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How Loyalty Programs Can Benefit From an Emerging Technology

July 21, 2014

Shoppers are eager for engagement. Augmented reality, the combination of real-life images with information, is keeping it real via mobile apps. In this feature, we look at how Walgreens and others are using the technology.

The idea of an immersive in-store shopping experience is becoming a reality, thanks to a technology that takes retail customers into a different realm.

Augmented reality, which combines visual imagery with data, allows retailers to engage shoppers by creating an in-store experience that is uniquely their own. When implemented as a feature in a rewards program, this innovation can provide merchants the opportunity to deepen their customer relationships and loyalty.

The opportunities are on the rise. As smartphone adoption rates have risen, so has the use of augmented reality, which creates an enhanced version of reality by overlaying digital information on an image of something being viewed through a smartphone or tablet. Annual revenue from mobile augmented reality applications will reach $1.2 billion by 2015, up from just more than $180 million in 2013, according to Juniper Research, a U.K.-based analytics firm.

“At a high level, AR (augmented reality) promotions could be very effective,” said Don Hughes, chief information officer for Kobie Marketing, a St. Petersburg, Florida-based loyalty marketing firm and an expert on augmented reality. “Combining AR into a marketing strategy has shown to do a better job of engaging customers, drawing them to physical locations and encouraging frequency.”

Taking three to tango

One platform making this virtual reality a reality is Google's Project Tango, which creates three-dimensional maps of indoor spaces. The user's location is tracked within a centimeter of accuracy, and that's where company Aisle411 steps in. The St. Louis-based startup specializes in inventory floor plan maps for retailers, so the two technologies combine to make the shopping experience come alive.

Walgreens is conducting a proof of concept of the program in select stores in Manhattan, Chicago, Seattle and St. Louis using the Project Tango/Aisle411 platform. The behavior of Walgreens' customers is tracked and the information gathered is used to customize offers and provide reward points that are virtually clipped to the cards of its Balance Rewards members.

“We understand that convenience plays a critical factor in how consumers shop, and we are always evaluating new technologies to enhance their experiences,” Tim McCauley, Walgreens' senior director of mobile commerce, said in an email. He said once the proof of concept is complete the program will be evaluated for possible expansion but did not provide a timetable.

One thing is clear to Aisle411: Today's shoppers are engaged with their mobile devices while in store. “They are smart and digitally savvy and in this highly competitive retail ecosystem, it's critical for retailers that their shoppers have the right tools to keep them engaged in the shopping experience,” Aisle411 CEO Nathan Pettyjohn said in a statement when the technology was demonstrated at the Google I/O conference in San Francisco in late June.

Consumers are yearning for a more engaging shopping experience, research shows. According to CFI Group's Retail Satisfaction Barometer 2014, consumers indicated they wanted a much broader range of mobile options, including being able to check store inventory, find products in store, manage coupons, scan products to speed checkout and check loyalty balances.

The use of mobile apps while shopping is growing steadily, as the research found 41% of consumers now actively use mobile apps while shopping, nearly twice the 21% that did so in a similar survey last year.

Keep the customer satisfied

The CFI report recommends merchants include more capabilities in the areas of inventory visibility and product location in-store, which is the goal of augmented reality programs like the one being tested by Walgreens. This can help keep customers already using shopping apps pleased with other company offerings.

Keeping the customer satisfied in-store is a key component in building engagement, along with helping to fight revenue erosion from e-commerce. A 2013 report from AT Kearney, titled Recasting the Retail Store in Today's Omnichannel World, found consumers spent most of their time (61%) shopping in stores, compared with 31% of their time shopping online.

The study also found 40% of in-store consumers spent more money than they had planned, while only 25% reported impulse shopping while online. Capitalizing on that spending behavior by increasing the number of feet walking through store aisles is something that an effective augmented reality program can do, according to Hughes of Kobie Marketing.

“There's so much focus on creating these memorable sticky experiences tied to these brands,” Hughes said. “If the loyalty marketers can creatively harness that power, it would be a great way to increase the level of personalization and make it part of a significant program/marketing mix.”