Death of the Loyalty Card? Not on Our Watch – Even as Mobile Makes its Mark

Sep 11, 2012

Assuming the International Space Station isn’t your home and Mars a world you’ve only “visited” via rover, chances are you’ve witnessed a rapid proliferation in the growth and expansion of loyalty programs. Almost every in-person transaction today, it seems, is completed with that question, “are you a member of our [insert name of company] rewards program?”

And it’s equally likely that many of those programs were delivered through a traditional plastic loyalty card – the kind that fits conveniently inside a wallet or purse, but is nearly as adept at getting buried in those “manmade” black holes.

The reality is this: nearly half of all loyalty programs, according to the National Center for Data Mining, are not used, lost, forgotten and ignored. For a variety of reasons, including loyalty overload, (too many competing and painfully similar programs) confusing rules, frustrating regulations or laborious points redemptions, many loyalty members couldn’t recall their myriad loyalty programs if their life depended on it.

In fact some in the loyalty space are calling it “the death of a loyalty card.”

But let’s not jump on loyalty’s card-based funeral procession just yet. To be sure, smartphone adoption, which in the US is hovering at 50% (and above that threshold in a growing number of countries) is having a profound effect on loyalty programs, both in how members monitor and track their points accumulation, the manner in which they access their rewards and the ability for marketers to gather that data and act on it in real time. Yet none of those facts preclude a loyalty card’s worth – not even close.

For one thing, smartphone’s always accessible reach means that logging in to check rewards and points status is easier than ever. But the next iteration of that ease of access comes down to loyalty programs themselves – a fact we began addressing in an upcoming article, Loyalty Unleashed: How Mobile Means First Order Success for Marketers. In other words, loyalty cards can easily become loyalty apps. And some loyalty apps are beginning to group multiple rewards programs under a single app umbrella and include examples like: Award Wallet, GoMiles and MileageManager. Add to the mobile mix service offerings like Google Wallet – NFC-enabled (near field communications) technology – either built into a smartphone or accessory add-on – that can store multiple credit and loyalty cards in one digital location where proximity wireless transactions take the place of the traditional “swipe,” and you begin to appreciate the extent to which the plastic, physical loyalty card is fast becoming a component of loyalty program delivery and no longer its spotlight star.

Of course, such “buffet style” loyalty programs have their risks too – both for themselves and for their plastic card counterparts. For instance, in the Google Wallet example above, the technology continues to face security risks from hackers while its adoption rate has remained sluggish due to the lack of NFC-enabled devices. Working against physical cards, if reward program differentiation is a challenge now, imagine how hard it’s going to be when all it takes is a few taps of an index finger to remove an unwanted app. At least with physical wallets and pocketbooks, there’s a cyclic nature to the periodic “clean out,” where different cards, like errant baseball players, have a chance of being shuffled around and reconsidered.

But considering smartphones are already the technology and convenience driver for millions, it would be foolish to rail against what will likely prove their eventual dominance in the loyalty space, just as they’re already impacting nearly all aspects of personal and professional life.

So are we looking at the beginning of the end of card-based loyalty? Absolutely not. Rather than one loyalty channel trumping the other, it’s likely, as with the continued merging of digital and traditional technologies, cards and phones will become even better loyalty partners, not bitter enemies.

In other words, smartphones, their attendant apps, Google Wallet and all the other mobile wallet platforms that are likely to follow in the coming years are learning to play together nicely. And just like the long-predicted but unfulfilled paperless office, somehow we think the plastic loyalty card hasn’t run out of history just yet.