I recently spent a week on holiday in Japan. As a digital marketer from the UK, my expectation was that Japan would feel incredibly futuristic – filled with gadgets and gizmos that simply wouldn’t be seen at home, even in technology centres like London.
It turns out that I was halfway right. Japan does have lots of technology that feels years ahead of the West. But apparently Japanese retail habits are more traditional than I had expected.
In the UK it is very much accepted that high street retail is in decline. But in Japan this trend is far less apparent. Physical retailers are still busy, with the ubiquitous convenience stores seemingly thriving, with most finding it viable to remain open 24 hours a day.
There are undoubtedly many factors behind why high street retailers may succeed or fail. But what is not in doubt is that online commerce is having some sort of impact on our high streets.
I did a little digging and was surprised to see such variation between the levels of e-commerce sales in the UK (ranked #1 in the world) and Japan (ranked #10). Both are digitally mature marketplaces with high levels of internet access across desktop and mobile.
Store Loyalty in Japan
Something is stopping Japanese consumers from adopting e-commerce en masse as they have done in the UK. I suspect a part of this reason is the in-store shopping experience available in Japan.
On my visit, I saw a small promotion being used in 7-11 (which is everywhere in Japan) that UK retailers might wish to consider.
Instead of a loyalty card, 7-11 offer something very different in Japan. When you spend ¥500 (£3.38) or more you get entered into a tombola-style draw that happens on the shop counter, just after your transaction. In one visit I won an "apple cyder" soft drink and a cup of instant noodles.
Whilse these prizes might not sound particularly exciting or noteworthy, I can see many potential business benefits for any UK retail brand wishing to launch their own loyalty program.
Creating a memorable experience
The UK loyalty market is largely saturated and homogenous. Despite heavy ownership of loyalty cards, UK consumers are less likely to redeem points than in any other global market. While this position may sound attractive to brands from a cash-flow perspective, clearly these cards are under-performing in terms of driving preference between retailers and ultimately influencing purchase decisions.
Brands like Waitrose have entered the loyalty market later than established players like Tesco and Sainsbury’s. Waitrose’s response was to launch a unique offering which includes a free tea or coffee for each shopper. While I am not privileged enough to know the results of this scheme, anecdotally it seems to be driving recall and distinctiveness, two aspects that most marketers would agree are key to success.
Whilst I am told that the 7-11-style tombola draw is common in Japan across multiple retailers, it could offer a UK retailer that distinctive point of difference that many seek. This is especially true when scientific studies have clearly linked dopamine release into the uncertain process of winning. Certainly I would argue that winning a small prize is a more memorable experience than gaining a small number of loyalty points that are unlikely to ever be used.
Up-sale and stock management
Where UK loyalty cards may be helping retailers (and there are many notable critics), it is almost certainly in terms of overall store loyalty. There is very little evidence that these cards are creating any form of upsell effect.
But the Japanese tombola model does just that. At ¥500 there is a minimum price point, this could be used to create up-sale on low cost shopping baskets. Perhaps bigger prizes or a bigger chance of winning could be available with bigger baskets? There are many tactics that could be used.
And that is not to mention the benefit of new product trial. Existing UK loyalty programs may encourage purchase of new or untried products via points based offers, where the user gains extra loyalty points for making specific product purchases. But perhaps the target audience sees no real benefit to the product or they perceive it to be something they do not like. In these instances the user really needs to be given the product for free if they are to have any chance of trialling it.
Retailers could also benefit from better stock management in using this model. What happens to UK stock when it is close to expiry date? Typically it gets discounted or thrown away. By giving away some of this stock as "rewards", this cost of business could be reduced significantly. Indeed, commercially savvy retailers could build partnership relationships with FMCG manufacturers whereby their products are used as prizes and this could then become a new income stream.
On the streets of London we regularly see FMCG products given away as a free sample. Is this devaluing the brand? Potentially, but this problem is almost certainly mitigated when that same product is a "prize" rather than simply free and available to anyone and everyone.
Ultimately I think the ingredients to successful marketing revolve around being distinctive, memorable and organically discussed with others. The Japanese tombola experience did exactly that for me.
Indeed this process could be considered win-win, given the consumer and business benefits outlined above. With GDPR looming in May 2018 and consumers increasingly cynical about how their data is used by brands, perhaps some retailers will actively seek a loyalty program where no data is exchanged. My experience in Japan shows exactly how that could look.
Aidan Mark is head of performance planning at Havas Media Group UK