Category: Blog

Will My Loyalty App Stick?

Today, the average household has joined 29 loyalty programs, but only actively participates in 12. Some merchants are going the mobile phone loyalty app route. But consider that there are over 1.5 million apps out there. Mobile users only download really important, relevant apps. On average that is 20-50 apps per phone. And users delete unused apps. With these hurdles, how does a smaller, less known or less frequented business get into loyalty without being one of the 17 abandoned loyalty programs or deleted apps?

The key to starting any loyalty program is enrolling members. If it is too hard, they won’t enroll. Asking customers to download an app for any merchant other that Starbucks or Walgreens is asking a lot. Maybe early adopters will hurdle the obstacle. But what about the other 90% of the customers who want to be loyal, but are unwilling to make the effort to download?

And once enrolled, declining engagement is a serious problem for loyalty programs. Does that customer really want to take 4 steps to earn points?

Pay, then
Pull out phone
Open the merchant’s loyalty app
Show the mobile loyalty app to the clerk or scan it

That is a lot of work! If earning points and redemption is too hard, the app is getting deleted.

There is a better way . . . linking the customer’s own payment card to the merchant’s loyalty program. Loyalty should be part of simply paying. Every time a customer pays with the customer’s own credit or debit card, they should earn points for that merchant’s loyalty program. Redeeming the merchant reward should be as simple as paying normally with the enrolled credit card.

It has to be easy. That means no app. That is card linked loyalty.

Buy from ISOs

If you have read my blogs, you will notice a bias towards real time card linked promotions and loyalty versus delayed card linked promotions. As a refresher, delayed card linked promotions put the rewards back on the credit card statement or in some form of cash back or airline points model. That is very 1990s. The future of card linked offers I believe is real time, which enables the consumer to enroll right at the point of sale, receive real time text or email acknowledgment of points earned, and significantly, automatically redeem the reward back at the same merchant where the points were earned.

For delayed card linked offers, assuming a sale can be made to the merchant to market with delayed card linked offers, enabling the merchant to accept delayed card linked offers is not hard. All that has to happen is that the merchant needs to sign a contract authorizing his merchant credit card bank to share the data with the matching company, which then shares matches with the marketing company. This means any company can really do this. The barrier to entry is pretty small. The benefit to the merchant is smaller still as addressed in my previous blogs.

For real time card linked offers and loyalty, the barrier to entry is much higher. Real time is harder to implement because it’s integrated into the credit card terminal or the point of sale system (“POS”). The terminal or point of sale system must do three things. First, it must redirect the transaction amount to a gateway, which then relays the transaction data back into the data stream. Second the terminal or POS must be able to allow for registration at the point of sale. And third it must be able to print out the receipt showing points earned or reward redeemed. If the POS is involved, it has to account for the redeemed offer or reward discount.

There are two channels or industries that make sense for reselling real time card linked; the merchant acquiring independent sales organizations (“ISO”) sales channel and POS companies. Terminal companies use the ISO sales channel to resell their product as do many POS companies. Larger POS companies have their own direct sales teams and network of resellers. Marketing companies are not going to be able to resell real time card linked promotions and loyalty because of the integration requirements described above. This is good for the ISO industry mired in commodity pricing, and looking for the next big thing.

ISOs today are looking for products to compete with the likes of Belly, Level Up, and other loyalty companies that do not touch the payment stream. As discussed in previous blogs, Real time Card Linked loyalty and promotions require no additional steps to earn points or redeem rewards. Simply pay with the enrolled credit or debit card, and loyalty happens.

The ISO is the perfect party to resell real time card linked promotions and loyalty to the merchant. 2014 is going to be the year of the real time card linked promotions and loyalty. Stay tuned.

The Makings of an Industry: Card-Linked Offers – Part II

Card-linked offers may seem like a relatively new development – a breakthrough very much still in the making – and it is. But the industry as we understand it today, is also the slow maturity of more than two decades of market testing and iteration. In the second part of our two-part series, we explore the early history of card-linked offers, the delayed card-linked systems from which they arose, and delve into why real-time card-linked offers have garnered the attention and active support of industry giants ranging from Microsoft to Bank of America.

Hello World 1.0: Delayed Cards

In 1981, American Airlines launched their highly successful AAdvantage frequent flyer loyalty program. This groundbreaking foray into loyalty marketing opened up a whole new era of proprietary card-based and points-based rewards initiatives. While literally miles ahead of the humble punchcard, rewards cards still suffered from many of the drawbacks of a static system.

A decade later, credit card companies began experimenting with the integration of rewards directly into their consumer cards. Typically, card companies offered points that consumers could then convert into cash back on their credit statements, or other financial rewards. This system is still popular today, and consumers eagerly play along.

Today, there are in excess of 176 million credit holders in the United States alone. Of that number, 60 percent have a rewards card. Unfortunately for merchants, these delayed-offer systems can become prohibitively unwieldy when applied to the customer loyalty space.

Real-Time Advantage vs. Delayed

One of the key advantages real-time card-linked offers enjoy over delayed-rewards systems (think points), is the manner in which points are redeemed, and the corresponding effect on customer loyalty. With delayed card-linked offers, consumers essentially receive cash back, typically in the form of points, as a percentage of total spending. This financial windfall can then be spent virtually anywhere – thus completely negating any incentive to revisit the original store from which the reward was initially earned. No return visit, no repeat purchase.

In a real-time card-linked offer system, the rewards in question are applied instantly at the point of sale, and more importantly, at the original merchant. This just makes a lot of business sense since, after all, the whole point of merchant participation in card-linked initiatives is to cultivate consumer loyalty. In a real-time, open card-linked ecosystem, as opposed to a proprietary, delayed one, individual local merchants become the primary point of a rewards transaction, putting the establishment at the top of consumers’ minds, and more importantly, on top of their money as well.

Better yet, as one integrated, open system, the new approach to card-linked offers does not lock merchants, and consumers alike, into specific sites, publishers, applications, or card types.

That means everyone wins.

Card issuers continue to drive card usage with an expanded ecosystem of rewards options, consumers get their discounts immediately as opposed to at the end of each month, and merchants get more consumers to return to their establishments.

The History of Card-Linked Offers

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Card-linked Offers Are Here!

As we have seen, real-time consolidated card-linked offers are the natural next step in this highly iterative process of technological integration and innovation in the offers space. Further more, consumers have proven again and again that they will not be limited – whether by a proprietary rewards system, a lack of technological integration, or any other artificial barrier merchants or financial institutions choose to employ.

Consumers will continue to seek, demand, and ultimately acquire freedom and flexibility in the way they make purchases. Businesses and local merchants who can offer the easiest way for customers to get what they want when they want, will continue to nurture a considerable advantage over their peers and competitors. Microsoft, Facebook, and many other leaders in a variety of markets certainly think so, and see card-linked offers as the best way to do so.

We believe that card linked offers will play a key role in delivering on this promise… – The CardLinx Association

If you would like to learn more about a loyalty marketing strategy please provide some information below:

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The Makings of an Industry: Card-Linked Offers – Part 1

Hello World 2.0: Card-Linked Offers

2010 saw the rise of Card-Linked Offers, as a distinct marketing segment unique from, and very much intent on superseding, both the declining daily deals phenomenon, as well as conventional loyalty marketing schemes such as reward cards and coupons. To that effect, expansion of the field has positively exploded. 2011 saw a flood of startups and established industry giants alike rush into the field in a series of uncoordinated first attempts at cornering the card-linked offer market before it even crystalized.

American Express Company (AXP), the largest credit card issuer by purchases, began delivering customized discounts and offers to cardholders who opted into the program. In return, participating cardholders allowed AmEx to mine their personal Facebook data.

At the time, this drive for online integration and data collection in return for rewards was largely informed by the rise of mobile and online payments, and the apparent success of e-coupon purveyors such as Groupon. With continual iteration, and the sensational but completely understandable implosion of Groupon’s daily deals model in recent times, the doors have swung wide open for card-linked offers to enter the mainstream.

In October of this year, many of the movers and shakers of the e-commerce, payments, banking, and social media sectors formally formed The CardLinx Association, an interoperability organization promoting the adoption and expansion of card-linked offers. Industry giants, including Microsoft, Facebook, Bank of America, Mastercard, and LivingSocial, just to name a few, see card-linked offers as a keystone of the new consumer experience.

Industry experts have projected earnings from the real-time, locations-based deals sector to surpass 4 billion by 2015. In 2010, that number was just 815 million. But in many ways, so-called static or delayed card-linked offers have existed as a viable marketing strategy for some decades now.

Today’s consolidated systems, in which a single consumer credit or debit card is linked to all manner of personalized discounts, deals, and promotions, is only a degree removed from the relatively simplistic, and already widely adopted, rewards cards issued by banks and other financial institutions. These often points-based systems are, in turn, not so removed from the simplest proprietary rewards cards offered by retailers, grocery chains, and airlines. That means that, from an evolutionary standpoint, the story of card-linked offers begins in the 1980’s.

Join us next week as we dive into the frequent flier programs of the 1980’s (the granddaddy of loyalty programs) and the delayed card-linked systems (think rewards credit cards) of the 1990’s that we still use today. More importantly, we will look at some of the differences between the delayed and proprietary card-linked rewards programs popular today and the rapidly crystallizing real-time card-linked offers sector.