Is the future for loyalty schemes in mobile apps?

The days of retailers offering customers only traditional loyalty cards could be over as technology opens up huge opportunities for mobile apps to offer instant rewards and offers as well as location-based messaging, but not everyone is sold on the idea.

harvey nichols loyalty

Brands are increasingly thinking mobile-first when creating and growing customer loyalty. The news earlier this month that upmarket retailer Harvey Nichols is launching a loyalty scheme exclusively as a mobile app is a significant statement about the rising power of digital and mobile at the expense of traditional plastic cards.

Speaking to Marketing Week, Harvey Nichols’ head of digital marketing Kerem Atasoy said the launch was based on research with customers that showed 80% preferred a mobile app to a plastic card. The retailer had decided that people “don’t need another piece of plastic in their wallets”.

The move has thrown open an intriguing debate within the marketing world about the future of loyalty schemes. Although Harvey Nichols is a trailblazer with its app-only approach, it follows recent moves by several big brands that have brought their existing loyalty schemes to mobile devices.

Last June, for example, Boots launched an app that enables customers to receive offers linked to the Advantage Card rewards scheme on their phone, while last September Costa Coffee released an app for its Coffee Club loyalty programme. Both brands have retained the plastic cards, giving customers the option to engage with their schemes either on their smartphones or via the more traditional format.

Tesco is also expected to improve the digital functionality of its 20-year-old loyalty scheme Clubcard under the leadership of Dave Lewis, who became CEO last September, while Marks
& Spencer is reportedly set to launch a loyalty scheme called Sparks after filing the name with the Intellectual Property Office.

Not everyone is sold on the benefits of apps, however, and industry insiders have suggested that M&S may simply offer a traditional card scheme and no app, after suffering painful teething problems with digital launches in the past. Research from the Centre for Retail Research (CRR) and VoucherCodes.co.uk, published last month, also shows that only 16% of retail apps are used ‘a lot’ by consumers and more than a quarter (27%) are downloaded but never used.

With these developments in mind, marketers must consider whether having a loyalty app is right for their business. What are the potential benefits, how can brands encourage people to engage with their apps, and will the technology ultimately spell the end for plastic loyalty cards?

Jon Fisher, head of mobile and loyalty at Costa, does not believe apps will completely cannibalise cards but expects mobile to play an increasingly prominent role in the coming years. The Costa app has had more than one million downloads since launch last year and its use as a proportion of total Coffee Club transactions is growing every month, he says.

“It’s about choice,” Fisher adds. “There will always be customers who want to have a plastic card, so my job is to support however our customers want to interact with a loyalty scheme. We have already seen people shift to mobile and there’s definitely a market for customers who want to have everything on their phone, but there will always be people who want to use the plastic card.”

Costa’s Coffee Club loyalty scheme app has had over one million downloads, but the chain continue to offer plastic cards

The app, available on both iOS and Android, provides users with a QR code that they scan using readers next to the checkout to collect their points. Fisher explains that Costa’s primary concern in the first year since launching the app has been to ensure that it works smoothly and syncs seamlessly with the back-end technology powering the loyalty scheme.

The app offers a couple of additional features, including a store-finder function, but Costa plans to develop richer content for the app based on customer data. “The next step for us is to use our data to deliver more relevant, location-based messaging and personalisation through the app,” says Fisher.

Costa is also considering how it could use in-store beacons to drive engagement with the app. A host of major retailers are experimenting with the Bluetooth-enabled technology, which has the potential to send marketing messages to people’s phones when it detects they are in the vicinity of a shop.

However, the Costa app does not use push notifications – Fisher notes that “not all customers want to receive them” – so the potential applications for beacons could be limited. Despite expressing an interest in the technology, Costa is not running any beacons trials at present.

Regardless of new hi-tech opportunities, Fisher suggests that one of the biggest benefits of an app is the convenience and simplicity it offers. To date, Costa has focused on promoting the app to its existing Coffee Club members via email alerts, although it also uses in-store advertising to raise awareness.

“Having the Coffee Club app on mobile means that customers don’t have to frantically search through their purse or wallet, trying to dig out a plastic card,” he says. “People almost always have their phone with them so it means that customers are never going to miss out on collecting their reward points.”

He adds: “Also, because you get a real-time update on your rewards points, you don’t have to go online and log into your account to understand how many points you have or if you have enough for a free treat. You’ve got it live on your phone.”

The convenience factor fits with Costa’s broader strategy of using technology to provide a quicker service. The company has rolled out contactless payment for debit and credit cards across its stores, for example, and will allow people to transact via Apple Pay when the service launches in the UK next month. The technology uses near field communication (NFC) to allow people to pay by holding an iPhone 6 or Apple Watch near a contactless checkout reader.

At its WWDC conference in San Francisco earlier this month, Apple announced that in addition to its compatibility with standard debit and credit cards, Apple Pay will sync with branded loyalty cards so that users can collect or redeem points automatically when they pay. Card details will be stored in the Passbook app, which is being rebranded to Wallet.

Fisher, who is looking into how Costa could sync its app with Apple Pay, argues that the growth of mobile payment facilities will encourage more people to engage with loyalty schemes. “It’s an exciting time in mobile and we are looking at how Costa can use those innovations to support our teams and give customers the best experience possible,” he says.

According to the research by VoucherCodes.co.uk and the CRR, 21% of UK consumers feel that having discount vouchers delivered to their smartphones would drive them into a store they weren’t planning to visit. The study also shows that 73% of people expect to spend more on their mobile this year, while 62% expect to spend more via tablet. This compares to only 20% who believe they will increase their outlay on purchases made via a desktop computer.

The importance of mobile to minicab firm Addison Lee is reflected by its decision to release an upgrade of its app alongside a new loyalty programme ClubLee (see Q&A, below). The scheme enables the company’s regular customers to build points in return for the journeys they take. Customers using the scheme can reach different tiers of status: silver, gold and black.

The scheme offers a sliding scale of benefits across the tiers including discounted journeys, quicker collection times, guaranteed pre-bookable journeys during peak times and upgrades to executive vehicles. ClubLee members can earn points by booking via the company’s website, call centre or app.

The app upgrade incorporates new real-time features including driver tracking and a ‘pick me up now’ function. The app is also launching on the Apple Watch so that, according to Addison Lee, customers can book a car in seconds “with three taps of the wrist”. The company has also confirmed that it will make its payment processes compatible with Apple Pay.

The Apple Watch move suggests an expectation by Addison Lee that a high proportion of its affluent target market will be early adopters of wearable technology. It also highlights the growing demand for quick and seamless mobile services following the rise of app-only taxi brands such as Uber.

Marketers considering whether to launch an app for their loyalty scheme must also weigh up the role of mobile in their overall brand strategy and the industry in which they operate.

Peter Boucher, chief commercial officer at Addison Lee, says: “Our recent investments in the Addison Lee app, together with the Apple Watch app and now Apple Pay, demonstrate how we are continually striving to innovate and develop our mobile offering, without compromising on the premium service we offer our customers.”

Why did Addison Lee decide to launch a loyalty scheme?

We have invested a lot of time speaking with our customers to find out how we can make the experience of using Addison Lee even better and it was from this process that Club Lee was created. The purpose of the scheme is to reward our loyal customers with points for their journeys, which in turn, enables them to earn benefits and priority service. Our long-standing client relationships are what have helped us grow into the business that we are today, and as Europe’s largest minicab company, the ClubLee initiative is our way of giving something back to those customers who use us regularly.

How will you integrate the Club Lee scheme into the Addison Lee app?

We wanted to have a loyalty scheme that is integrated across all the channels our customers use – this includes access through the latest app, on the website and over the phone. As soon as a user downloads and registers their details on the new app, which is now available on Apple Store and Google Play, they will be given the option immediately to start accruing loyalty points in return for the journeys they take.

Why did you decide to make the app available to download on the Apple Watch?

Following the global expansion of our business in New York earlier this year, we wanted to create an updated mobile phone and Apple Watch app that would benefit not only our European-based customers, but also our increasing number of our busy, on-the-go clients across the Atlantic. We invest in the latest technology if we think it will give our customers the best possible user experience.

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Comments
  • ASHGUPTA 29 Jun 2015 at 11:13 am

    I decide to put the new HN AP to the test. When i lived in London i was loyal to HN so i visited the Edinburgh store with the AP on Saturday. I have to say this IS the future but the future is now.

  • Peter Cunningham 30 Jun 2015 at 9:42 am

    With the continual rise of mobile it makes sense to migrate loyalty schemes to mobile, but perhaps brands should first focus more on making their loyalty schemes more valuable and relevant to their members before engaging in the ‘plastic card vs app’ debate.

    How many times does the person at check out have to ask you ‘do you have a Boots Vantage/Nectar card’ etc. so that people even remember that they are actually already a member of that brand or retailer’s loyalty scheme?

    Because if the loyalty scheme is really valued and provides you with benefits you really want you will have your card or app at the ready when queuing up! But most schemes lack imagination and rarely provide valuable benefits other than an endless stream of emailed vouchers and coupons. No wonder users disengage and forget they have the card or app!

    Marketers need to rethink online loyalty and provide something altogether better that is engaging, entertaining and provides what customers want rather than ‘cookie cutter’ loyalty rewards. A first step is to ask customers what rewards they actually want or ‘co-creation’. Waitrose’s ‘Pick Your Own Offers’ scheme is a good start in this direction but it could be made more effective if an ‘invite a friend’ component and gamification elements were added to encourage viral sharing.

    The Apple Pay example appears interesting but presumably the person on checkout would probably still have to ask us ‘do you want points added to your card?’ due to privacy laws.

    The Voucher codes research that “only 16% of retail apps are used ‘a lot’ by consumers and more than a quarter (27%) are downloaded but never used” should surprise no-one who has developed and marketed an app. Given the high costs to develop an app, marketers need to drive downloads and use throughout the life of the app. Here are our tips to ensure your loyalty app does not join the ever-growing ranks of zombie apps: http://blog.buyapowa.com/escape-from-zombie-apps-plan

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