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The case for a mobile loyalty program

Home furnishings retailer IKEA's decision to launch a mobile loyalty program should not be an isolated case. A loyalty program -- mobile, online or offline -- is a bulwark against shifting consumer allegiance when the times get rough.

IKEA's mobile loyalty program is a good model for most marketers and retailers to follow. Enlisting the help of San Francisco firm bCode and Valassis Interactive, IKEA has created a text-to-enter loyalty program for customers interested in receiving timely discounts from the retailer on their mobile phones (see story). Opted-in program members will receive texts each week, including coupons that can be redeemed in-store.

This is absolutely the right time to debut such a mobile loyalty program.

In good times, consumers typically face the classic dilemma of making buying decisions based either on brand or price. No surprises then that during tough economic times, such as the current period, the decision swings in favor of price. Only a loyalty program that shows it values its customers' business will prevent the switch in allegiance.

Most marketers, retailers and airlines have already extended their loyalty programs from mail to online. The next logical step is mobile, where most consumers are.

A text-based loyalty program is easy to implement, as the IKEA article shows. What it needs is a champion within the company's database marketing department or a nudge from the database marketing agency or service provider.

It will fly
Fear is what stifles most innovations and, sad to say, most marketers are running scared today of the implication of this economic downturn on their P&Ls and balance sheets. A strong, multichannel loyalty program will reassure customers that the brand cares for them in these troubled times.

What's the No. 1 pain point today for most commuters? High gas prices. Imagine an Exxon franchisee inviting customers to join a mobile loyalty club and then offering them special deals before major travelling occasions or even every other week. A gas station in Minnesota is already working on a similar program (see story).

Take Starbucks. The coffee shop chain will close 600 stores nationwide in response to weak sales and over-expansion. How to motivate customers into visiting its stores to buy $4 coffee instead of switching to a cheaper Dunkin' Donuts or even a McDonald's?

Starbucks is known for its loyalty program and even has a co-branded credit card. So why not extend that program to mobile and invite customers to opt in for mobile discounts and offers every week? Business tapers off in the late afternoon, so a mobile coupon served up before the end of the work day might just trigger the need for a coffee. Or serve the mobile coupon in the morning for the pick-me-up.

A mobile loyalty program for booksellers such as Borders or Barnes & Noble is a natural fit. Both have fee-based loyalty programs that offer percentage discounts on purchases made in store or online.

Barnes & Noble offers 10 percent off purchases to program members, sending constant reminders by email of the latest book, music or movie arrivals. It is easy to translate such a program to mobile with the help of the right vendor.

And it's such a logical thing to do. The latest James Patterson book is out? Send a text link to a coupon for in-store redemption. Chances are that if that customer walks in to the store to redeem the coupon, she will end up buying a couple more items.

The airline industry is known for its dependence on loyalty programs. An airline such as United would not even survive were it not for the MileagePlus frequent flyer loyalty program and the co-branded MileagePlus Visa credit card.

United or even online travel sites such as Orbitz, Travelocity or Expedia have long allowed consumers to sign up for mobile alerts to inform about flight delays or gate changes. How about sending an alert on the day of travel to see if the passenger wants a seat upgrade at a reasonable discount? That seat is a perishable, so the sooner it sells the better.

A mobile loyalty program will require upfront investment in upgrading systems, software and equipment. But it is an investment worth its weight in gold. As most businesses know, 80 percent of the revenue typically comes from 20 percent of the customers.

Building a database of opted-in mobile consumers is going to be the next major battleground in marketing. But just as with email newsletters, consumers may have a limit to the number of mobile loyalty programs that they sign up for. Better to make the move now and be on the preferred list of mobile loyalty programs.