Loyalty Programs: Which Scanning Technology Is Right For the Coming Decade?

  • Jul 12, 2011

choosing the proper loyalty scanning deviceAustin, Texas: In this high tech age, there seems to be a great deal of discussion about the technology that will drive the next loyalty wave.

Colloquy magazine did a recent article on the future of loyalty devices, that had some interesting analysis between upcoming high tech trends and mechanisms to measure and track loyalty programs.

Some of the devices that author Sharon M. Goldman had looked at included magnetic stripe cards, contactless chips, mobile apps and even biometric identification and Near Field Communications (NFC) devices

Mobile Phones: Currently, mobile phone apps are nothing more than essentially a 2-D barcode these days. Sure, Starbucks and several others have jumped onto this technology–but with only a small percentage of their audience owning this technology, it leaves a lot to be desired.

However, as new apps are designed for these smart phones, the future looks promising. The biggest problem remains that different phones have different standards, and to make a loyalty promotion work on just one platform, such as the iPhone, will dramatically limit your reach and potential.

Until the US, Asia and Europe come up with universal standards, mobile technology will have too much baggage to get implemented across the board.

Radio Frequency ID (RFID)? Still in use in some places, and Dairy Queen and some other retailers have tested it recently. However, it seems to be more of a bridge technology, with NFC looking most likely to replace it.

Magnetic Stripe Cards–Works on most levels, because it can be digital (for use on mobile phones and websites) and printed. However, it has been around for decades and some people are wanting more innovative real-time, data capture instruments. That being said, it is still the most popular form of digital loyalty program available at this time.

If it ain’t broke, why fix it–say many about this technology, especially as they have invested in the readers and are not clamoring to replace them with much desire.

Old Fashioned Punch Cards: Don’t laugh, but punch cards still work for smaller stores-but it does not capture data. Just because it is old, doesn’t mean it cannot be effective — especially in industries that are not trying to be cutting edge. For example, some mom and pop stores, like restaurants, bakeries, hair salons and dry cleaner can still use punch cards effectively enough for their use without investing in technology or equipment. These are also popular in smaller markets and with a less tech-savvy customer base or older audience.

Near Field Communications (NFC): NFC technology seems poised to have the brightest future, especially with the recent introduction of Google Wallet last month.

In fact, the article mentions that “some of the biggest players have finally gotten off the sidelines and into the NFC race in a committed way. Google, Citi, MasterCard, First Data and Sprint have teamed to test and introduce an app called Google Wallet, which allows contactless payments through a PayPass-eligible Citi MasterCard or a virtual Google Prepaid card—and will feature deals and offers, while Apple has also been rumored to include NFC technology in the next version of the iPhone. Visa announced its Digital Wallet for the holidays. Telecommunications heavyweights Verizon, AT&T and T-Mobile joined forces last fall with an NFC-enabled national commerce network venture called Isis, expected to begin a pilot in early 2012. Meanwhile, Research in Motion co-CEO Jim Balsillie announced that, “many if not most of BlackBerry devices throughout the year will have NFC in them.” And Amazon is rumored to announce an NFC-payment service in the next few months. “

Sounds like a done deal–right? Well, unfortunately, lawsuits are being filed on this technology from Paypal, which will probably delay its acceptance by a few years.

Without digital standards, many retailers will sit on the sidelines, missing out on the opportunities that a well-run loyalty program can provide.

After all, retailers cannot be expected to purchase different technology readers–just to keep track of a loyalty program.

Hopefully these lawsuits will come to an end and one technology will stand out in the next few years– so we don’t have a VHS/Betamax battle–or even a Cassette/Vinyl/8-Track Tape/CD battle that confuses the market place.

The best thoughts on these devices comes from Joy Das Gupta, Category Manager, Brand Loyalty at Starbucks, who pointed out that it really depends on how much a company listens to its customers and how carefully it determines how the technology drives the customer value proposition. “Otherwise, you’re chasing a platform and technology versus thinking strategically about what you need to deliver to customers to truly enhance their experience and differentiate from the competition.”

Waiting around for the perfect standard might not happen in our lifetime. Garret Ippolito of MasterCard said, “Loyalty cards won’t go away in my lifetime or my children’s, but we have a line of sight to a day when they will.”

In the meantime, what should a retailer do?

I’d suggest, if budgets allow, simply offering a mag stripe program, that can be run on smart phones and a printed card and key fob. This will more than double your usage over just a digital-only version, while still allowing for some data capture.

In addition, having this program in place will allow you to be able to stay ahead of your competition, where you can test, monitor and gauge what your customers find easiest, and most convenient for them.

You should put your energies into worrying about putting together the best loyalty program that can help drive traffic and sales, while changing customers’ buying habits.

Don’t fret over the device itself. It is just a mechanism for keeping track.

After all, it is a customer loyalty program, not a technology program that you are running.

Don’t ever lose sight of this detail.


  • Category: Blog, Loyalty Marketing/Frequency Programs
  • Tags: frequency programs, loyalty devices, loyalty programs, mobile apps for loyalty promotions, mobile phones for loyalty tracking, NFC Technology for loyalty programs, which technology s best for customer