SmartShop, Powered byPay By Touch

January 2007

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SmartShop,Powered by Pay By Touch

Many retailer loyalty programs have failed to meet theirpotential or provide their promised return. This is becausethe loyalty card is often used as a mere vehicle for deliveringdiscounts already advertised on the shelf. Valuable shopperinformation is tracked, but is acted on only in a limitedfashion. This approach both leaves money on the table anddoes little to engender loyalty to the retailer.And yet retailer differentiation has become more importantand more challenging than ever. The lines defining retailchannels are blurring rapidly. Traditional lifestylesegmentations have eroded as retailers look to create amore compelling shopping experience and increase theirshare of the consumer’s wallet. New departments andpartners (Starbucks, etc.) are added to the store to attractconsumers. The effect is to expand the shopping choicesfor consumers, who are spreading their purchases acrossmultiple retailers.As shopping options have increased, so too has the difficultyin reaching consumers. Two trends are making it morechallenging to get a message through: (i) a proliferation ofcommunication channels; and (ii) a deluge ofadvertisements in every media form.To stay competitive and differentiate themselves in thisenvironment, retailers are making changes in branding,product selection, services and layout. In addition to theseefforts, forward-thinking retailers are recognizing that thereis an historic opportunity to turn their underutilized loyaltyprograms into a strategic advantage.

Individualized Retailing

– also known as PersonalizedMarketing – is the application of one-to-one marketing on amass scale. Reduced costs for technology, the rise ofdigital communications and increases in processing powernow make it possible to go beyond the mass marketingapproach that has dominated retail for decades.Most retailer loyalty programs are overdue for innovationand advancement into the next generation of consumermarketing. Online companies have shown the benefit ofapplying one-to-one marketing models. Through Pay ByTouch’s SmartShop, traditional retailers can reap thebenefits of marketing’s evolution into a truly personalizedmedium that delivers an individualized shopping experience.

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Personalized Marketing & IndividualizedRetailing

Individualization

refers to the provision of products, promotions,marketing messages and information that are tailored to theinterests of each shopper. The concept starts from theperspective of the consumer, seeking to understand theirpreferences. From this foundation, the retailer applies its view ofeach shopper. Not all shoppers are of equal value, andindividualization enables the retailer to incorporate this fact.

Retailers’ Gold Mine: Shoppers’ Purchase Histories

Shoppers communicate their preferences to retailers every timethey shop with a loyalty ID. More powerful than demographics orconsumer declarations of preferences, shopping historyilluminates what is relevant to a shopper when they make theiractual purchase decisions. Actual purchase histories eliminatethe imprecision of hypothesizing shopper preferences based onlifestyle segments, which require a significant amount ofinformation about each consumer.Purchase histories also tell the retailer how a shopper respondedto a given promotion. The retailer can use this information to finetune promotions and improve outcomes.

Power of Relevancy

To understand the potential for leveraging consumers’ interests,consider two giants in the online world, Google andAmazon.com. In the space of a decade, each has become amulti-billion dollar company.The key to Google’s success has been its AdWords product.Based on a user’s search terms, Google serves up relevant andunobtrusive ads alongside search results. These ads garner thehighest click-through rates in the industry.Amazon.com has pioneered a recommendation engine thatdetermines relevant products for its shoppers. A shopper ismatched to other shoppers based on common productpurchases. The other shoppers’ purchases become the basis forrecommendations to the consumer. Amazon.com generates upto 35% of its revenue from recommendations.

Consumers areloyal to both companies based on their excellent service and therelevancy of their offerings.