In this post, part two to a post published yesterday, I address some more common questions that I’ve been receiving about some of the biggest opportunities and challenges related to mobile loyalty programs. In my work with customers, I’ve become increasingly involved in developing mobile loyalty programs, and my responses offer some lessons I’ve learned about this exciting and fast-moving area of mobile. In part two here, I cover some of the challenges involved in mobile loyalty programs and spotlight some examples of brands that are using mobile loyalty programs successfully.

What are some of the biggest challenges in creating a mobile loyalty program?

Oversaturation. If a brand can get a consumer to engage in a loyalty program through an app, it can deliver a rich, compelling user experience. But that can be a big “if.” The slew of apps available today has resulted in a sea of retail, social media, news, game and entertainment icons battling for real estate on a consumer’s home screen.

Moreover, consider the typical consumption process for a mobile app. First, a brand must raise awareness about its app and entice a consumer to go through a discovery phase and learn more about the app. If the app piques a consumer’s interest, then the consumer has to go to the appropriate app store, find the app and install it. Next, the consumer must accept the user agreement, create a username and password, and select notification preferences. This is definitely not an easy, low-friction process. On top of all this there’s the question of how to engage customers before the app is installed or how to re-engage with users after they stop using the app. Finally, the disappointing truth about apps is that nearly one in four people stop using them after only one use, according to the firm Localytics.

And for a consumer who does use the app, how can a brand determine the best channels to engage that consumer? Email, text messaging, push notification, or social media, for example? Furthermore, for deeper engagement, how can a brand convince a consumer of the value of agreeing to share their usage data so the brand can personalise rewards and offers? These challenges can pose serious obstacles to a mobile loyalty program, and they are ones that brands must carefully devise strategies for.

What are examples of brands that are successful in using mobile to build brand loyalty?

Starbucks has one of the best mobile loyalty programs in terms of retention, growth and technology innovation. Starbucks first popularised using barcode scanners in its stores to track its customers’ visits and purchases with plastic cards, and then with smartphones. And its mobile payments platform was adopted well before mainstream advances in mobile payments, like Apple Pay or Square.

A recent upgrade to its app is the integration of the Mobile Order & Pay system with the Starbucks Rewards program, which is significant because members previously couldn’t redeem rewards when placing mobile orders. What’s more, the upgrade enables the app to show what’s “Now Playing” in the local store the customer is visiting and allows the customer to save songs heard in-store to Spotify. This improvement builds on a long collaboration that Starbucks has had with the popular music streaming service to improve its app experience.

Even more impressive is the program’s success. In the first quarter of this year, Starbucks had 12 million members in the US, and 24% of US transactions occurred through the mobile app, according to MarketWatch. Moreover, an impressive $1.2 billion in customer funds had been loaded on plastic and mobile Starbucks cards, according to data from S&P Global Market Intelligence that was analysed by the Wall Street Journal, a figure that is almost double the $621m Starbucks had in 2014, according to Bloomberg and Fortune.

What does the near-term outlook look like for mobile loyalty programs?

Based on the latest research and the increased pace I’ve seen in my work, mobile loyalty programs are set to soar in the next few years. According to a study published by Juniper Research in May, more than three billion loyalty cards are predicted to work as mobile-only or be integrated into mobile apps by 2020, which is more than double the 1.4 billion mobile-capable cards in use in 2015. In particular, the research argued that the improved targeting and personalisation made possible by digital coupons is leading to greater activity rates, which addresses a shortcoming of many current mobile loyalty programs in which a lack of relevant offers has resulted in a downturn in usage.

Personally, I think we’re on the verge of a new age of mobile loyalty programs and are just beginning to make full use of all their capabilities. In addition to the integration of mobile loyalty programs with mobile payment systems, a number of other areas offer exciting possibilities for driving mobile loyalty use. These include, just to name a few, integration with social media channels, use of games and contests, and collection of individual customers’ data (with their consent) to provide much more personalised offerings.

Professor Oleg Urminsky of the University of Chicago summed this up eloquently when he commented recently that a strategy built on a mobile app to reward loyalty uniquely offers “a loyalty platform rather than just an isolated loyalty program.” I’m looking forward to seeing how we improve mobile loyalty programs in the future.


By Lisa Paccione at Syniverse


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