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How Mobile Payments and Loyalty Programs can Create a Winning Combination for Merchants

mobile payments, mobile loyalty programs, dailydealmedia.comWe’ve talked a lot at DDM this past year about new burgeoning mobile payment solutions and the popularity of mobile loyalty programs. The amazing growth of both of these niche industries shows that consumers are more than ready and willing to embrace mobile as their preferred method of shopping.

But are retailers missing an obvious and potentially profitable connection between mobile payments and mobile loyalty? While the two are often considered as separate segments of the mobile industry, evidence shows that a symbiotic relationship between the two may create a better user experience that will allow for broader acceptance.

Just last month Google announced that it would discontinue Punchd, its mobile phone-based loyalty service, in June 2013. It is widely believed that this is an initial step by Google to eventually integrate the loyalty app features into the company’s mobile payment solution, Google wallet.

President of Kobie Marketing, Michael Hemsey says that while disposing of Punchd is a strategic move on the part of Google to clear away the competition for Google wallet, this may very well reflect the direction of the industry as a whole.

Mobile punch card apps are great stepping stone into mobile loyalty, but the core functionality of collecting punches to achieve a goal – such as a free meal – limits a brand’s potential interactions with consumers, as most will only refer to the app at the point-of-sale,” he said.

 “As consumers become more and more connected, marketers need to do a better job of making mobile a part of the entire loyalty lifecycle.”

This new focus on loyalty incentives may be just what mobile payment services need to motivate consumers. At least this may be the case for Google. Tom Nawara, vice president of emerging solutions and innovation at Acquity Group said that simplifying the user experience of both mobile payments and loyalty applications could be in Google’s best interest in terms of user acquisition and long-term retention.

Mobile wallets will need to move beyond pure payment transactions in order to attain mass adoption,” he said. “Loyalty features – whether via punch card type activities or more advanced functionality – will go a long way toward enticing users to move to mobile wallets.”

Loyalty Incentives – Where Merchants and Consumers Come Together

Apple’s Passbook app which launched in September is the perfect example of how mobile loyalty can and should work. The app allows users to collect and store loyalty cards and offers from companies such as Starbucks, Target, McDonalds, Bob-Ton, Barnes and Noble, Sears, Old Navy and more all in one location

Krishna Subramanian, CMO at mobile marketing firm, Velti, called Passbook perhaps the most under-rated feature of iOS 6.

“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.”

Scott Forshay, mobile and emerging technologies strategist at Acquity Group seems to agree.

 “We are beginning to see the influence of proactive in-app push notifications with POS-redeemable offers executed through Apple’s Passbook, which effectively illustrates how mobility can be a powerful catalyst for the synchronization of the off-premise and on-premise consumer experience with the brand.

The Logic of Mobile Payments

For consumers, mobile payments simply make sense. They create an easy and hassle-free experience at the checkout and they make it easier for users to keep track of expenses. For merchants mobile payments are a more efficient way to do business and cut costs.

But the value of mobile payments goes far beyond convenience. Merchants have the benefits of being able to track, identify, and reward customers. The smooth transaction created by mobile payments can potentially increase customer loyalty and this ultimately means more revenues for retailers.

In the near future we should begin to see the convergence of mobile payments and mobile loyalty programs. The growth of mobile payment systems means wider use of loyalty programs.

With 2012 mobile commerce sales reaching over $20 billion in the U.S. alone and  global mobile transactions projected to reach more than $1 Trillion by 2015 mobile payments will continue to be a major game changer for merchants. Add to this the attraction of loyalty incentives for consumers and those retailers that have the foresight to see the potential in combining mobile payments and mobile loyalty programs could stand to win big in the coming mobile commerce rush.

Mobile Commerce Daily, AdAge

Krissa Ashton

DDM Reports
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