How Digital Advances and Privacy Regulations Are Impacting Retail Loyalty Programs

Fortifying Retail Loyalty Programs with Privacy at the Core

When Ryan Monahan, SVP of Product Solutions at Catalina, was asked by a leading industry trade publication about how retailers need to adapt their retailer loyalty programs as third party cookies continue to crumble, he had a lot to say. The full exchange follows.

Q: As digital heralds a new era in consumer data and opt-in targeting, what role does retail loyalty play?

'Retail loyalty' has gained significantly greater importance and applies to a much broader spectrum going forward. What was purely measured in trips & baskets is now a new paradigm of KPIs. The foundational building block for retailers looking to utilize their first party data more broadly is user consent, and the most frequently used mechanism to garner that is participation in a loyalty program. Before retailers can leverage their physical and digital ecosystems as media networks, they must have scaled user consent. Without it, there are limited ways for a retailer to align customers to purchases.

Q: What learnings from the past will be helpful as we enter yet another new dawn for digital?

Some key historical learnings point the future in a different direction. In the past, the linkage of shoppers to items purchased was primarily utilized for retailers to deliver personalization to their own marketing and assortment decisions. Now, it's table stakes for retailers to be able to maintain that linkage at a massive scale. The retailers who make those technology investments and embrace this priority through all verticals will be the ones who have the most impactful levers to pull for driving shopper loyalty and overall revenue.

Of note, the pace of change is much faster than retailers have historically moved. That means agility can’t just be a buzzword, it's a necessary mindset.

Also, there will not be a one-size-fits all solution. No one technology provider can power or measure all of the channels with the scale advertisers demand. While retailers are trying to learn the efficacy of advertising on their e-commerce platforms, emerging channels like digital out of home, podcasts, and advanced TV are taking off with advertisers. A successful ecosystem for targeting and measuring shoppers will be one that is built from its foundation to be flexible and accessible by multiple ad platforms.

Q: Are today's loyalty schemes still fit for purpose as we move into this new world?

Retailers are competing on many new fronts for each individual transaction. The traditional customer journey is extinct; shoppers can now make their buying decisions without leaving their couch or during a conference call. And not only are retailers competing with each other for loyalty, they are also competing with a growing range of options from Direct-to-Consumer entrants built on very different business models. Thus, the retailers who develop an ability to connect with current and prospective shoppers using personalized engagements across the entire digital universe (not just the digital properties they own) will be the ones with the best opportunity to grow. Here are some ways Catalina can help.

Q: How is the rapidly evolving digital landscape impacting retailers; how are they adapting?

The pace at which the ad technology universe is transforming is putting a massive amount of pressure on retailers to accelerate their technology investments to take advantage and leverage the growing value of their first-party data. The industry is emphasizing the ability to target consumers within the new privacy-driven era, but it's equally important to look at the role of measurement. Determining what consumers purchase relative to what ads they saw is the holy grail for the ad tech space. Retailers' first-party data is a critical ingredient in that recipe, and that information will drive where and how advertisers make their next marketing investment. Remember that speed matters now more than ever. Advertisers need to make these decisions in real-time. The retailers who enable rapid decisions and in-flight adjustments will be the ones advertisers return to.

Q: What does the future of loyalty in retail look like?

Over the past two years, we have seen an emergence of new 'loyalty schemes' at retailers of all sizes and sophistication, along with the growth of varying subscription models. Two notable entrants are the CVS Carepass program and the Hy-Vee Plus delivery subscription. These two examples show how retailers of varying sizes are testing different mechanisms to provide their shoppers with more value and be more 'sticky' with them. Shoppers still want more value for their dollars, but we will see whether the market determines levers like convenience and personalization will outweigh traditional savings and rewards.