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[13 comments]

BrainTrust Query: Enter Perka, Exit Punch Cards

November 8, 2012

Through a special arrangement, presented here for discussion is a summary of a current article from the Hanifin Loyalty blog.

For a generation, local merchants have been limited to using newspaper ads, coupon mailers and punch cards to attract and retain customers. That wouldn't be terrible until you compare those tools with the ones developed for national and franchised merchants who are competing for the same consumer dollars.

Generally speaking, innovations in payments and loyalty have been targeted to the bigger players, leaving local merchants to decipher a way forward in the digital economy on their own.

Location-based marketing and mobile solutions are now affordable for local merchants, but there is irony at work here, as the explosion of activity on the social graph and changing consumer purchase decision making has resulted in information overload.

I've looked at a variety of location-based systems and technology inclusive of Foursquare, Shopkick, LevelUp, Belly as well as payments innovations PayPal, Dwolla and Square. One that just appeared on my radar is Perka and I had the opportunity to speak with Rob Bethge, a co-founder of this highly personalized and incentive-based loyalty program.

A location-based check-in triggers an electronic "punch" or "stamp" in the system, and customers are encouraged to return for visits to earn rewards, all of which are issued by the participating merchant. The check-in is validated through an app downloaded from iTunes that runs on an iPod at the merchant's counter. Through the app, store personnel are able to personally greet customers, making Perka also an effective customer service tool.

The crisp mobile application provides a very low start up cost and minimal impact to the cashier or point-of-sale environment in store.

More recently, Perka added social media to its loyalty program, allowing merchants to reward customers for posts, Likes, and tweets. Coupons issued by the merchant can be shared among members, and all the activity can take place without a plastic card or key fob.

So far, Perka is running at over 400 locations in the U.S. and Canada, along with a few popping up in the U.K., Australia and Ireland. Over 100,000 consumers are playing the Perka game as the company expands its footprint nationwide through phone sales and incoming Internet leads.

Discussion Questions:

Will Perka and other LBS (location-based services) solutions spell the end of paper punch cards? What criteria should a local merchant use in deciding which LBS approach, if any, to adopt? Are these emerging location-based POS solutions better suited for local merchants or could they be adopted by national chains?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Are location-based technologies helping even the playing field around loyalty programs between smaller and larger retailers?

Comments:

We're definitely headed toward all-mobile loyalty programs which do not require that the shopper carry a punch card or other physical card into the store.

In the meantime, until full market saturation, retailers must identify the needs of their current loyal shoppers. They may need to faciliate a dual phyiscal/mobile program for some time.

I think these programs can be particularly successful for local merchants, as long as they are affordable.

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Debbie Hauss, Editor-in-Chief, Retail TouchPoints

Really Great! Yes, this is the beginning of the end of punchcards, but don't throw them away just yet. Adoption lags behind innovation about 18 - 24 months...and in this case, possibly a bit longer.

But whether this was Perka, or another player, we could've seen this coming. Shoppers armed with mobile computers and apps are the way forward for retailers of all stripes.

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Liz Crawford, VP, Strategy & Insights, Match Drive

We are living in the wild, wild west of retailers and brands trying to find a place of value and relevancy in the revolution of the digitally empowered, connected shopper. New technologies are being introduced daily! Any technology that allows small business owners to level the playing field with their enterprise competitors is a great thing.

All too often, however, technology is merely replicating traditional and understood analog marketing methods. Understood yes -- but truly effective and valued by today's shopper? -- oftentimes not! Digital technology certainly reveals endless opportunities but it often masks the reality.

Shoppers are now in control and the transparency of the digital world doesn't leave marketers many places to hide gimmicks. All too often marketers use technology and then claim to be innovative. Being true to yourself, your brand and your customer is the new innovative. Brands should focus on designing a great product, with great service through a great omni-channel experience and then use technology to enable that strategy.

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Adrian Weidmann, Principal, StoreStream Metrics, LLC

As all of you know, I'm reluctant to declare "the end of" much of anything purportedly being replaced by a new technology. Things tend to operate in tandem for a fairly long time -- generally much longer than leading-edge folk wish or predict. (The movies still exist, despite TV. The big TV networks still exist, despite infinite cable channels.)

What concerns me about the proliferation of so many new social media channels is the difficulty a small retailer has in keeping up with them all. To do them all effectively, it takes a huge amount of time. And who's got time for that? Is there truly ROI in hiring someone to do this full-time if you're a small operator? I don't see any game-changers out there, just slow evolution which I know is really frustrating if you are a techie.

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Warren Thayer, Editor & Managing Partner, Frozen & Refrigerated Buyer

There are a number of apps that are turning the traditional loyalty card to a smart-phone based product. Another example of our society moving toward "paperless." Merchants should adopt quickly while there is still a "cool factor" to using the technology. They should train the customer to use their phone to accrue points, rewards, etc.

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Shep Hyken, Chief Amazement Officer, Shepard Presentations, LLC

These are great developments and make powerful solutions available to smaller businesses. However, many big businesses haven't succeeded with loyalty mechanics because they adopt the wrong approach, and smaller businesses should take care too.

The other warning for businesses entering these kinds of programs is to ensure their data is appropriately protected: if you choose to leave the program, your data doesn't get left behind for competitors to access....

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Matthew Keylock, Senior Vice President, New Business Development and Partnerships, dunnhumbyUSA

These solutions might not spell the end for paper punch cards, but they are a great way for local merchants to have customer loyalty programs incorporated with social media while taking advantage of current technology. Not only will local merchants be able to provide special offers to their regular customers, the sharing and social media aspect that is involved will hopefully attract new customers. When looking at criteria for these solutions, I should think pricing and area coverage would be rather important. I looked at Perka's website and I must say this is a great idea for local merchants. In regards to national chains, I think it would be a substantial investment in hardware and most chains already have loyalty card programs in place.

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Zel Bianco, President, founder and CEO, Interactive Edge

The biggest challenge for local merchants wanting to support a loyalty program comes at the backend. Big retailers can obtain supplier and manufacturer sponsorship that enables them to offer customer discounts with minimal impact on gross margins. Smaller retailers do not have the same leverage on suppliers. It becomes difficult for them to offer significant discounts without impacting margins.

As far as the characteristics of a loyalty program I think the number one factor is simplicity. If the program is offered by a variety of local merchants it makes more sense. A great way to promote the service might be through the local business chamber of commerce. By offering the service to their members they encourage consumers to shop locally and can offer retailers support for their implementation.

Ultimately another issue will be too much fragmentation. As more service providers emerge, it will become more difficult for any of them to reach significant volume. Just as consumers have seen their key chain fill up with ID tags, they will see their smart phone load up with apps. By itself, that may not be bad but it creates an impediment as the consumer has to join multiple services (another reason for using a local organization like the business chamber, although they are probably not allowed to choose a particular provider).

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Bill Bittner, Principal, BWH Consulting

Yep but there are still many folks out there without smart phones, so don't throw them away. As for criteria for making the best selection, as I always say, Retailers need to know what their customers want and expect from them and then give it to 'em. There is no one size fits all.

Lee Kent, Brings Retail Executives Together to Meet.Learn.Profit, RetailConnections

Loyalty punch cards are an outdated and need to join the ranks of paper transfers for rapid transit or punch card voting machines.

The point-of-sale system definition is rapidly evolving and already have the capability of incorporating more advance loyalty systems such as gamification and interact with mobile devices and card systems.

The most revolutionary product merchants have not realized is the new $499 Microsoft Surface RT. Easily attach a USB barcode scanner or contactless NFC reader and can run point of sale applications that can access back-end systems in real time and process payments and communicate with consumer phones or card to provide and redeem loyalty points.

Ed Dunn, Founder, (Stealth Operation)

Services like this are clearly the wave of the future, but it's anyone's guess when the tipping point will be reached and we'll all be able to carry thinner wallets. Services like Perka are certainly hastening the arrival of that day by driving adoption among small retailers.

I would advise a retailer to look at two primary criteria when deciding which LBS platform to adopt: First, they should look at how easily the program will integrate into their existing store processes and systems and secondly, they should judge the platform on how likely consumers (and their target consumer in particular) are to adopt the platform in question. LBS can be a great opportunity for small retailers, but they have to make sure it doesn't come at the cost of bogging down their operations and they should feel comfortable that more than a few consumers will either already be on the platform or will join once they hear about it in the store.

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Martin Mehalchin, Partner, Lenati, LLC

The punch card was the only low-cost loyalty concept for the small retailer for years. The greatest weakness is the physical card. In two shopper households either each must have a card or they must make sure the shopper of the day has the card. Smartphones do provide an option, but few of the retailers have the knowledge base to support such a program. This be definition will increase the cost, which may put it out of reach for many small retailers.

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W. Frank Dell II, CMC, President, Dellmart & Company

On a feature-by-feature basis, LBS + loyalty can level the playing field between large and small players. Want an electronic punch card app like the big boys? There are dozens of providers who can help you.

What small businesses usually can't emulate is the selection and locations the large players have. These convenience elements increase the value of loyalty programs because the currencies have more value in more places.

Vendors are getting around this problem by creating coalition programs where non-competitive (and sometimes competitive) small businesses team up and pool points. This can be done on a local level and by plugging into existing programs such as that operated by American Express or Nectar. Local businesses that participate trade off proprietary brand building for broader reach that coalitions provide.

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Dan Frechtling, Vice President, Global Product Management, hibu, PLC

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