Ken Musante: A gift card and loyalty conundrum - Napa Valley Register

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I love Papa Joe’s Pizza. Their loyalty program is unique. You can exchange 12 receipts for a free pie. Though this may be an ‘old school’ approach, given the issues with loyalty programs, I understand why.

Nothing says ‘I care’ like a gift card

Loyalty programs are distinct from gift cards. Gift cards are prepaid cards. Before the physical card, stores would sell gift certificates with specific denominations. This was difficult when your purchase was less than the amount of the certificate.

Open loop gift cards display the Visa or Mastercard logo. Closed loop gift cards may only be used at the retailer where the card was purchased. Gift cards may be either a physical or virtual.

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Hi-fidelity

Loyalty programs, like airline miles, are meant to keep customers "loyal" by rewarding them for repeat purchases.

Loyalty programs can be a card which is initialed with every purchase. That solution, however, is insecure and does not scale. Moreover, punch cards do not provide analytics and customer insight. Loyalty programs increase sales with existing customers; which is far more profitable than obtaining new ones.

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My wife spends more at a local winery because she is a member. The winery benefits because of the additional purchases and when she drinks, she is more apt to recite the member benefits.

Loyalty programs establish a more personal relationship with your customers.

Businesses benefit from increased visibility and deeper understanding of their customers. All the better if you can unify data across various channels and segment those customers for targeted campaigns. If you have a customer who only buys online, you may provide them a targeted in-person incentive.

Restaurants can target their most valued customers and entice them to visit at an earlier hour. The point is the data available with today’s loyalty program allows businesses tremendous insight into customer shopping behavior, preferences, profitability and proximity. Retailers can use this data to make their marketing more meaningful.

Love the one you’re with

Many Point of Sale (POS) solutions offer integrated gift and loyalty programs. The costs for transacting are much lower because the interchange or wholesale cost is near zero. Because your team is familiar with your POS, it is the most efficient way to roll out a gift or loyalty program.

The downside is that typically the gift and loyalty solution is proprietary to that POS. Consequently once you have enrolled and have existing customers, it is extremely difficult to convert to a new provider or POS.

It's impractical to have two differing card readers for the old and new programs and, as you can imagine, the old provider doesn’t always ‘play nice’ with the new provider.

As a result, many businesses, after electing their gift and loyalty provider, never change their POS. This too has its issues but that’s a topic for another article. It does explain why in today’s world, however, when I can simulcast three NFL games, I still have to save my receipts at Papa Joe's.

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Ken Musante is President of Napa Payments and Consulting. Ken has deep industry knowledge regarding interchange optimization, PayFacs, Fintechs and integrated solutions. He provides merchant consulting and expert witness consulting. He can be reached at 707-601-7656 or kenm@napapaymentsandconsulting.com.

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