If you only looked at topline revenue numbers, the retail sector seems to be doing just fine. Total U.S. retail and food services sales in 2022 increased 9.2 percent over the previous year, and despite modest declines in December, retail trade revenues were also up 5.1 percent year-over-year.
But retailers know these rosy performance figures mask more concerning developments. Customer loyalty seems to be in flux as suddenly price-sensitive shoppers seek savings wherever they can find them. The inflation that, well, inflated 2022’s retail sales totals may be ebbing slightly but is still persistent. Two-thirds of retail executives are pessimistic about maintaining or increasing their profit margins in 2023.
To combat these underlying weaknesses, retailers need better and more effective ways of engaging with their customers. They are – and should be – placing an increased focus and investment on personalization and looking for solutions that can quickly scale their promotions, improve customer loyalty, and deliver measurable and profitable returns. Many of these investments are centered around the retail loyalty program and the technology that supports it.
A Resurgent Interest in Loyalty Programs
This is important, as loyalty programs, if not actual customer loyalty, are finding new relevance among consumers amid their cost-of-living struggles. We recently commissioned a survey of consumers and loyalty program managers to assess the attitudes and strategies affecting retail loyalty worldwide. We found that 33 percent of US consumers joined new loyalty programs last year in an effort to save money, and 57 percent of consumers worldwide used loyalty points in 2022 for the same purpose.
Increased loyalty program participation means more opportunities for retailers to engage their shoppers – and personalization is the best way to achieve that. Our survey also found that 60 percent of consumers believe it is “very” or “extremely” important to receive offers from a store or a brand that are personalized to their needs. This preference is based on value: 84 percent of consumers believe that receiving more personalized offers should help them save money.
The Object of The Game is Engagement
But despite the widespread consumer appeal of personalized promotions, comprehensive personalization initiatives have been traditionally quite challenging to scale, particularly for grocery retailers. Executing personalized offers at scale requires a tight orchestration of inputs and outputs, alignment across three key stakeholders (the customer, the retailer and CPG brands), and significant investments in resources and technology. Retailers must build an audience and keep them engaged to generate the data needed for effective personalization and continue attracting promotional funding from their CPG partners.
Personalization efforts – and overall loyalty engagement – can be enhanced by gamification or incorporating digital games, contests, and challenges into the loyalty program experience. According to our survey, 66 percent of consumers would (or already do) participate in games, contests, or challenges through a loyalty app, but only 15 percent of companies think that gamifying the shopping experience is what consumers respond to most.
That’s why our company recently acquired Untie Nots, which enables retailers to develop highly personalized, profitable and gamified promotions at scale. The Unite Nots approach leverages artificial intelligence and machine learning in innovative ways to automate the creation, execution, and measurement of promotions, all while requiring minimal integration, resources or impact on a retailer’s existing systems or processes. This allows retailers to get the most out of their current loyalty programs and make their promotions more efficient by rewarding the incremental customer behavior they want to encourage.
Personalization and gamification are the keys to driving customer engagement, and Untie Nots helps us deliver these capabilities to retailers worldwide.
Global Grocers Lead the Way
There is a need for increased gamification capabilities in the US retail market, specifically among enterprise grocers. Walmart’s Rewards app has some gamified elements, and some US retail brands like Starbucks have gamified their loyalty app experiences for years. But many of the most visible gamification efforts in the grocery sector have come from overseas grocers like Asda and Carrefour France.
Consumers are ready for the high-touch, high-value approach to loyalty that personalization and gamification represent. Now it’s up to retailers to give their shoppers what they want. By embracing gamification and stepping up personalization initiatives through their loyalty programs, US retailers can better engage with their customers and improve their revenue and profit projections for 2023 and beyond.