For more than a decade, Aaron Serruya's main loyalty program at Yogen Fruz was the old buy-nine, get-one-free punch card that so many other businesses used, too. It worked well over all, but it wasn't perfect.
"There was a lot of fraudulent things happening with those cards," the company president says. "That's why a lot of people got rid of them."
About five years ago, the co-founder of the popular frozen yogurt chain started using plastic swipe cards, where people receive points for every purchase made. While that worked better than the punch cards, that, too, caused his company – and customers – headaches.
"People would forget the cards," he says. "And how can we expect them to walk around with 100 different cards from 100 different retailers?"
Last July, Mr. Serruya launched his third loyalty card iteration and the one he thinks will be the most successful of the bunch: the mobile loyalty card.
Mobile technology has made it much easier for companies to issue rewards and for customers to collect them. Cards get stored in an app, so as long as someone has his phone, he can access those points.
But mobile loyalty rewards are about more than just points. While Mr. Serruya will still offer free treats to people who collect a certain number of rewards, he can now easily deposit additional points into someone's account or push out special promotions to a specific group of users.
"The whole thing about mobile points is that it now allows business to reward customers over and above pure purchases," says Daniel Ezer, founder of D1 Mobile, a mobile payment company that creates loyalty-focused apps.
For instance, the system will know when it is someone's birthday and can then automatically deposit an extra 50 points into that person's account. "You can start to use it as currency to reward customers for [loyalty]," he says.
Sandy Shen, a Shanghai-based research director with Gartner Inc., says that data collection is the biggest business benefit of this technology. While companies have always known which stores are the most popular and at what times of day people shop, now you can drill down on specific customers.
"You can quickly track consumption and purchasing data to demographics, location and time data," she says. "Then you can use this information for targeted marketing."
For instance, if store traffic is slow in the afternoon, you can send out a notification to all loyalty users in a specific area that they get 10 per cent off an item if they come into the store between 1 p.m. and 3 p.m. "It's all controlled through the app," says Mr. Ezer. "And the rate of them coming into the store versus sending out a flyer in some random place is much higher."
There is a cost to implement this system, Mr. Serruya says. He had to pay for the app development and install a special reader, which will be able to recognize a bar code on the app, at all of his stores. But he's confident the costs will quickly be recovered.
Plastic cards, he explains, are expensive to purchase. While he's still going to buy and distribute them to his customers, at some point he hopes to do away with the cards altogether. That will save him money, he says.
He also plans to use the technology to drive more traffic to stores in off hours, which he hopes will boost overall revenue.
As well, he hopes to gain new customers by doing things with the app that he couldn't do with a piece of plastic. He wants customers to take pictures of themselves with a frozen yogurt and upload to a social networking site. A weekly winner will receive bonus points.
He also hopes to make it easier to give gifts. Someone can simply buy an item for someone else and when that person downloads the app he'll have a free frozen yogurt waiting for him.
Mobile loyalty is still in its infancy, but Ms. Shen thinks that rewards will become far more integrated into the user experience. "Loyalty is one of the many things that merchants need to do to deliver a good mobile experience," she says. "It's much more than a standalone program now."
Mr. Ezer thinks that at some point no one will be carrying a wallet, so offering a mobile rewards program is a no-brainer. "You want to get front and centre on a person's wallet," he says.
Mr. Serruya doesn't yet know if it will work out, but he's excited to see whether this technology will make his loyalty program as efficient and robust as he hopes.
"I'm just happy to be one of the companies trying to do this," he says. "We'll see what happens."