It is well understood that retail shopping is one of the most significant customer experiences that is being disrupted with digital technologies. Historically, customers visited a store to browse and often completed the purchase in the moment. Now, shopping is often started online, consumers researching on their phone, and if a retailer is lucky, the customer then comes back to make the purchase. Each stop along the way includes touchpoints with competitive offers, which reduces the chances the customer ever comes back. What is not as well understood is how retailers can use modern point of sale programs to not only facilitate this new way of shopping, but also to use it as a competitive advantage.
This is fundamentally about how to move customers from a transaction-first mindset to repeat behavior so they are loyal to a specific retailer. This, in turn, requires creating compelling conditions that encourages them to buy into an enticing value proposition that spans across multiple purchases.
Apple is doing this today with the iPhone Upgrade Program by offering installment loans at low or no cost to the consumer that can include benefits such as Apple Care, pre-order privileges, and upgrade opportunities. This creates more value for the consumer and the retailer can evolve the relationship from a single, transactional purchase of a device to a broader value proposition paid monthly that encourages constant engagement and repeat purchases.
The typical in-store credit card model does not support this type of an experience. First, customers do not want to open up yet another credit card to make a purchase. Second, these credit cards set up the customer to think about each purchase as a one-time transaction rather than part of a compelling longer-term value proposition. For example, private label credit cards typically offer introductory financing at 0% but if you don’t pay it off, the customer ends up paying significantly more interest than they expected. And if a customer wants to finance a transaction after that initial purchase, they will experience a very high APR without a clear understanding of the monthly plan required to pay it off. In fact, this model penalizes repeat behavior as additional purchases are charged at higher rates than the initial purchase!
Evolution in consumer behavior and advancements in technology are now enabling point-of-sale capabilities that incentivize repeat purchases over one-time transactions. This change has also allowed consumer product companies and OEMs a way to stand-out in highly competitive markets. Several trends that are emerging:
- Payment options are integrated into the core product value proposition. This is no longer just a payment option at check-out, but rather an integral part of the product
- Services, warranties, and additional products are bundled and sold as a single monthly payment.
- Engagement points are built into the experience including frictionless ways to upgrade to newer and premium models
- Customers have access to an “open to buy”, allowing them to understand how additional products can be added to their single monthly payment
This model is already taking off in several verticals including consumer electronics, home security, home goods and appliances, and travel & entertainment. Forward-thinking retailers, OEMs, and service providers have an opportunity to capitalize on this shift to build innovative products that shift their customers from a transactional mindset to one of true loyalty.
Andrew Rostami is an executive vice president and is the head of unsecured lending at Citizens Bank
