Creating merchant loyalty – location–based offers, discounts and targeted messaging are helping to place merchants at the centre of consumer engagement.
According to research by IDC, 1.5 billion smartphones will be in use globally by 2017, while research firm Gartner predicts that worldwide mobile payment transaction values would reach $235.4 billion in 2013, a 44% increase from 2012’s $163.1 billion.
The pressure is now on for merchants and mobile wallet providers to create effective solutions that encourage consumers to leave their cards behind. Fully embracing mobile payments and wallets means opening up a host of new opportunities for brands and retailers to engage with customers and provide more convenience and utility as a result.
Geo-location services, real-time offers and discounts, coupons, loyalty points and targeted messaging are converging to give merchants unparalleled insights into the purchasing behaviours of their customers.
One of the best-known merchant loyalty programmes is operated by coffee chain Starbucks, known as ‘My Starbucks Rewards’, enabling the chain to capture valuable data on a large proportion of its customer base. The Starbucks programme combines loyalty with payments and technology to provide its customers with both value and convenience. Consumers can also use a Starbucks mobile app, tied to the Starbucks Card, on a smartphone to make payments and accumulate loyalty points. Consumers can also store value on the Starbucks Card. The Starbucks mobile app is now used for 10% of all Starbucks transactions in the US.
The application of loyalty rewards and benefits via the digital wallet is now seen by many as potentially the killer app that will help to finally ignite the long simmering mobile proximity payment market.
“Ovum’s research highlights that 53% of consumers globally report they’ve either used or are interested in redeeming offers and coupons with their handsets, while 44% have used or are interested using their mobile device to pay for things in store and restaurants,” said Gilles Ubaghs, senior analyst, financial services technology at advisory firm Ovum. “Combined rewards and offers in conjunction with mobile payments are set to be a common feature in the near term as a means to reach consumers and drive spending in new ways.”
But launching these services is easier said than done as the loyalty market itself continues to undergo a disruptive evolution just as powerful as that impacting the payments space. In particular the loyalty market is rapidly becoming inundated with offers and daily deals leading to a growing need for more personalised and targeted offers to consumers to help maintain engagement levels among an increasingly fickle audience.
“Payment providers today already hold a rich seam of transaction data that can be and already is applied to loyalty programmes,” continues Ubaghs. “However, much of this data remains largely unstructured and the needs of modern loyalty programmes remains largely ill-defined. Wallet providers who can crack this and create a broader payments loyalty ecosystem have the potential to both drive mobile wallet usage and create new consumer retail experiences beyond the POS.”
The emergence of e-coupons
Excluding print-at-home coupons, 27 million digital coupons were redeemed in the US in 2012. The average redemption rate of digital coupons was 11.2% – eleven times higher compared to conventional coupons, according an Inmar report. By 2015, distribution of digital coupons in the US will rise by 898% and will have a total face value of $150 billion.
Juniper Research has also found significant growth in the number of digital reward schemes adopted by retailers with mobile coupon schemes to meet growing consumer demand. Juniper found that there are 560 million mobile coupon users in 2014, with this figure set to rise to 1.05 billion by 2019.
The number of e-coupons is set to nearly double over the next three years, rising from 16 billion this year to more than 31 billion in 2019. Juniper argues that while there would be some growth in the PAH (print at home) space across fixed and mobile, the increase would primarily be driven through in-store, barcode based redemptions and online redemptions.
Juniper also states that consumer behaviour was evolving to incorporate online or mobile coupon search prior to either remote or in-store purchases. It cited the sharp rise in visits to the couponing section of retailer sites, and in traffic to aggregator sites such as VoucherCloud.
Even with context-driven offers, consumers were increasingly storing the coupons on-device (often in a wallet such as Passbook, Samsung Wallet or Google Wallet) and redeeming them at a later date.
Juniper states that analytics of consumer purchase patterns are essential to enable an increase in customer lifetime value. According to Juniper report author Dr Windsor Holden: “Coupons should offer discounts on products that a consumer might be interested in purchasing, rather than those purchased on a regular basis: otherwise, coupon redemption represents a loss to the brand or retailer.”
According to UK digital consumer engagement specialist Eagle Eye Solutions, merchants across the UK are adopting digital loyalty strategies and embracing the power of mobile coupons, rewards and gifts.
Steve Rothwell, founder of Eagle Eye, said: “Research illustrates the enormous growth in demand for mobile coupons and rewards. These are patterns and trends we have seen in our data and we predict that demand will continue. Even if you issue paper coupons you can count it digitally and that saves money. Added to this, when you have coupons that are distributed and redeemed digitally via the phone you find out what your customers are doing, adding value to the customer and in turn bringing loyalty.”
Increasing interest in loyalty
In September 2014, the interest in loyalty solutions was illustrated by the acquisition of Welcome Real-time, a global provider of payment-based loyalty solutions, by Collinson Group.
Welcome Real-time’s technology integrates with banking and retail systems enabling banks, card issuers and retailers to provide special offers, points redemption and other real-time communications to consumers at the POS. In May 2014, Welcome Real-time announced its expansion into proximity locations-based services with the launch of Welcome-OmniConnect, a cloud-based communication and marketing solution for proximity locations.
Welcome-OmniConnect aggregates several location feeds (BLE beacons, QR Codes check-ins, POS or ATMs transactions, social-media check-ins, etc.) approached by visitors who instantly receive generic or hyper-personalised messages (promotional messages, loyalty status, redemption reminders, etc.) sponsored by a retail bank or a merchant.
And in September 2014, Barclaycard announced the acquisition of Logic Group. Barclaycard’s customers will also gain access to Logic Group’s loyalty programmes and data insights solutions, which enable merchants to provide highly targeted services to their customers.
Other payment players are also focusing their efforts on mobile loyalty solutions. In July 2014, global payment processor First Data announced the launch of the ‘Perka’ mobile loyalty solution for small and medium-sized merchants.
The acquisition of Perka in 2013 and its subsequent launch on the First Data platform ties in with a 2014 BIA/Kelsey and Manta study of 1,000 small businesses in the US, which revealed that while more than 60% of small to mid-sized business owners generate a majority of their annual revenue from repeat customers, more than two-thirds do not have a loyalty programme in place.
“Until recently, effective loyalty programmes have been largely out of reach for small merchants,” said Rick Ducey, managing director, BIA/Kelsey. “The programmes were too cumbersome for small merchants to manage, and they often lacked the technology to implement them. This has changed with the development of new loyalty programmes such as Perka, which enable small merchants to compete against programmes provided by much larger competitors, and clearly connect the dots between loyalty and the bottom line.”
In the UK, several independent merchants have started accepting Yoyo, a mobile payment and loyalty app which is already in use across four universities in London. A total of 62 retail outlets across the capital are now accepting Yoyo.
Users download Yoyo on the App Store or Google Play, and attach a funding method to top-up their account. Yoyo integrates into the retailer’s till system and uses a unique QR-code for each transaction, which is scanned at the POS using a scanner. Users collect loyalty points automatically in the app and can receive offers and promotions from their favourite retailers
Earlier this year, Yoyo announced that it had raised US$5 million in seed funding. The company is using the funds to continue to grow its partnership programme with POS software vendors and catering companies, before it looks to raise more funding later in the year.
Apple boost for proximity payments
With the launch of the NFC-enabled iPhone 6 handset from Apple, and its Apple Pay mobile payments service, the payment industry is gearing up for a boost in the usage of mobile payments and proximity services.
Neil Garner, CEO and founder of proximity marketing specialists Proxama, said: “What the new iPhone’s NFC capabilities will bring is everything else the technology could provide beyond just payments. In particular, as we’ve seen through dozens of deployments of NFC payments and proximity marketing enablement for our customers, location-based marketing and real-time engagement opportunities are made far more powerful.
“The Apple Watch should provide an instantaneous experience that is essential inside the store whether for getting information on a product, checking in, paying, registering a loyalty card, or receiving offers. Supporting such use cases with a watch will gain better consumer adoption. It is much easier to react to a beacon-pushed message and information looking at your watch than taking your phone out of pocket or purse, unlocking it and clicking on the alert in the notification area.”
The post Making the most of merchant loyalty appeared first on Payments Cards & Mobile.
