Meet the Startups About to Revolutionize Mobile Loyalty Programs

From Shopkick to Belly, Punchcard to Foursquare: Get Ready for Big Changes at the Register

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A renaissance in the customer loyalty program has been long promised, but so far the reality has failed to live up to hype . Mass-adoption of smart-phones and the availability of location and social data mean the consumer loyalty program is ripe for a makeover but so far programs haven't really taken off with consumers and merchants.

That's about to change and I believe the next twelve months will be critical in the growth of the mobile loyalty program. Before I explain why, here are some key platforms, some already getting to scale and others still in the garage:

  • Shopkick: Leverages sound emitters to "check-in" users at retail locations and areas within a store and awards them based on various factors.
  • Belly: Leverages in-store placement of iPad as the "receiver" (Similar to Square Register). Users can either get the app on their phone or user feature phone users can get a traditional style loyalty card to swipe.
  • LevelUp: Merchants use a LevelUp terminal. Consumers sync their card to the app and scan it at point of purchase.
  • Punchcard: Uses some sort image recognition/OCR in order to "read" receipts. "Punchcard" style loyalty programs are delivered to customers (i.e. get the 10th coffee free).
  • Cardify: Not yet live, but the site says "no scanning or checking in necessary."
  • Passbook: Part of iOS 6 from Apple. Passbook aggregates various coupons, loyalty cards and tickets. The merchant must have a way to scan them for redemption.
  • Foursquare: If you don't know this one, there is nothing I can do to help.
  • Square: Proprietary hardware that leverages the audio input of iOS devices to scan credit cards. They recently announced a loyalty component as part of the Square Register service

The limiting factor for mobile loyalty programs has not been the handset. While handsets have drastically improved over the last few years, the technologies powering many of the aforementioned platforms are not new. We have yet to see the widespread adoption of cutting edge technologies such as near-field communications or NFC.

Enabling Factors
Over the past few years a number of factors have lead to the growth in mobile loyalty programs, despite the widespread adoption of NFC:

  • Post-pc growth: the growth of tablet devices and various other form factors has allowed retailers to create a closed loop ecosystems using affordable consumer hardware
  • Increased adoption of QR codes at point-of -sale: In addition to the use of QR codes and other 2D barcodes for marketing purposes, retail locations such as Starbucks and Target have installed laser imaging scanners, creating a closed loop between mobile phone and retail point of sale
  • Increase in the amount of available location data: Companies such as Foursquare have collected an incredible amount of location data and allowed merchants to create their own offers without the need for any specific technology (incidentally, Punchcard is powered by Foursquare data).
  • Brilliant inventions: Square has created a mobile payment ecosystem based on an unique invention by Jack Dorsey. An invention that affords merchants the ability to create their own loyalty opportunities.

Bring On the Social Graph
The final component driving the onslaught of mobile loyalty is the widespread integration of Facebook (and to a lesser extent Twitter and Foursquare's) social graph. As brands get better at forging relationships with their customers in social environments, they are becoming more sophisticated and increasingly capable of running effective sCRM programs (social customer relationship management). As social media and mobile distribution converge, the ability to scale mobile loyalty programs becomes much simpler.

Bottom Line
Merchants cannot work with every platform and consumers cannot be expected to have an app for every loyalty program. Over the next year we will see consolidation in this space and who knows, it may not be one of the players mentioned in this article. The winner may be a financial institution or a company we have not heard of yet. One thing is certain, the winner in this space will win based on a simple and elegant user experience (I am not betting on QR codes as the simplest solution) and ubiquity. With that in mind, it is important to watch this space, as it is very dynamic and will be very lucrative for marketers.

Adam Broitman is chief creative strategist at Something Massive, which acquired Cir.cus, the agency he co-founded, in March. Broitman has worked in a variety of roles at Digitas, Morpheus Media and Crayon.
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