Commentary

Loyalty Programs & the Small, Vending Machine Mobile Payment

Soda-machine-BLoyalty programs around small-ticket items may push mobile payments along.

Big retailers and brands have long used loyalty programs to entice and reward their best customers.

Many reward coupon programs have been integrated into mobile apps so shoppers can see their rewards when most relevant, such as when they’re in a particular store.

But rewards for loyalty to small-ticket items have hardly been at the top of most loyalty reward program lists.

An interesting experiment is about to hit the vending machine market with consumers being rewarded for using a mobile wallet.

The mobile payments program Isis, a joint venture with Verizon, AT&T and T-Mobile, is rolling out the program in its test markets with USAT’s 100,000 cashless payment terminals using NFC (near field communications) technology.

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The general idea is that consumers get points or credit for using their mobile wallet (Android only, of course, since Apple doesn’t yet buy into NFC) at vending machines.

You get enough points, you get a free vending machine product, like buy four, get one free, that sort of thing. The idea may just be ready for the masses.

Smartphones out-shipped feature phones worldwide for the first time in the latest quarter, according to new data from IDC. Additionally, the number of NFC-enabled smartphones is projected to pass 500 million next year, according to ABI Research.

This means more consumers will have the capability to tap into vending machines with  smartphone payments.

Of course, putting coins or a dollar bill into a machine may be considered just as easy as using a phone to pay, which is where the incentive comes in.

Consumer data from cash transactions at vending machines hardly falls into the realm of useful consumer insights. But when a consumer gets credits toward free vending machine products like Coke, Pepsi, Doritos or M&M’S, it may cause that little tilt to using mobile rather than cash to pay.

We’ll have to see how this plays out, but it may be loyalty and rewards around those small-ticket items in vending machines that get consumers to reach for their phone rather than cash.

Smartphones are going to be everywhere. Vending machines already are.

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8 comments about "Loyalty Programs & the Small, Vending Machine Mobile Payment".
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  1. Gordon Borrell from Borrell Associates, April 26, 2013 at 12:19 p.m.

    Chuck, I think you nailed one of the biggest opportunities with the small guys here. When I saw our own research from an SMB survey we did last December-January, something incredible popped out: 78% of businesses are collecting customer database info (mainly email addresses), yet only 28% of them do anything with that info. HUGE opportunity that mobile media is best positioned to take advantage of. Coupled with a mobile payment system or even just a mobile coupon, this indeed could be the big hit in the "small" business world.

  2. Chuck Martin from Chuck Martin, April 26, 2013 at 12:39 p.m.

    Thanks Gordon, those are large numbers you found around data not being leveraged. Agree, a very large opportunity, indeed!

  3. Jason Gross from VeriFone Media, April 26, 2013 at 12:59 p.m.

    Ironically, I think vending machines are one of the few places where tapping a phone may be a better user experience for mobile payments. It is certainly easier than trying to flatten out your dollar bills before inserting them (if you even have the two or three singles sometimes required these days). And as for using a card at a vending machine, this is not a habitual behavior yet (due to slow upgrade cycle of machines), and it still feels a little unnatural to pull out your wallet, find a card, and swipe for what is much more of a walk-up impulse purchase than a traditional point of sale environment. It is much more akin to tapping a phone for transit, which has long been the early adoption use case for NFC around the world.

  4. Chuck Martin from Chuck Martin, April 26, 2013 at 1:57 p.m.

    That is a great point about mobile payments for transit, Jason, thanks for making that connection. You also may be right regarding habitual behavior, since this is really what it is all about.

  5. Jonathan Tavss from Scarlet Strategic, April 26, 2013 at 3:17 p.m.

    I think there is huge upside for Telcos with this. The opportunity benefits of swiping a smartphone as opposed to even a credit card or pulling out cash are immense. The challenge is definitely in getting the machines distributed and existing machines updated - with the fact that relatively few machines offer even credit card usage at this point, that uptake rate to ubiquitous, critical-mass NFC usage is worrisome. They do need to be strategic in the locations that they select to place those pilot machines or the test program will be useless.

  6. Chuck Martin from Chuck Martin, April 26, 2013 at 3:36 p.m.

    Yes, the same as the issue with point of sale systems and NFC, Jonathan. The challenge you stated cannot be underestimated.

  7. Paula Lynn from Who Else Unlimited, May 15, 2013 at 10:43 p.m.

    Nothing is free. You are going to pay for the "free" one way or another. NOTHING is free.

  8. Chuck Martin from Chuck Martin, May 16, 2013 at 12:45 p.m.

    Maybe not ultimately free, Paula, but at least an incentive to modify behavior.

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