YORK, Pa. (AdAge.com) -- The recession prompted many people to cut up their credit cards, but there's still a lot of plastic in most consumers' wallets. Loyalty and club cards can potentially beef up the average wallet -- or key ring -- by more than a dozen pieces of plastic. The average U.S. household belongs to more than 14 loyalty programs, according to loyalty market researcher Colloquy.
But what's a penny-pinching clutter-buster to do? Go digital. CardStar, an iPhone and soon-to-be BlackBerry and Android app, allows loyalty-card members to input and store reward and club-card information on mobile phones, which can then be accessed at the point of sale or service. The app launched in 2009 but recently topped 1 million downloads, and it has been used more than 5 million times. It can be used for grocery, retail, airline and hotel cards, but also gym memberships and library cards, and it currently has more than 400 merchants signed up. The app is now free, but cost 99 cents before last May.
"It's a single tool that captures all your loyalty cards," said Greg Sterling, principal of Sterling Market Intelligence, adding that part of the reason why there aren't more competitors has been the difficulty of getting the scanning technology to work on phones until now. In fact, some of the biggest detractors of CardStar are online reviewers who've complained about problems getting the app to work, either in general or at particular retail locations.
CardStar is aware of the problems of course, and said things like dust, fingerprints and screen protectors as well as in-store lighting and flatbed scanning can cause issues. The technology it calls "SyncScan," however, should work with most merchants using handheld laser-scanning guns. CardScan said it deals with consumer issues on a case-by-case basis and usually offers feedback such as helpful tips and tricks to help app users.
And there are, of course, plenty of fans of the app -- they have pointed out that, even if the bar code doesn't scan, the card number is still on the screen and can be input manually, still saving consumers the hassle of carrying many cards. The company also recently launched a plastic CardStar Card that can hold six loyalty cards' information in one for non-smartphone users.
The information the app collects is a huge data boon for CardStar, as it is similar to credit card issuers' treasure trove of buying and purchase habits of their consumers who use credit and debit cards. Granted, the pool of loyalty cards is smaller than credit or debit cards and certainly not every loyalty program member uses CardStar, but even the 1.2 million cards in the app's network can reveal a lot of consumer data.
CardStar CEO Andy Miller said the company walked away from a buyout deal last year on the strength of two things: its ability to capture unique data, and to do mobile marketing. The good thing about using loyalty memberships for both data and marketing is that people have already opted-in. Colloquy's data shows that while consumers belong to 14 programs, they're only active in 6. Use of the CardStar app shows exactly which ones those are.
"With our loyalty focus, CardStar is creating a personal card catalog for each consumer," he said. "By virtue of that [knowledge of preferred brands], we have one level of targeting ability. But the second layer is that with this card catalog, I can start to do predictive modeling."
He offered as an example a user who lives in New York City and has Best Buy, CVS, New York Sports Club and Sephora cards. Via modeling, Mr. Miller can find out that the user is probably female, aged 25-40, cares about herself and is likely an early adopter. Via the iPhone GPS technology, he can further predict that if purchases and loyalty swipes are concentrated on the Upper East Side and downtown, those are likely the places where she lives and works.
Another plan for the data is to offer specific retailers the ability to do things like targeted couponing and one-to-one direct marketing based on their loyalty-card customers' purchases. CardStar can also do more general marketing and advertising campaigns, and recently signed a deal with Chase to promote the bank's Chase Freedom card with ads in the CardStar app, a tailored content page and a click-to-call option.
Another idea includes aggregating the cross-store data or segment-specific data and analyzing it. For instance, Mr. Miller said to imagine that while at a strip mall, a customer goes to a Kroger grocery store and then goes to Petco to buy dog food. Kroger doesn't know that a customer buys dog food at all, but if he did -- using the information from CardStar -- the grocer could market dog-food specials to that customer.
Later this spring, CardStar plans to launch the CardStar Mobile Loyalty Index, which it previewed at the CTIA Wireless show last week, to illustrate levels of engagement for merchants as well as across the 20 vertical categories in its system. It's waiting for another quarter of data so it has three to compare, but already the loyalty index's initial findings have shown that, for instance, LA Fitness card holders are more engaged than any others in the system; 22% more so than CVS customers, Mr. Miller said. It's also found that grocery-store card users rank high in volume of use, but low in engagement. He said that the company will "probably look for a partner" for some of the data management and analysis.