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GUEST OPINION Why Apple’s Passbook will transform retail

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Krishna Subramanian, CMO, Velti explains why he thinks the under-rated and overlooked Passbook app in iOS6 is set to transform mobile retailing

Amid the excitement surrounding the iPhone 5 launch, some critics pointed to the device’s lack of near-field communication (NFC) as a crucial flaw, claiming it would make it impossible to use the phone for mobile payments — an area where Google has been leading the way. However, this may be beside the point, consider what matters more to retailer and consumers; providing one more way to pay for things (when your wallet is already full of cards) or delivering an entirely new way to deliver coupons, loyalty points, and other value-added shopping offers and services?

Apple calls its new shopping service Passbook and from my perspective this is perhaps the most under-rated feature of iOS 6.

While the sudden appearance of the Passbook icon on the iPhone’s home screen may have some users scratching their heads, its premise is simple; Passbook is an app for receiving, managing, and using offers, tickets and loyalty points. People can receive these items—called “passes”—via email, web, or SMS, or they can be delivered directly into Passbook via a brand-specific, Passbook-capable app offered in the App Store. To use the pass, the user simply clicks on it and a barcode appears. The merchant then scans it to apply the discount, redeem loyalty points, accept the ticket etc.

Brands and consumers in the US have already been quick to embrace the new service and Passbook-enabled apps for brands such as Ticketmaster and American Airlines quickly entered the top ten free apps in the App Store. Uptake in the UK has not yet been as rapid but once brands begin integrating and promoting the new service, it is likely to become equally as successful here.

On the face of it Passbook is a nice convenience and offers consumers a simple way to manage and make use of the offers they find useful and without having to stuff their wallets with coupons. However, on closer consideration it delivers much more than that and I believe that Passbook is poised to become a major force in retail and in the customer loyalty space.

Building a better mobile marketing channel

E-wallets provide a helpful time-saving service but they don’t really solve any problems, while Passbook addresses a very real issue for the retail industry – coupons simply don’t work very well. The number of channels they’re distributed through, mail, email, SMS etc., are simply too fragmented so the coupons rarely end up where they need to be, which is in the customer’s hand at the till. It’s a highly inefficient system for retailers and a significant hassle for the consumers who actually use them.

Now, brands have a direct channel to deliver offers right into their customers’ pockets—no waste, no coupons to be left at home, so no missed opportunities. Passbook apps give the brand a dedicated, persistent presence on the most personal device in the consumer’s life; in-app notifications of newly received offers re-engage customers where other apps can fade from memory and use.

The potential to integrate location-based services with Passbook makes the offer even more compelling and means passes can be sent according to time and location-specific triggers; for example, a customer walking past a store or café can be sent an alert to highlight that Passbook contains relevant offers or promotions.

Passbook may also make it easier for brands to track the performance of the offers they push out to customers. By seeing which coupons are actually redeemed, and how, brands could finally close the loop and apply robust analytics to their conversions.

Making loyalty work

Customer loyalty programs often seem better on paper than they do in practice. By rewarding customers with loyalty points that they can redeem for goods and services, you build stronger relationships, encourage higher spending, and foster brand affinity. However, it’s clear that not all customers find points useful.

34 percent of reward points go unredeemed and expire and to a large extent this is because they are difficult to track and redeem. That means that typically more than a third of loyalty programmes represent wasted effort by the brand and undelivered value for the customer.

With Passbook, loyalty points are updated in real-time as they’re accrued; customers can see how many they have at a glance, and can redeem them as easily as swiping their phone. Higher redemption rates may require brands to reconfigure the economics of their programmes but the impact on customer loyalty makes them well worth the effort.

Mobile marketing is already transforming the way brands engage with consumers and drive business. Passbook represents a fresh opportunity for brands and advertisers to bring the online and offline worlds together in a way that makes sense for consumers and businesses alike. The advent of Passbook could herald the start of a new era where the integration of promotions, redemption, and ongoing loyalty deliver more value than ever.

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