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Mar 01, 2012

Customer Loyalty and Prepaid Go Mobile

Digital Gift Cards Change Everything

Rivka Gewirtz Little

Welcome to the new world order of customer loyalty and incentive programs where virtual prepaid gift cards meet mobile wallet applications and geolocation technology is thrown in for good measure.
There’s nothing new about prepaid cards playing a central role in customer loyalty programs. For many years, consumers could trade in their retail reward points for gift cards or prepaid Visa cards.
But now that so many consumers are walking around with smartphones and mobile web access in their pockets, the possibilities for new customer loyalty offerings is endless. Over time, customers will be managing their rewards programs online, trading in these credits for prepaid cards that will be sent by email or SMS, and eventually retailers will do direct marketing via SMS.

The Rise of E-Gift Cards Changes Everything
Once upon a time when consumers wanted to exchange customer loyalty points for a gift card, they filled in an application, submitted it at a retail location and then waited for the plastic card to come in the mail. On the merchant side, retailers paid lots of money for plastic inventory and postal services. On the customer side, users waited weeks for their cards to arrive.
But virtual cards (or E-Cards) can be acquired online and then sent via email or SMS. In some cases, consumers retrieve a code that can be punched in by a clerk at a Point of Sale (POS) terminal. In other cases, they get a barcode that appears on their mobile device screens to be scanned by clerks. Eventually, the goal is to put stored value on chips in smartphones that can then be tapped against POS terminals.

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In any of these situations, E-cards are instant, so they have the potential to change customer loyalty programs by making them more affordable for retailers and more enticing to consumers that want instant service.
“When you go digital, you lower the cost of the program by not having to pick, pack and ship,” said Tom Niedbalski, senior vice president of business development, at gift card and customer loyalty program provider Transaction Wireless. “But also, you’re able to impact [consumer] behavior in real time vs. a reward coming two weeks later when they’ve forgotten about it already.”
What’s more, E-cards make it easier for retailers to initiate contact with customers in loyalty programs. Gone are the days of direct snail mail campaigns where envelopes get buried in junk mail piles. Now retailers initiate email relationships with their customers at the point of purchase or on websites, and customers actively opt-in to incentive programs. Once that happens, they’re much more likely to open offers via email.
Take for example the Christmas loyalty program that retailer Tory Burch launched using a platform from E-card platform provider CashStar. The retailer emailed a $50 E-gift card to 25,000 of its VIP customers. The idea was to say thank you – and of course to get the receivers shopping.
“We sent an email with a beautiful, customized E-gift card. We designed it to make the user feel special,” said David Stone, CashStar CEO, adding that customers could immediately open the email, activate and begin shopping.

E-gifting and Rewards Points: Banking Programs Lead the Way
The trick to E-gifting in customer loyalty is to establish an online relationship with customers so that they know to seek out virtual cards in the first place. Banks are in a prime position to do just that since so many bank customers already manage checking and credit card accounts online, said David Nelsen, CEO of E-gift card provider Giftango. In banking, customers could start by tracking and managing their reward points online and then move to exchanging them for digital cards through the same portal.
“If you were exchanging 10,000 points for a $100 gift card, you would be asked [on the website], ‘Do you want this via plastic or via SMS or email?’” explained Nelsen. Once a consumer chooses a digital card, “it confirms your email address or SMS and it would immediately issue that card.”

Throwing Location into the Mix
CashStar is taking the banking customer loyalty with virtual cards to a new level by involving mobile apps and even geolocation technology. The company has been trialling its MobileGiftRewards program, which enables consumers to use an iPhone app to manage their reward points and then also to convert their reward points into E-gift cards. But the program also uses geolocation technology to send consumers alerts on their cell phones when they pass by participating retailers where they can use digital gift cards.
Using the CashStar platform, JP Morgan Chase ran a customer loyalty trial called Chase GiftShelf that let users exchange Chase Ultimate Rewards points earned through a Chase credit card to receive E-gift cards. Cardholders could access the application using their online banking credentials and then purchase E-gifts for themselves or delivery to a friend through email or text message.
CashStar’s Stone has high hopes and he says trials went well on all fronts, but he cautions that these programs are nascent and will take time to become mainstream. Specifically, more banks and retailers will need to sign on for there to be major uptake.
“First we have to get more banks on board, and they move slowly,” said Stone. Beyond that, many retailers don’t have the appropriate scanners to take the barcodes from mobile devices. “Starbucks has scanners on all their terminals to read barcodes on phones (as does Target), but everybody else would have to key in the code, so that’s still a hassle for retailers.”
As this technology ecosystem takes shape, other banks are running trials that for now stay away from relying on E-card-friendly POS terminals. Citibank, for example, partnered with Best Buy for iPhone and Android mobile apps that let users track their reward points online and then use them to shop for items at Best Buy. But purchases are made online and then users schedule an in-store pickup to work around the POS problem.
Other programs are introducing the use of mobile technology in customer loyalty programs, but not yet for actual purchases.
Hallmark, for example, uses Transaction Wireless’ platform to alert customers that they have earned a reward and should go to the website to redeem their points. Then the platform is used on the back end to inform customers that the gift is on the way. The idea here is to “create a roadmap” into the mobile world for customers, said Niedbalski. “Then we’ll see that evolve beyond notification into gift delivery,” he said.

Location, Location, Location: But Can it be a Problem?
Using SMS, email and location-based technology as a part of customer loyalty is certainly enticing, but there are some concerns, including the fact that many consumers don’t want to be tracked or receive intrusive texts all day long. To address that, Transaction Wireless works with retailers to understand best practices for mobile marketing before they dive in.
“There are rules around texting individuals. They have to be opted in [to the program]. Transaction Wireless takes that seriously. You can’t just start sending out messaging to mobile phones,” said Niedbalski. “If you over-communicate, they can easily control it by having you blocked and locked down, which you don’t want to do.”
So what’s the answer?
“We will teach them what they need to know from a mobile marketing standpoint and help them start gathering data by changing their current opts-in [rules] on their websites, or [changing] the terms and conditions they have in place,” said Niedbalski. “A lot of CRM tools were built prior to mobile … so we look at what they have in place today to see that they’re catering to mobile. We also host websites and storefronts for these retailers and within that we have mobile and social capabilities that abide by the rules.”

Using Location-Technology that is Consumer Driven
While all of this is taking shape, other customer loyalty programs use location-technology that is initiated by customers. When Starbucks launched its 40th anniversary customer loyalty and retention program last year, it invited consumers to check into any Starbucks location using Foursquare and then unlock a so-called Tribute Badge that would qualify them to win a $40 E-gift card. The promotion garnered nearly seven million check-ins during one week. That meant Starbucks had a whole new pool of consumers to remain in touch with online for future mobile marketing programs, and the program created a whole new crop of consumers who became experienced in using location technologies and E-gift cards.
Shopkick, a new customer loyalty third party provider, has based its entire business model on this concept. Consumers download a Shopkick app on their iPhone or Android, and then simply open the application when they walk into a participating retail location. Every time they log in from a retail spot, they earn points. Then they can earn more points for scanning specific products in the stores with the mobile phones. Finally, users trade in points for a host of prepaid services, ranging from iTunes credits to virtual gift cards.

E-cards and Mobile Apps Take Customer Loyalty Global
Customer loyalty has generally been a North American and European phenomenon, but virtual gifting and mobile wallet applications stand to change all of that.
Specifically, the swift uptake of mobile broadband and smartphones in developing countries will make it so that customer loyalty programs can take root.
“They’re looking at what happened in the US market and understanding that there are companies like Giftango that understand how to leverage that technology in any location” said Nelsen. “This is especially the case for countries where gift cards were just becoming popular.”
While the uptake of this new ecosystem of technology will take some time, card program providers would be smart to start working on including virtual cards and mobile customer loyalty apps now. If not, others will take their space in the gifting and customer loyalty market. •

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