Personal issue

Most people will experience a sense of unexpected reward on discovering a voucher in their purse or wallet, or a forgotten £10 note crumpled amid a sea of receipts. The medium of paper may be considered passé in a lot of marketing sectors, yet the humble voucher still has massive appeal.

Those who work in the voucher sector accept that new technology will eventually take the place of paper. However, there is also an awareness that widespread use of smart cards, and the downloading or printing of vouchers from the Internet, or through m-commerce using a mobile phone, is still some way off because the systems available are not entirely reliable or secure. Barcodes on vouchers printed on home printers, for example, must be of a certain quality to allow them to read by retail scanners.

Paul Hunter, marketing manager for The Kingfisher Gift Voucher, which reportedly increased its sales by 22 per cent last year against a market average of 3.5 per cent, believes it is inevitable that the Internet will become a main distribution channel for vouchers, although he remains sceptical as to whether it will increase the market.

“We have to be honest and admit that the technology isn’t ready and that consumer interest just isn’t there yet. We are a long way off from writing ‘log on to this site and you can obtain a virtual voucher’ in someone’s birthday card, for example,” he says.

Hunter adds that the demand for online vouchers is well below the level Kingfisher would deem acceptable to justify the huge investment needed to upgrade the websites of the group’s retailers, which include B&Q, Comet, MVC and Superdrug.

At some stage, the company must also make a corporate decision as to whether it should introduce software that would allow consumers to redeem traditional paper vouchers when they are shopping from its retailers online.

Argos is also resisting the temptation to throw money at an online system for its Argos Business Solutions incentive and rewards business, which counts McDonald’s, TSB and BP among its clients. The Premier Points electronic points-based incentive scheme has proved successful, but marketing manager Steve Cooper says an online voucher service is only at the trial stage, and it will be some time before the infrastructure is in place to allow the issuing and redeeming of vouchers online.

“Retailers and consumers aren’t ready for paper vouchers to be replaced. The paperless society has been predicted for some time but, in reality, society is producing more paper than ever. Voucher companies must think of the recipient first – only when more people are shopping online will it follow that more will want to obtain or redeem vouchers in this way,” he says.

Keekaboo.com says its backroom Web facility, which drives visitors to a brand’s Internet site and allows them to send physical postcards to their friends, may help consumers adjust to buying and redeeming vouchers online. The branded postcards are dispatched in the normal postal system within four days and then redeemed as vouchers at bricks-and-mortar retailers.

“We are turning an online promotion into an offline offer to drive sales at traditional high street stores. Because of the global nature of the Net, this is the perfect vehicle for international campaigns,” says director Paul Edney.

Paper is not dead yet

There is a consensus within the voucher industry that paper gifts will exist for as long as people have cash in their pockets. This inevitably means that any electronic alternative, including simple card-based schemes, will be operating alongside traditional voucher schemes for a few more years at least.

Capital Incentives, a wholly-owned subsidiary of the Bank of Scotland whose client base includes Nestlé, Abbey National and British Airways, has complemented its

Capital Bonds paper voucher with an Incentive Award Card. The card is accepted at 14 million Visa outlets and is primarily designed for purchasing high-ticket products.

Managing director Graham Povey says the smart card is a first step for retailers and clients wanting to move the voucher concept forward. “Our card appeals because it can be used to make incentive, bonus and commission payments to staff and third parties, while holders receive a monthly statement showing the purchases made and the amount available to spend. This statement can also be accompanied by other marketing information,” he says.

One of the most lucrative areas for voucher companies has always been the staff incentive market, but there is a fear that if voucher schemes become purely electronic, many in this target market – for example, those who are not online at work – would be alienated. Not surprisingly, some companies are reluctant to discard their traditional vouchers for the time being.

Another factor has been the Government’s decision to remove National Insurance relief from voucher rewards given to staff – a move that has left the employee incentive sector slightly fragile. It is still unclear exactly how many clients appreciate the motivational value of vouchers, to the extent that they are covering any additional costs involved.

Voucher fulfilment company Maritz has been appointed a business partner of Amazon.co.uk and believes it is possible to persuade clients which use vouchers for staff rewards to at least experiment with online schemes.

Managers wanting to reward their staff can visit the Amazon site and pay for vouchers using normal corporate payment methods. Once they’ve logged the e-mail address of the employee they wish to reward, an electronic voucher, accompanied by a unique code, is sent to that mailbox. The recipient can then visit the Amazon site and spend the gift.

Perhaps significantly, though, Maritz is also providing paper-based versions, which should overcome the problem of those who are not online in the workplace but who could still redeem their personalised Amazon vouchers at home, at Internet cafés or using a friend’s Internet connection.

Electronic vouchers

“However you approach the move to electronic vouchers, you cannot ignore the trophy element of people receiving a paper voucher, yet 95 per cent of the client briefs we receive do ask for some Web element to the voucher scheme they want us to devise. How quickly clients migrate to electronic options will dictate the rate at which paper’s share of the market deteriorates,” says Maritz head of eSolutions Richard Hammond.

Maritz is not the only company to monitor how quickly paper’s share of the voucher market falls away. Caroline Pearson, sales and marketing manager at US company Marriott Incentive Vouchers, which offers hotel breaks at UK, European and US hotels, says the majority of its vouchers are still paper. She does, however, expect the format’s share to be down to about 30 per cent in five years’ time, with smart cards and Web rewards (which it introduced in May) making up the balance.

“As a US company, we are in a strong position to predict how the UK voucher market will react because technology in the States tends to be a year to 18 months ahead. From our research across the Atlantic, it is clear that card schemes that can be topped up or used for short one-off incentives are popular with clients – although they still want paper as well.

“We are working on a smart card which should go live early next year. The Web will grow at the fastest rate, but at the moment, it’s more about raising awareness of online rewards than actual sales,” she says.

One of the reasons why online incentive schemes have been slow to gather pace is a fear that a programme will not be completely secure. There are concerns that vouchers printed from a Web page could be redeemed more than once, or that an experienced computer hacker could change the value of vouchers.

Charles O’Reilly, managing director of insurance company PIMS-SCA, says he is unaware of any online voucher that is completely secure. “You can never be complacent, but we have devised schemes that offer unique PIN numbers to recipients of online vouchers.

“We are also close to seeing Epos systems being developed that will recognise PIN numbers in store in case someone attempts to use the same voucher twice,” he says.

PIMS-SCA is also developing a system whereby unique PIN numbers can be included on the inside of packaged goods. When a consumer gets home, they can log onto a brand’s site, type in the number and instantly receive a points or voucher reward.

Virgin Vouchers is concerned about security and it will only offer a Web ordering facility when it is convinced the security of the purchasing method can be guaranteed. It is working closely with payment protection company Checkpoint, which prints its vouchers, to develop an electronic system that will work online.

“If paper vouchers can be redeemed online, we have to make sure people cannot use them twice by then going into a shop. You have to bear in mind that people will not be purchasing a single piece of merchandise, they will have thousands of pounds of spendable currency. The implications of fraud are really serious,” says business development manager Tim Scarff.

It is still too early to say which of the new technologies will prove most successful in the longer term. It could well be the mobile phone – below-the-line agency PCg, part of the Ogilvy Promotions Network, has formed a partnership with m-commerce technology provider m-Wise and communications giant Vodafone to use their SMS text-messaging service as a promotional tool.

PCg is currently negotiating with a fast-food chain to offer phone users text vouchers – for free French fries or a free drink at off-peak times of the day, for instance – which can be redeemed immediately in restaurants simply by showing the message to staff at the service counter.

The new technology debate is of interest to the Whitbread group’s Leisure Vouchers’ general manager Bill Brown and his team, who track the movements of every voucher sold, from where it was redeemed to how long it has been in circulation. The average circulation is six months, but some vouchers might not be cashed in for years.

Brown says: “We must remember that it is not about whether a voucher is paper or electronic, it is what it stands for and what it says to someone who receives one as a gift. Will electronic vouchers alter the way in which people view and use vouchers?”

Only when a significantly greater number of consumers are happy to shop using new technology will virtual vouchers become more widely acceptable. The companies issuing them – and of course, their clients – want reassurance that an electronic voucher is not only completely secure, but that it’s also sufficiently reliable not to generate consumer complaints. Until they are convinced, paper is here to stay.