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March 5, 2020

Consumer Purchasing Metamorphosis: How Consumer Purchasing Data is Shaping Loyalty Solutions

MHT Partners  | Business & Information Services Investment Bank

Today’s businesses face increasingly competitive dynamics in brand loyalty as consumer preferences become more demanding and less forgiving. Companies traditionally relied on a one-size-fits-all approach to attracting and retaining loyal customers. However, businesses are now adopting a personalized, targeted, and multi-channel approach throughout the entire consumer lifecycle. Payment platforms, in combination with tech-enabled engagement and marketing solutions, continue to emerge as a more attractive option to create experiential success for consumers through the use of artificial intelligence (“AI”), machine learning, and data analytics, which has driven M&A interest and activity in the space.

Harvard Business Review’s, ‘The Value of Keeping the Right Customers,’ illustrates how increasing customer retention by 5% increases profits from 25% to 95%(1). The question is, what is the best way to incent consumer loyalty? Companies historically targeted repeat customers through a standardized marketing program. Consumers received mass-produced marketing material and participated in transactional rewards programs that offered little in terms of customization. While this approach has been successful in the past, brands have begun developing a more personalized, experiential approach to consumer loyalty. The use of tech-enabled engagement and marketing solutions in the rewards space has allowed companies to identify consumer trends at an individual level and build on consumer loyalty. Data analytics, in combination with AI and machine learning, allow companies to thoroughly analyze each consumer transaction and predict relevant product recommendations. Engagement and marketing platforms use consumer data to calculate metrics such as recency, frequency, and spend of each customer in addition to projected churn rate and customer lifetime value. This allows companies to understand what is driving behavior at the individual level and use successful engagements as a basis for increasing consumer loyalty. But where is this consumer data coming from?

Data gathered from a consumer’s purchases offers brands the opportunity to obtain deep insight into that customer’s habits and trends. The data captured through the payment process allows marketers to develop unique, individualized actions aimed at improving customer relationships and maximizing the potential of future interactions. Mastercard has been an early adopter of utilizing its payment data in conjunction with tech-enabled loyalty solutions to offer data-driven insights to retailers and other consumer brands. Mastercard has made a number of investments in the space to enhance its solutions’ offerings, from its acquisition of Applied Predictive Technologies, a test and learn analytics tool for brand loyalty, to its recent acquisition in October 2019 of SessionM, a SaaS platform for customer engagement and marketing.(2)   Information gathered from the payment process lays the framework for tech-enabled engagement and marketing companies to deliver advanced insight into consumer spending and personalized solutions for consumer loyalty.

In addition to facilitating an individualized experience for consumers, the combination of payment and tech-enabled engagement and marketing platforms helps to curate the unique experience across multiple facets of the product purchase cycle. Companies with strong omnichannel customer engagement strategies retain 89% of existing customers, as opposed to a 33% retention rate for companies failing to embrace these strategies(3).  Payment platforms provide another channel of insight into consumer loyalty by analyzing purchasing habits and using the data collected to deploy targeted interactions that incentivize consumers at various stages in the sales process. The acquisition of Honey by PayPal for $4 billion in November 2019 illustrates continued investment by payment platforms in omnichannel engagement and marketing solutions(4). Instead of solely targeting customers during checkout, PayPal will now leverage Honey’s product discovery, price tracking, offers and loyalty solutions to interact with consumers across multiple touch points and earlier in the deal discovery process.

MHT, a leading technology investment bank, will continue to follow consumer loyalty trends as investment in engagement and marketing software remains an increasingly beneficial option for companies looking to maintain high growth and expand into new services. To learn more about MHT, please contact Mike McGill (mmcgill@mhtpartners.com), Kevin Jolley (kjolley@mhtpartners.com), or Cameron Mullen (cmullen@mhtpartners.com).

(1) https://hbr.org/2014/10/the-value-of-keeping-the-right-customers
(2) https://newsroom.mastercard.com/press-releases/mastercard-acquires-sessionm-to-broaden-its-merchant-loyalty-marketing-services/
(3) https://www.digitalcommerce360.com/2013/12/31/why-omnichannel-strategy-matters/
(4) https://investor.paypal-corp.com/news-releases/news-release-details/paypal-acquire-honey

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