Mobile loyalty scheme reaches Generation Y with coupons

And those coupons – aren’t they so last year? What happened to the advances in technology? Aren’t only middle-aged women prepared to mess with bits of paper?

Proving that nothing is predictable in the world of rewards, the merchant services division of Irish bank AIB has taken its home market by storm with a POS-based loyalty system that uses a contactless mobile phone sticker to connect the consumer to a retailer led-loyalty scheme – and it is now rolling out fast in the UK.

The system can provide customer information and dispense coupons and very shortly it will be using NFC (near field communication) technology which means that those with smart phones won’t even need the sticker. A major advantage is that the loyalty system can reward customers for using cash as well as cards.

The scheme was fully rolled out across Ireland in September 2010 after a short pilot and is now being used at 40,000 terminals both in the Emerald Isle and in the UK. The important milestone of 2 million transactions has been passed, and these are currently running at around 120,000 a month.

Participating merchants can send email and mobile alerts to customers to advertise in-store promotions and also to drive customers to the merchant website – very much in the same way that Google Places, Groupon, Facebook Deals or FourSquare operate.

The merchant stays in control, deciding the level of reward and can actively recruit customers to use the scheme.

AIBMS Loyalty Plus data
The system has become so popular in Ireland that Zapa Technologies, the company that runs the AIBMS Loyalty Plus infrastructure, is having trouble keeping up with the number of unprospected merchant requests to join coming to the AIBMS website.

There are 150,000 active users of the tag and the demographics are very interesting. The scheme is appealing to young users in that magic 13-35 age band, and retailers are seeing a 33% uplift of spend from those using the loyalty tag.

For Sharon Duffy, marketing manager of AIBMS in Ireland, the success of the scheme owes much to the fact that it is simple and easy to use for the consumer, with the benefit of providing information to the merchant with easy to access online reports. This means merchants can analyse their customer base and their spending profile and trends. As a low cost, out of the box loyalty scheme, the implementation costs are low, and the merchant is in control of how much the rewards will cost.

Duffy commented: “We were talking to  restaurants and cafes where they had no idea how much money in terms of special offers was likely to be claimed. With our system from Zapa, merchants know exactly how much they are giving away. It is also possible for merchants to appeal to a wider audience with the scheme. If, for example, they were offering one free cup of coffee for every six bought, they are completely ignoring all the tea and orange juice drinkers, who are equally good customers.”

Duffy admits that AIBMS is still on a learning curve, and that attracting young people was the easy part. “One of our merchants is a large pharmacy chain, with a high percentage of elderly people among its customer base. These are unlikely to have an internet connection, so we arranged to register the tags at the store for them, which has worked well.”

Future rollouts
The scheme will now be moved out increasingly into Ireland’s smaller towns and also into UK urban areas, where the goal will be to get a number of retailers in an area offering the scheme. AIB’s acquiring arm, AIBMS, will be targeting the smaller independent retailers, while Zapa Technologies is dealing with the larger merchants wanting integrated systems.

If the loyalty system is integrated at the POS, it is possible for merchants to interrogate the full basket of registered users. This gives useful information to the merchant. It also enables the merchant to carry out coupon redemption against the basket items.

Donal McGuinness, chief operating officer of Zapa Technologies, explained to Loyalty Magazine that registration by the consumers was voluntary, and currently only 50% have taken this step. Increasingly however, they are choosing to register so that they can receive the special offer and coupon notifications. He said: “The minimum information they have to give us is name, email and mobile number. When we started the scheme at the end of 2009 for the pilot, the registration level was 10% but now most people choose to register, because they are aware of the benefits in terms of being able to take advantage of offers.”

So what is the big attraction of a customer loyalty scheme that offers coupons?

McGuinness explained: “We did some research in the summer of 2009 that showed that loyalty rewards was something that only middle-aged women wanted, and that men were not interested at all. Young people were definitely not prepared to engage.

“What has happened is that social networking has changed all that. The mobile phone experience, even five years ago was poor in terms of internet use, but today, especially with the iPhone, couponing has been made exciting. Google and the smart phone are driving this awareness and use is mushrooming.”

This type of loyalty scheme is also competitive, explained McGuinness. People go to a coffee shop and their phone tells them what deals their friends are getting. Networking, together with the recession has made people, especially young people, far more interested in offers, especially when they arrive in a cool way onto their phones.

McGuinness is increasingly working in the UK market, where the O2 arena will be using the Zapa Technology system at its retailers. Food store EATS is also going live with the scheme this year.

While AIBMS had some competition from traditional loyalty schemes in Ireland (including Tesco and Dunn Stores) the crowded UK loyalty market is  a much tougher place, not least because of competition from similar schemes, such as Barclaycard Freedom, that only rewards Barclaycard card users, and Nectar.

McGuinness however is unphased by these, seeing his competition as coming from the online space.

While there is a viral element to uptake, McGuinness says a marketing campaign will be taking place soon in the UK to raise awareness of the scheme. With Google, Facebook, Groupon and FourSquare among one’s competitors, it is not sensible to either be complacent or to be slow coming forward.

AIBMS was announced the winner of the Best Merchant Acquiring Initiative at the recently held Card and Payments Awards in London.

Recent partnership
Recently Vivotech partnered with Zapa Technologies as its partner to help it roll out  next generation Trusted Service Manager (TSM) services across Europe.

ViVOtech’s loyalty and payments business, based on  Near Field Communications  (NFC) technology uses Over-The-Air (OTA) provisioning infrastructure software, smart posters, and contactless terminals to enable retailers around the globe  to make payments and run loyalty and marketing schemes. It  has 600,000 contactless and NFC payment terminals in more than 35 countries.

VivOtech chose Zapa because  the US company  wants  a clear growth path from today’s NFC (Near Field Communication) sticker-based solutions for existing phones to future handsets which will have integrated NFC technology when it becomes available.