Loyalty tokenisation could be the key to turning your occasional customers into loyal regulars

Loyalty tokenisation as a vital enabler of low cost, frictionless, yet highly secure digital loyalty schemes which could turn many of your occasional customers into loyal regulars.

Loyalty schemes not always driving loyalty in the past

Loyalty schemes have seen quite a lot of change over the last few decades. Before digitisation it was all about paper-based vouchers and swapping spend-based credits, which you normally collected in a book, for prizes.

Many UK readers remember the famous sets of glasses available for loyal Esso fuel customers. Some older readers may remember Green Shield Stamps - a UK nationwide sales promotion scheme (borrowed from the US, as ever) that rewarded shoppers with stamps that could be exchanged for a range of household goods such as?toasters, garden furniture and toys once pages of stamps had been collected.

These paper-led schemes demanded the unflinching diligence of the customer to store the stamps, stickers etc and bring them in when sufficient credits had been gathered and they’d worked out what prize they wanted to redeem. It was also administratively intense for the merchant. Whole teams of people looked after these schemes for retailers back in the day.

It's a little bit different today. If you are a coffee lover, you will have been numerous bank card-shaped pieces of paper for collecting stamps from various cafes. The idea is generally that your tenth coffee is free. Job done – the coffee shop has encouraged you to stay loyal and you’ve been rewarded with a free coffee after two weeks of daily visits.

This type of café loyalty card scheme is much cheaper for merchants to run than the more complex bulk buying and prize booklets that are gradually being phased out. They are far easier to administer and cheaper to pay out on. Indeed, the loss of revenue from running these loyalty card schemes is more or less invisible to the merchant’s CFO. However, do any of these types of schemes really make your customers more loyal?

Indeed, aren’t they simply rewarding the already loyal customers which are prepared to keep your loyalty card with them and collect your stamps dutifully?? Those customers on the margin may end up with three or four forgotten partially stamped cards in the corners of their wallets.? In my view, great loyalty programmes need to be low cost, easy to administer and successfully convert occasional customers into loyal believers.

Tokenisation offers route to winning new loyal customers seamlessly

As the world of mobile apps expands and we learn more about what types of people use them, Mypinpad is beginning to see an opportunity for loyalty credit tokenisation as a natural extension to the network token-based payments that I wrote about back in February.

In that earlier piece, I wrote about the merits of using tokenisation to enable seamless ‘multi-matching’ (using different cards to pay the same merchant) for payments. So that, if you decide to do a business meeting in your favourite café, you can pay for your client’s coffees for that meeting on your added business credit card (associated with your existing record), instead of your personal current account card which normally handles that payment.

But why does it make sense to extend tokenisation to loyalty credits? From a business perspective it’s sensible to put PCI DSS-level security around these schemes because points have a clear monetary value. Those able to hack into mobile apps could, in theory, steal these credits and resell them. Others might choose to simply boost loyalty accounts so that they suddenly have many full cards providing them with free coffees for weeks.

However, the bigger benefit goes beyond improving customer experience and securing credits better for both parties. Loyalty tokenisation offers a powerful and low cost way of hooking those marginal customers. You know the ones: they have been in once on the way to work but their routine varies and they have not come back for many weeks, even months.

So, if this is powered by a bank grade-certified payments provider such as Mypinpad, the merchant can enable loyalty point giving and redemption right off the bat, even as part of the very first ever payment settlement with a merchant. The experience at the payment terminal might go something like this: You tap your card or phone on the terminal to pay.

The terminal screen offers the option of redeeming any credits on this transaction immediately or going through with the full payment now. If that card is new to the merchant’s system, the terminal could add the question: ‘Do you want to enrol – Yes or No’. This offers the potential for instant onboarding if they press Yes.

Inspiring loyalty from the very start

If the new customer volunteers some personal information as they are being enrolled, they might immediately gain access to a loyalty bonus: perhaps because they have provided their date of birth and the transaction is within that same month, they might get ￡2 off that transaction. They shouldn’t need to download the mobile app to redeem that bonus– it should be possible to do that right there on the terminal in a frictionless manner.

That’s vital. It offers the potential for an occasional customer to become a loyal regular. If they are prepared to provide more information about themselves for your CRM system, who knows what other loyalty incentives they may receive next time they visit? This ‘hook and haul in’ customer acquisition strategy is definitely aided if your mobile app is capable of tokenising both payments and loyalty points.

The key thing here is that tokenisation technology enables smaller merchants to roll out a very low cost loyalty scheme which is still highly secure and highly effective in turning those occasional customers into loyal regulars which could begin raving about your company within days of coming in for the first time. Now that’s the sort of loyalty scheme small merchants are likely to be queuing up for.