Retail Loyalty Programs and Their Importance for New Payment Innovations

Oct 8, 2013

Retail Loyalty Programs and their Importance for New Payment InnovationsIf ever there was a set of new technologies giving mixed signals, mobile payments would be it.

A Yankee Group study found that 68% of consumers are interested in adopting mobile payments and the service and technology providers are listening.  However, almost daily, contradictory data are published regarding consumer and merchant mobile payment interest as well as which transaction methods are the best solutions: mobile wallet, RFID/NFC, swipe, contactless, etc. In contrast, Consult Hyperion recently determined 64% of Americans would never use a mobile wallet.  Why the contrasting findings?

That’s why I asked Joe Easley, Kobie Marketing’s Senior Director of Business Development & Product Strategy, to shed some light on this statistical ‘face-off’ and discuss how retailers are navigating the inevitable loyalty strategy challenges posed by ambiguous research.

How are retailers using new mobile payments, NFC, mobile wallets, etc. to augment their loyalty programs? And are retail loyalty programs with mobile payments being overlooked by consumers?

I don’t think loyalty programs are being overlooked. Program designers are waiting to see what resonates most in the consuming public and the technology community. Mobile wallets are reaching a point where they are gaining attention among consumers, but loyalty programs tend to move a little slower. They take a “wait and see” approach to determine what kinds of rewards and interaction options draw and retain consumers. Loyalty programs are often most concerned with matching the brand’s overall culture to its loyalty brand and technology. In this context, mobile wallets are a lower priority, but loyalty programs will inevitably embrace mobile payments.

Shifting the focus to Walgreens and its loyalty program Balance Rewards, is the retailer’s omnichannel loyalty approach on the right track?

As a Balance Rewards member, I’m not as inundated with conflicting or poorly aligned messaging and un-segmented offers as I am by other retail programs.  For example, when I receive emails, they don’t provide a litany of my purchase history paired with semi-contextual offers.  They seem to try their best to offer salient and consistent messages at all points (channels) of interaction that, in this case, compliment the email’s timing, tone and value message.  My perception is that they “meet me” with information and a consistent loyalty brand promise “where” I want engage the program. So, yes, Walgreens does have an effective omnichannel loyalty approach with channel consistency. Whether I want to engage with the brand at the point-of-sale, review my balance online or use my Walgreens app, I can do it all seamlessly. Walgreens has the pace, depth and channel consistency to get the loyalty experience about right.

To what extent was Google’s removal of loyalty cards from its mobile wallet an industry-wide setback?

I don’t know if it’s an industry-wide setback versus a setback for Google. Google’s isn’t the only mobile payment app experimenting with loyalty – there are other loyalty centric mobile applications, such as Apple’s Passbook. The reality is,Google has its eyes on a bigger prize: mobile wallets. It likely views them as a place where rewards currency can be deposited and spent just as easily as credit or cash. I think that, for Google, the notion of having a loyalty card in a mobile wallet is a bit passé in terms of strategy. Google Wallet’s loyalty card removal is a response to Apple’s Passbook penetration.

Of the multiple payment methods, do you think that mobile wallets have the best chance to be included in a loyalty framework? Why or why not?

Including a loyalty framework is the next logical step for mobile wallets, but we’re not there yet. A mobile wallet is a place to store the credit or currency value that consumers spend daily, but it also can serve as a medium to store loyalty reward currency from whatever the program sponsors. If you have a general mobile wallet, it converts your cash, your Home Depot points or your AMC Theatres stub points into currency useable through that app. There’s currency conversion at work. How can mobile wallets be used to store those values seamlessly? Short-term, the easiest approach may be single-merchant value cards like those we enable for AMC, as opposed to complex wallet apps that include loyalty. Mobile wallets have the potential to be great in terms of payment convenience. But they don’t necessarily enrich the loyalty experience.

Final Thoughts

Mobile wallets with loyalty components are starting to come into their own and I encourage their continued development. But as evidenced by the success of single-merchant loyalty wallets like Starbucks’, banking on their immediate payoff might serve as a “stepping stone” technology until next-generation wallet apps with loyalty features emerge.

Which payment method do you think will be most dominant, Mobile wallets or single merchant mobile payments?Why? Let us know in the comments below or email us at