apple passbook - the impact on mobile vouchering, and what it means for brands and retailers

Copyright © 2012 BrandEmotivity

Apple Passbook The impact on mobile vouchering, and what it means for brands and retailers

Apple Passbook of 14 Copyright © 2012 BrandEmotivity

Intro

With the new mobile app Passbook, Apple is pushing ahead with a common infrastructure for the delivery of coupons, tickets, boarding passes and loyalty cards, straight into consumers’ pockets. Passbook is an immediate opportunity, which brings together time, location and interaction combined with ease of set up. Brands need to understand the potential value of delivering loyalty cards, vouchers, or payment on mobile devices, through a platform that has a strong brand, awareness and reach. The potential of Passbook is significant, bringing the opportunity to create new forms of engagement beyond the obvious vouchering, loyalty and payment. This whitepaper explores the advantages and challenges of Apple’s Passbook platform, why it matters for marketers and which brands will be able to benefit from it.

What’s going on today?

There is strong evidence that customers want to access coupons and vouchers on their mobile devices. A Direct Marketing Association/Toluna Study in November 2012 found that half of UK consumers searching for retail information on their smartphones were looking for discounts or vouchers. A Nielsen survey from Q1 2012 in the U.S. found that of the smartphone/tablet owners that use their mobile devices for shopping-related activities, 36% used it to redeem a mobile coupon. Juniper Research recently reported that more than 500m people across the world will use mobile coupons next year, an increase of 30%. Not only are mobile coupons showing increased use, but the evidence is that they are more effective. As early as April 2010, Borrell Associates stated in their report ‘Local Mobile Advertising & Promotions Forecast’ that redemption rates for mobile coupons are 10x that of mail- or newspaper-distributed coupons. When Apple launched Passbook in September 2012 as a response to this trend, there were only a few brands on-board, which limited the potential for broad consumer adoption. Three months later the situation has not changed significantly, with only a handful of Passbook-compatible apps available in the U.K. iTunes store, and some fifteen apps in the U.S. As a result, growth of the platform so far has been limited.


Some commentators believed that the introduction of Passbook was as a consolation prize for the lack of NFC (Near Field Communication) payments in the long-awaited iPhone 5. Apple argued that Passbook offered a familiar and integrated experience through the use of barcodes or QR codes. However, it may also be the case that the lack of NFC technology (Near Field Communication), which has been embraced by Google/Android, is hindering the development of Passbook. The limited redemption options in Passbook could make for a poor user experience, which may hold back adoption. Still, the early signs are that Passbook is in fact delivering high adoption, delivery and redemption rates for those brands that have tested the system. The online ticketing business, Eventbrite, said that over 20,000 tickets had been sold through Passbook in the first week. The French supermarket, Auchan, announced in October 2012 that 10,000 people registered for a Passbook loyalty card within a few days of its release. According to senior VP Julie Bornstein in Sephora digital, more than 75,000 of their loyalty program members set up a card in Passbook in the first five days. Similarly, in France, McDonald’s has updated their “GoMcDo” iPhone app to incorporate Passbook. The app can be used in more than 50 restaurants, which allows users to place orders or pay, directly from their iPhone.


The problem with mobile vouchering today

When it comes to vouchers, tickets, loyalty and payment on mobile, today’s space is highly fragmented, presenting a number of key problems for brands. Vouchering inefficiency A 2011 Colloquy survey found that while $48b worth of consumer loyalty reward points are dispensed each year in the U.S., only two-thirds are actually redeemed. Traditional print distribution of vouchers is often considered to be an inefficient method. A report from Juniper Research in January 2012 said that by 2016, the global redemption rate of mobile coupons would see an eightfold increase over the best paper coupons campaigns. Customer information and handling of data There are already a large number of apps available that can store customers’ loyalty cards, credit cards, vouchers or tickets. At the same time, brands are distributing the same kind of information on paper, via email or online. The space is fragmented, and brands are struggling to consolidate the data in one place. Redemption and Clearing The largest problem with vouchers is their redemption. Whilst many retailers have sophisticated EPOS systems, they are somewhat inflexible and hard to adapt for different forms of vouchering. For brands, such as those in Consumer Packaged Goods (or FMCG), they have little control over the retail outlet and have difficulty creating a redemption system, particularly where independent retailers are concerned. For the retailer, besides compatibility with their systems, clearing payment for the voucher can be an issue. Location-based services (LBS) The problem with today’s use of LBS is that it is non-contextual. Brands use LBS for proximity marketing, but consumers’ contextual behaviour is not taken into account. The result is that brand communications are less relevant to the consumers, leading to a higher wastage from delivered messages. Tech infrastructure Brands who intend to process tickets, vouchers or payment from mobile devices require an infrastructure in which to do it. The platforms available today are fragmented, but for brands to develop their own solution is a costly exercise. NFC can offer a more frictionless experience but it is not gaining much traction yet, even when installed in credit or debit cards. A survey published in August 2012 by ATM and Bank Operator found that 51% of Britons have no idea whether or not any of their bankcards are enabled for contactless transactions. Without a common platform, such as NFC, brands will find it difficult to deliver vouchering or payments on mobile.


The benefits of mobile vouchering As a broad channel mCommerce includes transaction, loyalty and ticketing. Vouchering or couponing has been an important channel in retail and product marketing and will continue to be so. Mobile vouchering, however, offers a number of opportunities for brands, especially those in the retail space. The strongest of these are location-based offers. These can be enabled when the user is near retail locations, venues or live events. The location element has been shown to be a powerful factor in mobile and can effectively drive footfall and uplift. Mobile vouchering can be used to amplify a product, especially those that are heavily in ATL media, by serving relevant reminder or call to action. Mobile users are also more likely to share content, and thus vouchering in this channel can be used to incentivise a consumer’s friends or family.

A different approach with Apple Passbook

The key concept behind Apple Passbook is that brands can address many of the current problems of mobile vouchering and payments to provide a better, frictionless experience for their customers. A frictionless experience With Passbook, brands and consumers are able to access all of the information in one, single iPhone application. Apple has pre-installed in on the iPhone 5 and is a native app in iOS6, which means that users cannot delete it. This brings an assurance to brands that their tickets, vouchers or messages will reach consumers seamlessly through the familiar iOS environment. The opportunity of context With the information consolidated in a single app, it creates an opportunity for brands to understand consumers’ contextual behaviour. For example, if a customer has a ticket from Eventbrite for an outdoor concert, brands can use Passbook to send event reminders, along with relevant offers: “The forecast says rain tonight, don’t forget your wellies! Need a new pair? We’re offering 10% off for anyone going to the gig.” Enabling businesses of all sizes Apple is creating an ecosystem, which is potentially available to all brands, regardless of size. In some ways it takes a similar concept to Foursquare’s Check-in Offers. Passes can be delivered in a number of ways: they can be integrated into an existing app, through the Passbook app or via email, mobile web links or messaging. As there is no need for an app presence, it makes passes available to all businesses. Besides Apple’s own API, there are a number of third party tools available to quickly create passes, many of which are free (see the list in the appendix). These use simple form-based web interfaces, which avoid the need for developers to create passes. For example, the social marketing platform Woobox allows businesses create Passbook coupons, in which they recently added support for SMS.


Completing the frictionless experience Perhaps the greatest potential of Passport is in providing a frictionless method for brands and consumers to interact, through products such as loyalty cards, vouchers, tickets or boarding passes. Although it’s impossible to predict what Apple might do in the future, it is possible that they can bring Passbook into an NFC offering in the future. Apple’s reasoning for their choice of a barcode-based solution is down to the lack of penetration in NFC reading devices. Although not discussed publicly, another reason for not installing NFC in their devices may be down to issues about who owns the ‘credentials’. Are they attached to the SIM card or stand independently? Other companies have certainly banked on the future of NFC. In the UK, Barclays launched its biggest ad campaign in three years in November 2012. The aim was to encourage adoption of contactless, mobile-payment technology.

In contract to Apple, Android and its Google Wallet system is expected to continue pushing for NFC. If it gains traction it could leave Apple out of the loop if it really starts to gain traction. However, MasterCard executive Ed McLaughlin said in an interview in January 2012: “the contactless payments industry needs Apple to hit critical mass.” Certainly, Apple has been very successful at pushing forward technologies and channels in mobile, such as touch screen devices and app stores. Whilst they like to lead on innovation, it would be no surprise, if NFC technology becomes less fragmented and available across a larger tranche of retailers, Apple will complement Passbook with NFC.


Advantages of Apple Passbook

Sustaining customer relationships With a consolidated, single destination for loyalty cards, vouchers, or, the life of a loyal consumer is made much easier. Brands that also enable mobile payment via Passbook, such as Starbucks, make it easy for the consumer to both pay and collect retail loyalty points in a single process. With the combination of the always-on, always-present mobile, with functionality such as location-based reminders, brands are likely to see higher redemption rates. As it is mobile-based, consumers will always have their vouchers or loyalty card within their device, ultimately delivering a more rewarding shopping experience. Lower costs Because Passbook is a native app, the platform is already in place and in the hands of millions of iPhone users. Setting up passes via the API is free, which makes it a much more cost-effective platform to use. The infrastructure is there; all that’s needed is brand and consumer adoption.

Relevant and timely communication Passbook brings together time, location and interaction, and brands can use this to their advantage. When it is integrated into brand apps they can gain a better understanding of consumer’s contextual behaviour, thus being able to communicate more relevant messages. Point-Of-Sale efficiency When all consumers have to do to redeem a voucher or collect shopping points is to scan the pass at the checkout, the queues are effectively reduced, thus increasing the efficiency at the POS. Data capture With the information coming repeatedly through one application, it becomes much easier for brands to efficiently collect and handle valuable data on consumers’ behaviour on mobile. Some of the third party interfaces offer analytics that can support this. Although these are fairly basic so far, they show the potential to bring data capture through this channel. Immediacy Both the ease of setup and frictionless delivery brings immediacy to Passbook. Brands can set up ‘test and learn’ and AB testing campaigns to trial the system at minimal cost. From the user perspective, the fact that new passes are pushed to the front of the device creates an immediate call to action. One interesting example of using Passbook in an immediate context has been Medpasses (see ‘examples’ at the end of this document), who have used it to deliver medication reminders. Although the mobile payment space will see many different solutions from Square, Google Wallet, PayPal and Amazon, the channel is far from mature. Passbook delivers an opportunity for brands to experiment with vouchering or payment, without a long-term commitment, whilst the key players develop their offering.


Challenges in getting there

A promising solution nevertheless, brands are still faced with some challenges that must be overcome before they can take full advantage of Apple Passbook. Brand and consumer adoption As long as usage of the Passbook platform is low, the advantages of it will naturally be limited. We expect, however, that growth in brand adoption will significantly increase once they realize how Passbook in fact offers an immediate opportunity. When the platform then starts to really gain traction, consumers are likely to follow. For some brands, the fact that Passbook is iOS may be seen as a distinct. Whilst many iPhone users fall in a higher income, higher spending segment, it may not deliver the target audience for some brands. Android is currently selling double the number of handsets to iOS globally, and is used by broader demographic. A brand such as a supermarket may have to consider the implications of adopting Passbook. Will there be enough customers able to use it, or will it make a 2-tier system for loyalty and vouchering, preferring Apple users? So far, the signs show Passbook usage as very sticky such as demonstrated by Eventbrite, Airbnb or Sephora. Retail infrastructure In order to take full advantage of Passbook, especially when it comes to the integration of mobile payment, brands must implement appropriate systems in-store that allows for scanning of the passes via two-dimensional barcode scanners. Although common place, such scanners are far from ubiquitous. Arguably this could hamper uptake if the user experience is broken. Collecting and making sense of the data An advantage of having a single destination for all loyalty cards, vouchers, tickets and passes is that the user data can more easily be collected. The challenge, however, lies in integrating the collected data with existing CRM solutions in order to gain a more complete understanding of consumer behaviour. As such, Passbook doesn’t solve that problem. Competing networks Whilst the obvious, natural competitors to Passbook would seem to be Google Wallet or PayPal’s mobile offerings, the real threat to Apple Passbook right now are the existing third party vouchering apps. Shopkick is the largest, with 3 million users globally and according to the company in May 2012, 7 million ‘Walk Ins’ or redemptions. In the UK, Quidco has made strong in-roads with their discount via mobile payment service. Other similar offerings include LivingSocial and Voucher Cloud. Perhaps the biggest competitor at the moment is Foursquare. Their vouchering centres around the Check-in Offer, which is managed and redeemed by businesses themselves. It is interesting to note that Apple has taken a similar approach in opening up Passbook to all brands, regardless of size. Foursquare has 25 million users globally and has a strong active user base in iOS.


Although the company does not currently offer any payment or ticketing, they have developed their business offering considerable, so it is not inconceivable that they will up their game in response to Passbook.

Who can benefit from Apple Passbook – Retailers or Goods & Services brands?

Considering the various advantages and challenges Passbook has, who is most likely to benefit from it? Chances are Passbook will have an impact on both. Why it makes sense for retailers Once the required two-dimensional scanner becomes ubiquitous, Passbook can help processing checkouts quicker. That means reduced queues, happier customers and a more efficient POS. An issue for the retail industry is that coupons simply don't work very well. They are important for the industry, however. Data from Valassis in September 2012, the UK’s largest coupon and voucher services provider, showed that retailers now account for over three quarters of coupons redeemed. Albeit the redemption rate of conventional coupons has shown growth over the past few years, it’s still low compared to mobile. In June 2012, direct mail-distributed coupons saw a rate of 5.6%. Even lower was in/on-pack coupons with 2.5%. Coupons issued in-store stood at 3.5% in June 2012. American retailer Target was among the first companies to embrace Passbook.


Why it makes sense for goods & services brands Given that Passbook provides brands with an immediate, cost-effective solution, there are several key advantages that make Passbook a good choice for goods/services brands.

Using Passbook for mobile loyalty cards can often be seen as innovative in the eyes of the consumer, increasing brand loyalty as well as creating positive and memorable brand experiences. There is no need for an app, and links to passes can easily be distributed via other channels, lowering the costs for smaller brands. Passbook also makes it easier for brands to track the performance of the offers they push to customers. With better knowledge of which coupons are actually redeemed, and how, brands can better analyse the data and become more efficient.

Which brands are using Passbook? The current ‘Best In Class’ example is probably from Starbucks. The coffee house franchise has been well-established in mobile, with a successful loyalty and payment app. Due to such a fragmented payment landscape, the brand effectively created their own payment ecosystem. Their solution was to introduce payments via a barcode, which easily integrated into their POS systems. So even before the launch of Passbook, Starbucks had taken a similar approach to mobile payment. Integration was a natural, obvious choice for Starbucks. The brand expects to see $500 million of mobile payments by the end of 2012. French cosmetic brand Sephora identified the potential of Passbook right from the start. They added their ‘Beauty Insider’ loyalty card and saw 20,000 users within 24 hours. That was even before the iPhone5 had been launched. They sent an email to their loyalty customers inviting them sign up via a banner. This took them to a microsite, which explained how it worked and a further link to set up the Passbook within their existing Sephora app.


The accommodation app AirBnB is using Passbook to enhance its service. Their passes show the check-in and check-out dates, the listing's address, the confirmation code, and the host's name, phone number and email address. As an app-based service outside the traditional hotel network, the integration of Passbook is natural and will bring familiarity to users.

Medpass is a good example of an imaginative use of Passbook, in this instance, to deliver service. Doctors or patients can quickly set up reminders through a web-based interface, which delivers the notifications to the front of the device. It is particularly useful for those with complex medication needs and the security of Passbook ensures that they are only seen by the patient.


Another service integration comes from Billguard. As with Medpass, it makes use of the secure and immediate nature of Passbook to deliver passes to the front of the screen, which allow users to quickly redeem their balances, fees and recent transactions in a seamless manner. Klout’s Passbook offering met with a less favourable response from commentators and is arguably one of the few Passbook fails. The system allows users to send their Klout details and Score as a pass. This can then be shown to other people and scanned, much like a QR businesses card. Whilst it would not be bad idea for delivering contact details, detractors felt that it was showing off your Klout score and ultimately rather arrogant.

5 steps brands can take tomorrow

Test and learn With minimal set up cost, any brand, regardless of size can experiment with gift cards, vouchers or even service reminders. Use one of the solutions listed in the appendix, which allows for easy integration, even where there is no brand app. Capture the data Collect some data! Even at the test and learn stage it is important to understand how, when and where passes are used. Using bit.ly links in QR codes, for example, means that scans are trackable. Once established, integrate Passbook data into your CRM. This helps brands to bring a more complete customer picture, and tailor future communications to consumer preference. Make it relevant As with many other mobile channels, leverage time or location-specific information together with information from other Passbook passes to provide consumers with relevant and timely communications and offers. Be imaginative The possibilities are endless. Passbook cards or vouchers can be enhanced with additional features such as location-based services. It doesn’t have to fall in the category of vouchers or tickets either. There are many different ways it can be used to enhance or deliver service. Examples include event reminders for ticket companies and push notifications reminding consumers to use their Passbook card when they enter the store. Engaging experiences Whilst some brands don’t consider Passbook particularly innovative enough, to some extent that could be the key to the channel’s success. Consumers are more likely to engage with familiar, frictionless channels, not necessarily with innovation. This is evident from the high take-up with those brands that have already used Passbook. Keep the experience engaging and think ‘why would our audience want to use this’?


Appendix: Additional Resources

http://www.passsource.com/ - can be used to create free Passbook passes https://passtools.com/ - 50 free passes after which it is a paid service http://passk.it/ - create free passes http://lemon.com/ - mobile wallet company with passbook API http://manapass.squarespace.com/ - Mana Passbook pass builder http://dwolla.com – has included an API for Passbook within their existing mobile wallet http://wordpress.org/extend/plugins/apple-passbook-gateway/ - Apple Passbook plugin for WordPress to create passes


About BrandEmotivity

We are a mobile generation company, in a connected global world. Digital is ever more key to customer engagement, and mobile services and utilities are at the centre of brands value propositions. We help agencies and brands making sense of it all, thinking, acting and winning on the mobile battlefront. We are passionate about mobile and brands, and this passion is shared between our collaborators, partners and clients. Most importantly, we have fun doing what we do. For more information visit www.brandemotivity.com.

Christian Linnestad Mobile Consultant – UK BrandEmotivity [email protected]

apple passbook - the impact on mobile vouchering, and what it means for brands and retailers

Business