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

Apple Passbook

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

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.

Apple Passbook Page 2 of 14 Copyright © 2012 BrandEmotivity

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
christian.linnestad@brandemotivity.com


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

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Viewers also liked

Viewers also liked (20)

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

Similar to Apple Passbook - The impact on mobile vouchering, and what it means for brands and retailers (20)

More from BrandEmotivity

More from BrandEmotivity (8)

Recently uploaded

Recently uploaded (20)

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