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Business Advice

Loyalty cards go the digital route

Over 100 firms switch to smartphone apps for patron rewards system
The Straits Times - November 23, 2011
By: Jessica Lim
| More
Loyalty cards go the digital route Mr Desbaillets, co-owner of father-and-son start-up Salad Stop!, showing laminated QR codes from Perx. -- ST PHOTO: DESMOND FOO

THE cardboard loyalty card from your favourite coffee company which rewards you with a free cuppa after you have bought 10 could well be history.

More than 100 businesses from chains like The Coffee Bean & Tea Leaf to lone outlets in school canteens are going digital with their loyalty cards.

Another 100 are set to do the same next year.

This is how it generally works: The smartphone-owning customers of these businesses download mobile applications containing a QR code reader.

When they patronise a participating outlet, they launch the app and select the relevant loyalty card. Upon payment, the shop gives them a QR code to scan. The app then records the purchase.

The app already in use is for iPhones; versions are being designed for Android and BlackBerry phones.

Businesses have something to gain by getting on board: They have access to data such as which days and what time their loyal customers make their purchases and what they buy.

The service is the result of a number of similar apps developed by companies here, which persuade merchants to sign up and collect this data.

Perx is the company behind the digital punch cards for 54 businesses including Salad Stop! and Red Mango. It launched its app on Oct 17 and will have 100 businesses on board by the year end.

A home-grown start-up, around!, launched its app in July with 45 merchants, including The Cellar Door, Freshness Burger and Grandma's Restaurant. It is on track to hit 100 merchants by the middle of next year.

A third firm in this business is Squiryl.com, which launched its app last weekend with 33 merchants, mostly in retail.

And one-month-old Hachicode has five merchants.

American Andrew Roth, 35, set up Perx, which is bankrolled by, among others, Facebook co-founder Eduardo Saverin, who is based in Singapore.

'These loyalty cards are the tip of the iceberg. We're building a loyalty platform,' Mr Roth said, adding that merchants should be able to send marketing messages to their customers through the app from next month.

Fresh from shutting down his group-buying business MaiPlay, he said such businesses are not viable because they have to give big discounts and can neither track nor reward returning customers.

The founder of around!, Mr Xu Da Xiang, 29, said his outfit is location- based. When consumers launch his app, the digital loyalty cards of merchants in the area will pop up.

Similar programs exist elsewhere: In the United States, San Francisco start-up Stampt now has merchants in New York, Chicago and Cincinnati; Tesco in Britain also has an app, and similar ones are in use in India.

Singapore Polytechnic Business School senior retail lecturer Sarah Lim said the cardless system was the way for businesses to go: 'This way, companies without the manpower or expertise to develop such programs and manage their customer information have someone to do it for them.'

She added that going digital means shop employees cannot just put stamps on the cards so their friends qualify for the freebies.

Digital cards also do not get lost.

Personal data security an issue

On the downside, however, retailers and consumers may be concerned about security breaches: The QR code can be reproduced. Consumers may also be wary about the security of their personal information; at least one app asks for gender and date of birth.

Salad Stop! co-owner Adrien Desbaillets, 30, said his business has 500 customers using its digital loyalty card, and will phase out its cardboard one.

He said Salad Stop! had thought of launching its own digital membership plan, until it saw that it would cost $40,000 and take time to manage.

Now, its tie-up with Perx is low cost and enables it to reach out directly to its loyal customers. Mr Desbaillets said: 'We can give them special deals, and even thank them for visiting us. There's so much potential.'

Lifestyle concept store Hide & Seek in Telok Ayer has joined Squiryl.com. Its co-owner Keith Png, 34, said: 'Phone apps are the in-thing now. Most of our customers are Internet savvy. We needed a digital presence.'

Fitness instructor Gina Chua, 28, downloaded Perx's app last week and is using it for her purchases from Salad Stop! and The Coffee Bean & Tea Leaf.

She said: 'It's so much better than paper cards. I always forget those and they make my wallet very thick. And if I have one from each store I go to, it would be very inconvenient.'

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App: Perx

Number of merchants on it: 54

How it works: Users pick the card they want. After payment, an employee pulls out a QR code, allows the customer to scan it, and the app records the purchase.

How much it costs businesses: One-off charge of 50 cents per active customer.

App: around!

Number of merchants on it: 45

How it works: Users launch the app and cards of nearby merchants pop up. After payment, an employee pulls out a QR code, allows the customer to scan it, and the app records the purchase. Consumers can 'follow' their favourite merchants to get promotional alerts.

How much it costs businesses: Subscription prices start from $19 a month and go up to $99, depending on number of outlets and active app users.

App: Squiryl.com

Number of merchants on it: 33

How it works: Users log onto the app and can choose from a list of merchants. They can also trade stamps or 'acorns' with other users, and chat with them. To get an 'acorn', users receive one-off, randomly generated QR codes at the point of sale. These are scanned by the merchant.

How much it costs businesses: Nothing, but the company hopes to earn through location-based advertising soon.

App: Hachicode

Number of merchants on it: Five

How it works: Customers use the app to scan images of receipts. The scans are uploaded and stamps are awarded.

How much it costs businesses: Five cents each time a customer scans a receipt and gets points.

Perks with Big Gulp

AT LEAST one retailer has bitten the bullet, plonked down $60,000 and created its own digital customer loyalty card.

7-Eleven has such a card for fans of its popular Big Gulp sodas.

The loyalty privileges that come with the 7-Eleven@SG card will soon be extended to the convenience store chain's other products, such as Slurpees and Quickbites combo meals.

Since its iPhone app debuted in May, about 400 customers have started using it, and made about 150 redemptions.

Ms Tan Siew Shuen, 7-Eleven's marketing communications manager, said the chain started looking into creating the app last year.

She said: 'The loyalty card app fits the profile of Big Gulp drinkers, who are young and tech-savvy. We felt it would be timely to tap this new technology trend to create our own retail app.'

 

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