To help small, independent retail chains gain more loyal customers, a United Kingdom-based electronic payments provider is introducing a loyalty scheme that involves a contactless card.
SQuidcard Ltd., whose cards already are deployed in the education and transit sectors, last year tested the loyalty system with popular coffee chain Coffee Republic Trading Ltd. and found the results encouraging enough to roll out the product nationwide, according to Aruna Withane, SQuidcard business development manager.
Retailers can customize the scheme to include cash-back or merchandise discounts after a certain number of visits. Merchants also can use the system to support a prepaid gift card function using the chip in the same card.
“Flexibility is our key, and we obviously don’t know their business as well as they know their own business,” says Withane.
Withane, Coffee Republic’s former general manager, witnessed firsthand how the program can help a business. The retailer tested the program at a shopping center, a business center and a location in London where similar quick-service food chains exist. The scheme worked best at the business center, where Coffee Republic serviced repeat customers almost every day, Withane says.
“The shopping center was difficult because 70% of the people who came were new shoppers who we probably wouldn’t see again,” he adds, noting an ideal loyalty program would involve rewarding customers on their second and third visits.
Under a 10% loyalty scheme, for example, a retailer would load 5 British pounds (US$7.44 or 5.58 euros) into a customer’s card account if he spends 50 pounds in one visit. “The next time the card is presented at the [contactless] reader, it recognizes the 5 pounds, and the retailer would deduct that amount from their next purchase,” Withane says.
The system tracks a consumer’s transaction history at a particular retailer and the rewards earned. Consumers can view their reward totals at a dedicated Web site.
SQuidcard is not saying how much retailers will pay to participate, but Withane says the company is leasing a small contactless card reader to merchants for 15 pounds per month. The company integrates the reader and corresponding software into the merchant’s existing payment system.
SQuidcard receives 1.5% of the sale with no minimum or maximum charge, Withane says. “Even if a consumer spends one pound, we charge you just 1.5% of that pound,” he says.
The company’s loyalty efforts are significant because others have chosen not to invest in that space, according to Matt Simester, a director at Auriemma Consulting Group. “The economy has an impact on those decisions,” he adds.
The challenge facing SQuidcard will be in how consumers perceive the value proposition of any loyalty scheme involving the card. Consumers “won’t care about the [contactless] system,” Simester says. “The proposition has to be enough for the consumer to want to use it.”
