually shopping for," Pfeiffer-Smith said.

Over time, Dan Murphy’s wants to evolve the loyalty program and app beyond just being a transactional app to more of a lifestyle app.

Leah Weckert, CEO, Coles. Credit: Martin Keep/Coles

Coles is also experimenting with member pricing in-store and online for 8.5 million Flybuys members and is working towards introducing personalized real-time offers.

In November, Coles introduced Flybuys Member Prices for customers shopping in stores and online. Customers who swiped their Flybuys cards received instant discounts ranging from $1 to $10 at the checkout on a range of selected products such as minced meat, bread, cheese, and yogurt.

Coles' chief executive of commercial and express, Leah Weckert, said it was the first time Coles had given Flybuys members the opportunity to receive instant discounts – rather than accruing Flybuys points – when they swiped their loyalty cards.

Coles is assessing the impact of the Member Prices trial, which tested whether instant discounts would resonate more with Flybuys members than accruing points and lead to increased swiping rates.

"We have an in-house insights team that is focused on bringing all relevant customer data points together to optimize our personalization to customers,” a spokeswoman said. “We are continuing to enhance the way we offer customers highly relevant and valuable communications and content that is personalized and in real-time."

Given the links between Coles and Wesfarmers – each group owns 50 per cent of Flybuys – it's possible that Wesfarmers, through its OnePass online subscription program, will also explore ways to make personalized, real-time offers to customers shopping in Bunnings, Officeworks, Kmart and Target bricks and mortar stores.

Reeve says retailers will eventually have the capacity to make personalized offers in stores based on shoppers’ locations and activities.

"In our view, once retailers get the ability to communicate with customers in the moment, it will be just as transformative for retail marketing as ‘near me’ has been for Google searches because you can give customers the information exactly when they need it," he said.

As consumers become increasingly wary about sharing personal information with businesses after major cyberattacks, retailers need to ensure their loyalty programs are providing enough value to make it worth the risk.

Loyalty programs that are personalized and offer consumers immediate benefits such as rewards, product suggestions, and even recipe ideas when they are shopping in stores and online are sure to have an edge over traditional card-based programs.

This article originally appeared in The Australian Financial Review on January 19, 2023,  Real-time promotions a game-changer for retailers. Reproduced with permission from Copyright Agency, AFR 2023. Copyright 2023, Copyright Agency.