Like other payment programs that depend on technology, merchant loyalty and reward programs have experienced great transformation in the past decade. As affordability increased, many small businesses that once used paper punch cards were able to migrate to a mag stripe or barcode system. Likewise, some merchants are replacing mag stripe loyalty cards with automated POS loyalty programs or innovative mobile apps.
In the early days of transaction-based customer loyalty plans, it would have been impossible to predict the impact mobile loyalty apps would make on the marketplace. Some would say the advent of mobile loyalty apps has radically disrupted the loyalty landscape and redefined the definition of customer loyalty.
Take Starbucks Corp, for example. Thanks to the company's analysts' willingness to innovate, incorporating a loyalty program into a mobile app proved so effective it jolted the quiet loyalty industry into new territory. Starbucks' proprietary loyalty app even drew an expanded customer base that had never before participated in the retailer's card-based loyalty program.
Moreover, Starbucks launched the program with a much broader vision for the app than just storing value or calculating rewards. This led the company to dub the application a "mobile wallet," a term that is used to describe a number of mobile payment schemes, most of which incorporate loyalty applications. With over 4 million mobile wallet payments occurring every week at Starbucks by the app's fifth anniversary, the Starbucks model is now the poster child for mobile loyalty and loyalty-based POS applications.
Dragos Gheorghe, Manager, Gift and Loyalty Department at Sage Payment Solutions EFT, told The Green Sheet, "The main reasons for loyalty becoming mobile are consumer convenience and business engagement. Consumers tend to forget their loyalty cards at home, but they always have their smartphones. This also allows businesses to engage consumers via app notifications and send special offers."
Indeed, a primary impact of loyalty programs migrating into the mobile marketplace is the expanded interaction they create between merchants and their customers. Loyalty programs were founded on the opportunity to leverage a customer's emotional attachment to a company and its service offerings. Therefore, the marriage between customer loyalty and the smartphone has created an extension of the customer experience. Something a swipe, tap or punch card has never been able to achieve.
According to the results of a recent study conducted by Excentus Corp. and titled "The Road to Rewards: What Drives Millennial Loyalty", retail loyalty programs should also embrace the millennial generation's love of technology, peers and everyday savings. Not only is this generation a highly engaged and targeted consumer group, its members also use technology for staying connected to their favorite service providers and monitoring rewards.
In an online introduction to the study, Excentus stated, "A loyalty program that's built on technology, everyday savings and a variety of meaningful, everyday rewards-earning options for millennials can be the key foundational factors that cement rewards-based relationships, increased spending, return visits and lifetime brand loyalty."
Gheorghe agreed with that statement and anticipates more mobile loyalty programs will emerge, but he also believes a blend of traditional and mobile programs will continue for quite some time. He noted the biggest barrier to mobile loyalty programs going mainstream is that "most small to medium-sized businesses do not currently have the resources to implement mobile wallets which support loyalty functionality."
As for Sage's aspirations, Gheorghe said, "We have plans to offer a solution in the future that will bring mobile gift and loyalty to small and medium-sized businesses in an affordable manner. This will empower these merchants and allow them to become more competitive with mobile loyalty leaders such as Starbucks."
Until then, merchants using traditional loyalty programs can take advantage of data management applications that integrate through smart POS technology. "Most successful programs present the loyalty customer information in an easy-to-understand manner with key metrics, graphs and charts – so businesses can make decisions faster and smarter," Gheorghe said. 
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