How Will Apple’s Passbook Affect Couponing?

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On September 19th, Apple released its new operating system, iOS 6, which came loaded with new features. One of the most exciting developments for deal-hungry consumers is the Passbook app, which stores all of your coupons, store loyalty cards, boarding passes and digital tickets in one place. Passbook is included on the iPhone and iPod Touch, but not on the iPad.

The move represents Apple’s first serious attempt at debuting a digital wallet. While Passbook does not have payment functionality like Google Wallet, Apple’s new app allows customers to easily store all their loyalty cards and coupons in a single location. “[The] mobile digital wallet concept [has] been around for 20 years.   Payment-focused systems have been widely used in Asia and Japan for at least 10 years.   But now Apple is the first to go beyond payments and focus on the whole transaction and everything that surrounds it,” says Tobias Dengel, CEO of WillowTree Apps.

Passbook not only taps into the network surrounding a transaction but also runs in Apple’s own ecosystem. According to Lawrence I Lerner, a Global Change Agent, President LLBC, this is a substantial advantage for Passbook. “Other digital wallets run as applications in an environment,” says Lerner. “Passbook, like all of the other Apple applications, is a service built into the iPhone. There’s an immediate built-in developer community.”

The Current State of Loyalty Programs

While loyalty programs are popular amongst customers and merchants alike – the number of loyalty memberships in the U.S. exceeds 2.1 billion – it’s not clear how effective these programs are. According to a white paper published by COLLOQUY, 17% of U.S. consumers felt that loyalty programs were a “very influential” factor in their purchasing decisions and an even smaller 12% said they “strongly agree” when asked whether it pays to be loyal to a favorite brand.

Could the problem in the industry be the method of information delivery? Back in 2011, 81% of Americans said they didn’t know the benefits of their loyalty program or even how or when rewards would be given. But according to a different study, 8 in 10 activated and fully engaged department store loyalty program participants were extremely satisfied with their experiences.

How Passbook Can Solve Current Industry Problems

Passbook attempts to solve the loyalty program engagement problem by correcting for the oversaturation in the industry. If consumers have all their information in one place, consumers have to do less hunting for personalized discounts, in turn increasing their involvement with different programs. “The retailer now doesn’t have to send coupons in a mailer,” says Lerner. “You now have coupons that are more specific to you.”

Advertisers will love this innovation. “Passbook should massively improve the performance of mobile advertising because it radically enhances the consumer experience,” notes Dengel. The key, according to Dengel, is not just the method of delivery but also the method of offer retention. “In the past, if you saw a mobile banner ad or received a text with a special offer/discount, there was no clear way to store that for later use — now, with one click, you can add the offer straight into you Passbook, and the Passbook can remind you that you have it when you walk into the store,” says Dengel.

This brand of advertising should be cheaper, too. Lerner states that with Passbook retailers can use “very targeted advertising with very specific incentives that used to cost a lot of money to print and a lot to distribute. A small business owner just has to come up with cash and content.”

Additionally, Passbook doesn’t just let consumers find their loyalty programs – Passbook allows retailers to find their customers. The app senses time and location and will automatically display a relevant offer when a shopper is near or in a certain store. If users also opt in to location tracking, retailers can blast out targeted coupons to the user when the user is close to a retail location.

Passbook currently stands at the crossroads of some of the most important trends in the retail industry. Could earning coupons just by stepping into a store bring back brick-and-mortar shopping? Does the lack of near field communication (NFC) functionality in Passbook mean that NFC technology just isn’t ready for the big stage, or is NFC just losing popularity in the wake of continuing mobile payment development issues?

More Expert Opinions

We turn to some more experts in the field to answer a few more questions. Here’s what they had to say:

Ted Mann, founder and CEO of SnipSnap, a coupon app company, on Apple and NFC:

“What is interesting with Passbook is that even with all this talk about NFC, Apple has [made] the decision to use 2D barcodes as the universal way people can use and redeem passes and coupons within Passbook. 2D barcodes aren’t widely used right now, especially on coupons, but Apple seems to be trying to make it the new standard. This is part of the reason why at SnipSnap with our upcoming update, we’re focused on making these Passbook compatible coupons easily discoverable. With Apple’s push to bring that all together in a unified approach, more and more businesses are going take their mobile strategy a lot more seriously and more consumers will embrace using their phone to do everything from making payments to storing their coupons.”

Alex Campbell, co-founder and chief innovation officer of Vibes, a mobile marketing and technology company, on how Passbook will affect the offline-online retail competition:

“I think Passbook will ultimately benefit retailers – both on and offline. It is all about building loyalty with a brand, and that goes beyond physical and virtual walls. Consumers will ultimately flock to the brands that make it easiest and most convenient for them to buy the things they want and need. Since people have their mobile devices with them almost all the time, I do anticipate the location-based feature in Passbook will be beneficial to those brands that deploy it effectively and want to get customers through their doors. Overall, I think brands that implement a comprehensive mobile strategy that leverages Passbook effectively will benefit in their physical stores, as well as online.”

Campbell weighs in on one disadvantage for retailers in joining Apple’s ecosystem:

“However, Passbook does have some yellow flags for merchants, too. The passes themselves are very inflexible which means they have to keep things extremely simple. Merchants cannot use their own font, barcodes or images. As with most products by Apple, there’s not much room for creativity in a pass.”

Photo Credit: iPhone case created by tmbr.