Cards, Coupons, Cell Phones, Oh My.

By PYMNTS | May 6, 2010

There was a story earlier this week about the bigger role that “general purpose” payment cards are now playing in the store loyalty card space. The elevator story here is that there are a number of use cases now where store loyalty cards have become electronically attached to a credit card, so that at check out, coupons and other offers are triggered by the card swipe and automatically applied at checkout. The win for the retailer is that the card finally becomes a more direct channel to building customer loyalty – and a more targeted offer. For the customer, the win is the surprise and delight at checkout that they get deals and offers that they might not have ever known about. Plus, this approach has the extra advantage of making wallets thinner by eliminating those extra store loyalty cards that people always seem to forget to bring to the store anyway.

This is all made possible because of applications that live in the cloud and that make the credit-card-turned-retailer loyalty cards a less daunting task than it was years before when issuing dumb plastic cards were the only way to establish a loyalty program at the physical point of sale. Platforms like IPC Commerce and PayPal X make it easier for developers to push applications to the POS software that powers POS terminals than it ever was, and there are now more software developers who see the opportunity and willing to invest time and money to play around in their labs and dream up innovations like this. A lot of this recent innovation has been focused on the mash up of couponing and mobile.

As efficient as the development environment has become, there are still two problems: consumer enrollment and merchant acceptance.

While there are a handful of interesting new pilots being tried around bar codes at the point of sale, by and large, merchants are resistant to introducing technology that introduces friction in lane, a training requirement for their (always transient) staff and the need to invest in new technology. As cool and as promising as some of these things can be, few merchants want to take the risk of creating a bad consumer experience in store, or buying new POS equipment in the absence of a solid business case and the potential to delight the customer.

When it comes to consumer enrollment, it’s all about incentives. Asking people to comply with a new “process” (go on line, enter your card number, now your loyalty card number, oh, gee what loyalty card number, do I have one?, where do I find that?, hmm, look up by phone number used to open the account, gee, what was that number? … oh forget it.) has proven problematic, even when it comes to the stuff that is really important to do. And, this is where a few clever mobile phone platforms have innovated some very cool solutions to this consumer conundrum, creating both the systems and the incentives to drive loyalty, traffic and sales.

ShopText (disclaimer, an MPD portfolio company) is one such company. Their mobile platform enables people to enroll their payment cards in merchants’ rewards programs, message to them that there is an offer for them, then so that when that offer shows up on their phone, users can get that offer by just swiping the card that they have already been tagged to that program. But, they’ve taken it one step further. Since their roots are in consumer package goods marketing and promotion, they’ve designed a series of programs and campaigns that drive cardholder enrollment and create the incentives needed for cardholders to take that big first step and commit their data, including programs directed to card issuers who want to pre-enroll their cardholders in order to drive top of wallet positioning. Their program has generated some impressive numbers, with promotion response rates 17x online display ad click through and 30% more than 1-800 response rates. Furthermore, completion rates (successfully capturing address and card data) far exceed online form completion and range from 60-80%. Yep, you read that right … 60 – 80%. Offer redemption rates in store have ranged from 10-48%. And, they’re not just doing this with credit cards, they’re doing some cool things to turn prepaid cards into loyalty platforms, creating yet a whole new category of merchant/cardholder relationship.

ShopText is a great example of how the mobile phone actually becomes an important facilitator to a traditional POS transaction. What’s even more interesting is that it enables all of it via an SMS platform that is available today on 100% of all handsets. As I mentioned in a prior post, innovation doesn’t always have to be about the shiny new toy to be disruptive. In this case, the ability to leverage the common denominator, text, has turned the mobile phone into an enabler of loyalty and top of wallet without users changing handsets, merchants changing POS equipment and card companies investing in the adoption of new mobile platforms. The ShopText platform also manages the opt-in process for consumers to receive special offers from the related card, retailer or brand…a new direct-to-consumer channel that pulls its own weight, and then some.

And, what could be more innovative than that.

Karen Webster is the President of Market Platform Dynamics (MPD), a management consulting firm that helps companies profit from industry disruption. She serves as an advisor and member of the board for a number of companies operating in the payment, technology and digital media industries. More info here.