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Forget the E-Wallet -- It's Apple's Passbook That Will Transform Retail

At Last, a Solution to the Problem of How to Get Coupons to Work

By Published on . 7

Has Apple outsmarted its critics yet again? When it released the iPhone 5, some carped that the device's lack of near-field communication was a crucial flaw, making it impossible to use the phone for mobile payments -- an area where Google has been leading the way. But now that 's beside the point.

What matters more to merchants and consumers: providing one more way to pay for things, or creating an entirely new way to deliver coupons, loyalty points and other premiums right to peoples' pockets -- including offers triggered by their physical location near a store?

Welcome to Passbook—perhaps the most under-rated feature of iOS 6. Its premise is simple: Passbook is an app for receiving, managing and using offers, tickets and loyalty points. People can receive these items -- called "passes" -- via e-mail, web or SMS, or have them delivered directly into Passbook via a brand-specific, Passbook-capable app offered in the App Store. To use the pass, you simply click on it and a barcode appears; the merchant scans it to apply the discount, redeem loyalty points or accept the ticket, as the case may be.

Brands and consumers have been quick to embrace Passbook. Passbook-enabled apps for Fandango, Target and Walgreens rank among the top free apps in the App Store; Ticketmaster, American Airlines, United and Live Nation follow close behind.

On the face of it, Passbook is a nice convenience: consumers have a simple way to manage and use offers they find useful. Every ticket, coupon and loyalty point is right in their pocket when they need it. On closer consideration, though, it's much more than that . Passbook is poised to be a major factor in retail and throughout the customer-loyalty space.

While e-wallets represent more of a neat idea than a desperately needed solution, Passbook addresses a real problem that has existed since the dawn of modern retailing: coupons just don't work very well. No matter how they're distributed -- mail, circulars, e-mail -- they end up scattered all over the place, and rarely where they need to be: in the customer's hand at the checkout stand. It's a highly inefficient system for merchants and a significant hassle for consumers who bother to use them -- and many simply don't.

Now, brands have a direct channel to deliver offers right into their customers' pockets no waste, no coupons forgotten at home, no missed opportunities. Passbook apps give the brand a dedicated, persistent presence on the most personal device in the consumer's life; in-app notifications of newly received offers re-engage customers where other apps fade from memory and use.

Geo-sensing takes the utility and power of Passbook offers to an even higher level. Passes can be sent according to time- and location-specific triggers: a customer walking past a store or cafe hears an alert and opens Passbook to find a special offer or promotion for it. Clicking on the pass reveals a barcode that can be scanned at the register for easy, instant redemption.

And speaking of redemption, Passbook may also make it easier for brands to track the performance of the offers they push to customers. By seeing which coupons are actually redeemed, and how, brands could finally close the loop and apply robust analytics to their conversions.

Customer-loyalty programs often seem better on paper than in practice. By rewarding customers with loyalty points redeemable for goods and services, you build stronger relationships, encourage higher spending and foster brand affinity. But what if customers don't find the points all that useful?

Consider this: 34 percent of reward points go unredeemed and expire, accounting for $16 billion in point value, in large part because they're difficult to track and redeem. That means that more than a third of the typical loyalty program represents wasted effort by the brand and undelivered value for its customer.

With Passbook, loyalty points are updated in real-time as they're accrued; customers can see at a glance how many they have, and can redeem them as easily as swiping their phone. Higher redemption rates may require brands to reconfigure the economics of their loyalty programs, but the higher impact on customer loyalty they achieve will be well worth the effort.

Mobile marketing is already transforming the way brands engage with consumers across the customer lifecycle and drive business. With Passbook, the integration of promotions, redemption and ongoing loyalty will be closer -- and more location-specific -- than ever. Genius isn't too strong a word.

ABOUT THE AUTHOR
Krishna Subramanian is CMO of Velti.
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