Approaching Consumer-Facing Programs

“Do my consumers really want this? Will they use it?”

This is one of the most fundamental questions any merchant must ask when venturing into a new consumer engagement or payment program. It is also a huge lesson to be learned from both the successes and failures from some of the recent entrants the retail industry has seen. Any consumer facing program must consider that the merchant is looking to change the consumer’s behaviors. At its most basic, merchants are trying to get existing consumers to purchase more, while also enticing new consumers to try the brand; if the program does not support one of these two outcomes, the organization must reconsider its strategy.
Whether allowing the consumer to pay with a new tender type with incentive value attached, or engaging the consumer via mobile device through which constant communication is available, there are a number of ways to support the objectives of customer retention and acquisition. Looking back to one of the most heavily talked about retail programs, the Merchant Customer Exchange, it is possible to see where the strategy missed the mark.

“…providing merchants large and small with a cost-effective entry point into the mobile payments movement…”1

MCX originated with the idea that a mobile wallet program based on proprietary payment programs could be utilized to drive down the cost of acceptance stemming from credit and debit interchange fees. In a vacuum, it makes so much sense. Accepting credit cards are expensive and the card brands hold all the, well, cards. Finding a way to usurp those fees by bringing multiple retailers together seemed so logical.
However, there was one major problem. Consumers don’t care about cost of acceptance. If there is one basic tenet of any consumer program it’s the following: incentive drives adoption. Helping the merchant is just not an incentive for the consumer unless there is something tangible that goes along with it. MCX promised cross-brand access and offers but that simply was not enough to convince consumers to move away from the methods of payment they knew and trusted.

“So what can be learned from all this?”

With any new program, it is imperative to understand the consumer base and what constitutes value to the consumer. For example, in the gasoline and convenience industry, having the ability to mark down price of fuel not only brings tangible value to the consumer but also meets the overall direction of the industry. The next step is to understand where the margin exists to provide additional consumer incentive for increased basket size, while offsetting the base margin given up. Staying with the gasoline and convenience example, utilizing in-store products with a higher margin to incent consumers to purchase beyond the forecourt balances the highest volume activity with the highest margin product base. Finally, make the incentives easy to understand for the consumer. One of the quickest ways to turn off a consumer is to implement a program so complex that a consumer can’t figure out when they are eligible for rewards.
It is easy for a merchant to look at their own needs when introducing a new program. However, relevance and engaging interest to both current and potential new consumers must be central to the strategy to accomplish a successful program in the market.
 

For further discussion, contact Boyd at bfarrish@wcapra.com.
  1. “Retailer-owned payments venture MCX unveils CurrentC brand”. NFCWorld. www.NFCWorld.com. 3 September 2014