Gift And Loyalty: Beyond The Card

Industry experts unanimously agree the mobile phone is becoming the ubiquitous form factor used to enhance gift and loyalty programs.

Advancements in technology, a challenging economy, and savvy consumers are a few of the driving forces behind implementing new methods for gift and loyalty programs. Historically, loyalty marketing and gift card programs have been reserved for large retailers with big budgets and large staffs. Such retailers have developed sophisticated programs that generate huge profits and unshakable customer loyalty. However, the tide has now shifted to include SMB retailers, enabling them to compete head-to-head with the big box retailers in the gift and loyalty space.

Retailers procure an immense amount of customer data and therefore should be concerned with PCI (payment card industry) requirements for their gift and loyalty programs. While gift and loyalty programs are not the same thing (there is not yet enough loyalty crossover into gift programs), one thing is certain — mobile technology will soon affect both.

Identify Consumers With Cards, Engage Them With Phones
The words “gift” and “loyalty” have become mature terminology in the retail space. Consumers respond positively to the value loyalty programs offer, because retailers have pinpointed the consumers’ needs (e.g. recognition, a high perceived value, easy-to-understand program with rules, rewards, and options from which to choose). Further, gift cards were the second highest spending category in retail in 2008. These programs have penetrated the industry and our wallets, as consumers carry countless plastic cards. Industry luminaries unanimously agree that the mobile phone is the obvious form factor to store gift and loyalty information. “More than one study suggests the average American consumer knows where their phone is as opposed to where their wallet is,” says Stuart Kiefer, division manager of loyalty solutions at First Data, a provider of merchant processing services. “The mobile phone is a logical form factor to foster these programs. Retailers and vendors alike must be open to advancements in loyalty. They cannot be married to the idea of the plastic card as the loyalty identifier.” Indeed, consumers will store multiple balances (e.g. gift card coupon, loyalty, and promotional balances) on one card. “Retailers and consumers alike recognize that consumers feel guilty when they don’t use their cards,” says Karen Budahazy, executive VP at Givex, a provider of gift, loyalty, and other closed-loop card technologies. “Consumers feel like they’ve missed an opportunity for value when they forget to use their card. We’re going to see consolidation between better technology and better service to minimize the number of cards people have in their wallets. Enhancements in POS technology and NFC [near field communication] will enable the mobile phone to talk to the POS system, providing a seamless and fully integrated stored value or loyalty solution to the phone.” NFC is a short-range wireless connectivity standard that uses magnetic field induction to enable communication between devices when they’re touched together or brought within a few centimeters of each other.

“Certainly the card is here and present, but the mobile phone is becoming the ubiquitous form factor,” concurs Mark Friedman, chief marketing and business development officer at SoundBite Communications, a provider of multichannel communications solutions. “In the near future, the mobile phone will become the consumer’s wallet by containing credit, debit, gift, and loyalty card information.” The question is: when? It is difficult to determine how the economy might have affected innovation in gift and loyalty, and retailers are tightening their belts. Therefore, the adoption of new gift and loyalty technology might be slow if retailers are required to garner or adjust equipment. “Mobile phones will be a payment device in less than five years,” says Shawn Barrieau, CEO and cofounder of DimpleDough, a card management software platform for prepaid, debit, gift, and credit cards. “A good technology provider and the phone’s compatibility with the retailer’s system are the primary components that will enable the mobile phone to become a viable payment device. The mobile device will be used for loyalty purposes, for receipts, promotional personalization, and more.”

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