Should plastic loyalty cards go digital?

Discussion
Mar 14, 2016
Tom Ryan

According to a survey from Vibes, 73 percent of smartphone users are either very (38 percent) or somewhat (35 percent) interested in saving loyalty cards to their smartphones.

For consumers, one incentive is to avoid carrying and organizing so many plastic loyalty cards. In the survey of 1,027 smartphone users, 44 percent had two to four loyalty cards; and 25 percent, five to nine.

The greater openness to digital loyalty, according to Vibes, is partly tied to the arrival of mobile wallet applications that are reducing user friction and simplifying loyalty experiences. Already storing program information like point balances and loyalty levels in real-time, mobile wallets such as Apple Wallet and Android Pay can also deliver exclusive content and personalized messaging straight to the smartphones of loyalty program members.

A third (32 percent) of respondents currently use a mobile wallet like Apple Wallet and Android Pay. Of those, 94 percent are likely to save personalized mobile wallet offers and coupons. E-mail is the preferred mechanism for delivery, followed by text message.

Overall, 66 percent of respondents say they would have a more positive opinion of a loyalty program if it allowed them to store and access their information on their smartphone in a mobile wallet app.

“This is where the mobile wallet can truly shine as it seamlessly integrates the non-payment and payment sides of mobile wallet to create one unified experience for consumer,” wrote Alex Campbell, co-founder of Vibes, in a column for Mobile Marketer.

The survey also found:

  • Seventy-seven percent said mobile offers, such as surprise points or rewards, exclusive content and special birthday messaging, have a positive or very positive impact on their brand loyalty.
  • Eighty-two percent reported digital coupons as a convenient option compared to printed coupons, and 59 percent said their opinion of a retailer would be more positive if they started to receive coupons and offers that could be saved on their smartphones.

 

Sources: Android Pay; Apple Wallet

DISCUSSION QUESTIONS: Are smartphone-accessible loyalty programs bound to replace ones linked to plastic cards? Will programs tied to mobile wallets be a game changer for loyalty?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"As the leading Luddite on RetailWire, I confess I am very much in favor of smartphone accessible loyalty programs. I find myself increasingly loyal to the retailers who have made the change. This change is already long overdue."
"There are some people who still carry paper boarding passes. I don’t understand why, but they do. There are people who like carrying coupons around. I don’t understand why, but they do. There are people who like their key chains filled with loyalty cards. Not my style...."
"Easy access to loyalty program information for ID at the POS will increase engagement for most consumers. If you make a consumer fumble at the POS to be identified or if the program slows down the checkout line, it becomes an impediment rather than incentive."

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24 Comments on "Should plastic loyalty cards go digital?"


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Ralph Jacobson
Guest
4 years 4 months ago

Although a huge population of consumers, primarily aging Baby Boomers, still feel very comfortable with paper coupons and plastic “frequent shopper” cards, the world is definitely going digital quickly. Yes, convenience of data residing on smartphones is attractive to most shoppers.

And although some programs have failed, I believe there is a market for more joint/partner merchant programs to drive true loyalty. Far too many shoppers have cards from competing retailers while a joint program could generate compelling reasons to shop one grocery store, one apparel store, etc.

Warren Thayer
Guest
4 years 4 months ago

As the leading Luddite on RetailWire, I confess I am very much in favor of smartphone accessible loyalty programs. I find myself increasingly loyal to the retailers who have made the change. People carry an enormous number of cards on both plastic and paper. They stretch your wallet so that things start to fall out, you have to fumble through them at the register, paper ones stick to plastic and hide each other, it’s a waste of time, postage (to send them out) and non-renewable resources (plastic). It’s like using an abacus instead of a scanner/register. Keep the plastic cards for Luddites who just won’t change (worse than me, even) but please go smartphone friendly. This change is already long overdue.

Zel Bianco
Guest
4 years 4 months ago

I can’t imagine smartphone loyalty programs totally replacing plastic cards within the next several years, but retailers can certainly reach a broader audience by offering both. Honestly, I think the insight that 77 percent of mobile users are interested in surprise rewards is more significant. I have seen myself how the occasional huge savings can pay off for both the shopper and the retailer. When I get a large savings I am far more likely to talk about it, sometimes incessantly, and encourage friends, family, and coworkers to sign up for the same program.

W. Frank Dell II
Guest
4 years 4 months ago

I replaced my plastic loyalty cards with an application on my smartphone a couple of years ago. This app is expanding its application by providing member-only promotions. Another retailer links coupons to my loyalty number. When I provide my loyalty number via my smartphone the coupons are processed with my purchases. One approach is to have a common application for all loyalty programs or to have individual applications for each retailer. I favor the former. As long as loyalty programs are just pricing programs, no change can be expected. The smartphone can speed up the checkout process.

Max Goldberg
Guest
4 years 4 months ago

Consumers want fully integrated loyalty and discount programs linked to their mobile devices. Why have so few retailers moved in that direction? Yes, not everyone has a smartphone, but that should not stop retailers from offering more smartphone-based programs.

The current programs linked to plastic cards rarely need the card to be present to participate, just the user’s phone number. The problem with plastic card programs is not carrying around the cards, it’s the inability to bring loyalty and coupons together in a customer-friendly manner.

When retailers bring everything together it will be a game changer for loyalty programs.

Mohamed Amer
Guest
Mohamed Amer
4 years 4 months ago

Absolute game changer!

Loyalty programs are about rewarding shoppers for their business. An underlying component is making shopping easy, convenient and even exciting.

Smartphone-accessible loyalty programs expand the real and potential means by which a retailer interacts with customers and turns loyalty programs into a tangible lever in driving incremental sales and enhancing the shopping experience.

Bob Amster
Guest
4 years 4 months ago

No question about it! We’re moving away from the physical wallet and into the smartphone with everything we used to keep in our wallet, including our driver’s licenses. I wrote a white paper on the subject.

However, that is not to say that this migration will be a “game changer.” The game is still the same, just easier to play because it is now more convenient. Most consumers, and certainly the younger generations, don’t leave home without their smartphones so, in essence, they would not be leaving their loyalty program membership cards at home either. This evolution is a natural one and just makes the whole process of being a member more convenient.

Ryan Mathews
Guest
4 years 4 months ago

Over time, perhaps. But if I’m reading this correctly almost two-thirds of queried shoppers are still hesitant about conversion and, if I were selling app-based loyalty programs, I’d want to know why.

One reason may be the device itself. Why should customers be forced to buy a smartphone in order to receive a potential discount that can be accessed today by a phone number in most cases?

[Note to Warren: you really don’t have to carry all those physical cards around.]

One could argue that soon all phones will be smartphones and that may be right, but sooner or later people are going to start taking a good, hard look at the total cost of those phones and — if income inequality continues to increases — some segment of the current smartphone market may not be able to afford all the bells and whistles.

As to mobile wallets they make perfect sense, again assuming a world in which the majority of consumers are armed with smartphones.

Graeme McVie
Guest
Graeme McVie
4 years 4 months ago
Loyalty programs have two main objectives: to provide a differentiated, standalone value proposition and to identify customer transactions so companies can better understand and satisfy their needs. Mobile has the potential to enhance both aspects: it will make the customer experience more seamless to smartphone owners (removing the friction of having to carry the card), enable the delivery of a more enhanced and personalized value proposition, increase the number of people in the program and increase the number of transactions that have an actual customer’s loyalty number attached. The two areas where companies need to be careful is that they don’t make the loyalty program experience so seamless that the customer does not know or realize that they are benefiting from participation in the program and that they don’t expect the mobile nature of the loyalty card to address any shortcomings in the design and execution of the core loyalty program. Retailers will still need to ensure that they have the right overall loyalty strategy, that they analyze the loyalty data to understand and satisfy… Read more »
Camille P. Schuster, PhD.
Guest
4 years 4 months ago

The replacement question is not the right question. The question should be, should retailers add a smartphone-accessible form of their loyalty program? Not all customers have smartphones. Not all customers with smartphones use it to pay with in retail establishments. Even though this is a small and dwindling number, retailers may have some loyal customers in the no-smartphone category or in the group not using their smartphone for payment. As a result, retailers will need to continue to offer current programs while adding the new technology. Should they add the new technology? Of course. Those who pay with their smartphones would find it much more convenient to have a digital loyalty program than to have to carry plastic cards.

Paula Rosenblum
Guest
4 years 4 months ago

There are some people who still carry paper boarding passes. I don’t understand why, but they do. There are people who like carrying coupons around. I don’t understand why, but they do. There are people who like their key chains filled with loyalty cards. Not my style, but some people like them.

I think it’s a generational thing, and I expect to see changes as my generation ages out.

Ironically, we always used to say that mobile payments were a solution looking for a problem. EMV, which is slow and somewhat inconvenient, seems to be just the problem they were looking for. As people become more used to using their smartphones for payments I expect to see them more interested in PULL offers. I still don’t think “PUSH” offers are interesting.

Richard J. George, Ph.D.
Guest
4 years 4 months ago

Absolutely. First, I do not call such cards loyalty cards. Instead I refer to them as continuity of payment, frequent buyer or frequent shopper cards. Many multiple card carriers have cards from competing retailers which hardly suggests real loyalty to a single program. Second, unless these multiple card carriers have wallets like Seinfeld’s George Costanza, mobile access, even in a non-payment option like Card Star makes sense. Third, if whatever you call these programs can be linked to mobile wallets, the opportunities for additional use by customers and additional dialog between customers and programs is significant.

Gordon Arnold
Guest
4 years 4 months ago

If I were selling apps this would be my mantra of choice. The problem with loyalty programs isn’t likely to be resolved by digital inclusion. The problem is that the value they bring to the market is not recognized by most of the consumers out there. Retailers might wish to look at the success credit cards are having with rewards programs and divert returns from cash sales back to the customer for in-store credit or discounts. The key would be cash sales only.

Ken Morris
Guest
Ken Morris
4 years 4 months ago

Digital loyalty programs are definitely the way of the future and the transition is likely to be fast. The key will be if a retail-specific app or a wallet-based app will be preferred by customers, and that probably depends a lot on the brand/category and the individual customer. With growing app fatigue, many consumers don’t want to add another app to their phone unless it is for something they will use very frequently. Wallet-based mobile loyalty programs give consumers another choice in how they interact with a retailer’s loyalty program and don’t require an additional app on their phone. Retailer-specific loyalty mobile apps will still appeal to very frequent shoppers of brands, as they enable expanded features like gamification, geo-location and use of consumers’ photo capabilities on their phones.

So the bottom line is that savvy retailers will continue to offer multiple interaction models for their loyalty program — physical cards, apps and wallet-based mobile programs — so consumers can choose the method that works best for them.

Ross Ely
Guest
4 years 4 months ago

In many existing loyalty programs plastic cards are no longer required as shoppers can self-identify at checkout by entering an ID code or scanning their smartphone. Most loyalty programs also already enable shoppers to view their points balances and loyalty levels on their smartphones through the retailer’s website or app.

The next big advancement in loyalty programs will be the tie-in to mobile payments, which will link together the loyalty platform with the payments process.

Bill Hanifin
Guest
4 years 4 months ago

Having easy access to loyalty program information for identification at the POS will increase engagement for most consumers. If you make a consumer fumble at the POS to be identified or if any aspect of the program slows down the checkout line, the program becomes an impediment rather than incentive.

There are multiple wallet options available for consumers to store their loyalty information. Unfortunately each one comes with an agenda that serves a secondary need of the provider. Offering the consumer a simple way to store loyalty information without any strings attached could be very attractive to consumers.

The alternative to wallets is to offer secondary ID attributes. CVS, Office Depot and Best Buy all allow members to present a phone number to affiliate a transaction with their loyalty membership. That is the easiest answer of all.

Vahe Katros
Guest
Vahe Katros
4 years 4 months ago

Loyalty management for digital natives is different on many levels. It’s always an audience thing in retail, as in who, how and why.

Carlos Arambula
Guest
4 years 4 months ago

Smartphone-accessible programs allow for greater texture and consumer engagement than a card quickly replaced by a phone number that is rather static in nature and unclear of the benefits associated with it beyond a discount.

Any reward program associated with an app — not just a mobile wallet, will draw more consumers, repeat visits and loyalty. While the program will lose some of the more mature, non-digital consumers, the younger consumers will be of greater value to retailers.

Lee Kent
Guest
4 years 4 months ago

I would certainly hope so! The problem for me is, I loaded all of my loyalty cards into an app and then never found a chance to use it. None of my loyalty providers interacted with the app in any way and I would forget to pull out my phone when I needed to use the card.

When someone can figure this out, then things will change.

For my 2 cents.

William Hogben
Guest
4 years 4 months ago

“Smartphone-accessible” and “linked to plastic cards” aren’t mutually exclusive. Retailers who want to maximize engagement for their loyalty program will want them on smartphone — but in the name of maximizing engagement, they’ll also keep the plastic cards going for those who prefer them.

Making loyalty programs smartphone-accessible does very little besides lowering the barriers to use. In the end, it’s fundamentally the same programs, and doesn’t take advantage of the platform. I suspect that mobile will fundamentally change the loyalty landscape, but it won’t be by repeating the same programs in a digital format — rather it will be by taking advantage of mobile to build new programs that could not have been done with plastic — programs that empower consumers like mobile checkout.

Larry Negrich
Guest
4 years 4 months ago

To the first question: Yes, plastic is (almost) dead. Loyalty must be digital and must have mechanisms to increase the consumer engagement without being overly intrusive. However, digital wallets have some headwinds that are preventing adoption, and I don’t expect that to subside in the short-term.

Digital programs and incentives tied to a phone number or other numeric identifier seem to be best received by consumers at this point.

Li McClelland
Guest
Li McClelland
4 years 4 months ago
I agree with Camille that the point for retailers should be about giving buyers the opportunity for smartphone-accessible loyalty, coupon, and payment options where feasible, while not expecting or even subtly forcing outright replacement of the tried and true old ways. This weekend, we attended the spring (high end) antiques show in a suburban location of our metro area. Collectors/buyers and dealers are both local and from out-of-state. Many of us were using our smartphones to research pieces and to check out recent auction prices of similar items, so this was not a crowd of luddites. Still, due to both logistics and fees, many of the dealers choose not to even accept credit cards. They prefer personal checks even for items that cost in the thousands of dollars. Buyers are happy to accommodate if they want the item and want the best price. I would guess that only between 1/3 to 1/2 of the dealers took credit card payments. Now, clearly this is a fairly unique and specialized market. But still it reinforced to me… Read more »
James Tenser
Guest
4 years 4 months ago

Digital frequent shopper cards within digital wallets using contact-less payment is hardly a new concept.

It may be helpful to consider the frequent shopper offer as an alternative form of currency that may be instantly applied to the purchase in a consolidated transaction.

Yes, this requires a smartphone digital wallet app, which is a hurdle for some shoppers. The larger challenge, however, is for retailers to install an offer-clearing application on its POS card terminals that is also EMV compliant.

Digital frequent shopper programs are an unstoppable trend, but I also think Graeme’s caution regarding a “too seamless” experience is significant. If redemption becomes nearly invisible to the user, the value story may tend to disappear. That’s a challenge for CX designers.

Andrew Gregovic
Guest
Andrew Gregovic
4 years 4 months ago

Of course smartphones with QR codes are bound to replace plastic — loyalty program operators have been doing this for the past 8 years.

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Braintrust
"As the leading Luddite on RetailWire, I confess I am very much in favor of smartphone accessible loyalty programs. I find myself increasingly loyal to the retailers who have made the change. This change is already long overdue."
"There are some people who still carry paper boarding passes. I don’t understand why, but they do. There are people who like carrying coupons around. I don’t understand why, but they do. There are people who like their key chains filled with loyalty cards. Not my style...."
"Easy access to loyalty program information for ID at the POS will increase engagement for most consumers. If you make a consumer fumble at the POS to be identified or if the program slows down the checkout line, it becomes an impediment rather than incentive."

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