Point of sale redemption is key to mobile vouchers/codes

By May 18, 2010Advertising

There is an interesting article in the FT today talkingabout the rising influence of mobile in commerce generally – largely driven byrising smartphone penetration  – up to 30% of new phones sold in the US in Q1 from 21% in Q1 2009.  In summary people are using the mobile web to:

  •         Check competitor’s prices whilst they are instore
  •         Research products
  •         Read product reviews
  •         Buy products
  •         Access and redeem coupons

Retailers are rightly worried about the increased price transparency that comes with the mobile internet and whether they will have to reduce prices as a result, but from a startup perspective I think the mobile coupon opportunity is the most interesting one here.  I think I first saw a business plan based around mobile vouchers back in 2000, and I have probably seen one every year since then, but recent developments have me wondering if it might finally be an idea whose time has come, and that is because smart phones are enabling point of sale redemption.  According to the FT article US retailers Kroger and Target have begun issuing money off ‘digital coupons’ that can be downloaded to mobile phones and scanned against purchases at the store check out.  Similarly in Japan at McDonald’s users can download a coupon and then wave the phone over a reader at the till to receive a discounted price, and if they are on the right network they can even have the cost of the meal added to their mobile bill.

The point of sale redemption is usually based on 2D bar codes called QR codes (see picture) and it is this which makes the end to end coupon experience low friction enough that it could really take off.  The major barrier now is retailers updating their EPOS systems, which is expensive and won’t happen over night, but is clearly starting.  The obvious consumer oriented startup opportunity lies in driving people into real world stores by getting them to download coupons onto their mobile phones, and then taking a slice of the transaction – this is in many ways a real world parallel to the online affiliate network opportunity.  There might also be opportunities in technologies which enable this process.

Turning quickly to the other areas described in the FT article, I’m a big fan of the Amazon iPhone app, but forthe next little while I think m-commerce will be limited to big brands like Amazon thatusers already trust and who can afford to build high quality rich mobile apps.  As a result mobile price comparison and research sites will struggle to make direct links to transactions and the cost per action advertising model which supports these sites on the web won’t translate directly to mobile. Once mobile couponing gets underway, that will change. 

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  • We are doing exactly this with FastMall which is available on iphone and ipod touch with android and blackberry coming soon. Our main niche is indoor navigation at shopping malls and areas without using gps. Working out deals to offer this type of coupon at the register is the next wave coming.

  • Mark Hindmarsh

    Hi Nic
    We've been working with Eagle Eye Solutions who have integrated with a majority of the EPOS systems making their voucher redemption process seamless through chip and pin terminals. Their firmware is currently installed in a large percentage of POS chip and pin terminals in the high street enabling them to remotely activate it as they sign up retailers. They are working with the likes of Comet, Blockbusters, Nike, Antler, Calvin Klein, Moss and the Aurora Fashion Group who are seeing success!
    Cheers
    Mark

  • Thanks. I will take a look

  • Thanks Mark. I will give you a call.

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  • No problem 🙂 Very excited about this technology and the future of it all.

  • Hi Nic

    The main challenge is the inclusion of the digital coupon bank which can authenticate and redeem the coupons securely. This is what Eagle Eye Solutions does. The EPoS question is a question of identity, how do the EPoS identify the coupon etc. If the paper world a piece of paper is handed over and this forms the start of the settlement process through manufacturing agents and retailer agents to ensure security, authenticity and payment processes to the retailers.

    In a digital world there is no paper being handed over so the authentication trail needs to be initiated digitally, hence the coupon banks. We currently use numeric codes to identify the consumer and the coupon, but already we support barcodes and contactless. The key is that however the consumer identifies themselves the transaction is authenticated against the coupon bank.

    In essence we have become a traditional bank providing transaction services but in the coupon world.

    Happy to provide more detail if required by anyone.

    Steve

  • Very interesting. Thanks Steve

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  • Adrian Roe

    Nic

    Likewise I have come across these for quite some time. I used them to help consumers buy top up back in 2003. The top up till printed a QR code as well as a text PIN number and shoppers could “consume” the code either by sending in the code as usual or simply by using their mobile to scan the QR code. The challenge at that time was one of penetration – both the consumers with compatible phones thought the product was amazing! There are far more phones capable of reading QR codes now but they are still a long way from ubiquitous.
    There is an active battle to reinvent the clipped code, especially in the coupon crazy USA. Groups like Valassis have a huge amount to lose as they own the current dominant players in the paper coupon market. They have responded by launching companies like redplum and VRMS (who are behind the Kroger capability) in attempt to catch the new wave as well.
    The nature of the new wave is still far from clear though. Most large retailers know who their customers are anyway through loyalty programs etc. (Kroger certainly do). It is relatively straightforward at that point to find the specific offers available for that customer but very few are actually doing that. Companies like Tesco have been more than capable of doing this for a long time but have chosen not to do so. They have a promotion mantra of rewards being “easy but not too easy” for consumers. Too hard and nobody uses them, too easy and nobody appreciates the fact that they are benefiting from them – hence the quarterly paper mailout that all Clubcard users are familiar with and hence the long trumpeted death of coupon clipping in the USA appears little nearer than it did 10 years ago. The principal of QR codes is good but the practicalities are difficult – dull stuff like whether customers are happy to hand over their phones and whether scanners can read the QR code from the mobile’s shiny screen keep getting in the way.
    At the same time less connected retailers are faced with a real challenge by individualised coupons. It is a simple operational procedure (paid for my manufacturers) to process paper coupons. QR Code type coupons tend to require online confirmation to evaluate what product they are for, that they have not already been redeemed and how much to give the consumer. This requires both expensive network resources for a reliable online lookup to highly available servers somewhere and (more importantly) time. Tesco prices each transaction second at a million pounds a year (i.e. if I can make each transaction 1 second shorter they save a million pounds) and online lookups take time, especially over the maxed out networks just about every retailer in the world operates.
    At the same time online coupons up the customer stakes considerably. If I walk into a retailer with a 20p off paper coupon for a can of Coke then I know I am going to get 20p off a can of Coke. If I walk in with a clever QR code at a point that either the retailer’s network is down or the central servers are offline (and remember pretty much all retail is 24×7 now) then the retailer is faced with not honouring the implicit contract they have with their customer to give them 20p off – either that or they just give the money off anyway in which case what’s the point.
    This is a really fascinating area but I half suspect the next 10 years may see you have another plan a year before the problem is finally cracked.

  • Hi Adrian – this is really helpful. Thank you.

  • Anonymous

    I’m wondering how do I associate my coupon bar code generated online with my POS system? It is very appreciated if you enlighten me

  • I will be out of the office until November 1st. I will check email intermittently, but If you need to get hold of me urgently before then please call on 07990 567 993. thanks, Nic

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  • Point of sale redemption is key to mobile vouchers/codes
    I agree with you here. Which is not something I will usually do! I luv reading posts that will make one think. Also, thanks for allowing me to comment!
    http://bit.ly/bfyLbF

  • Gift SMS deliver Gift Vouchers va SMS and we have built api’s and also real time redemption via desktop software, IVR and web portal. We are at the forefront of Mobile and POS integrations. Visit http://www.giftsms.com.au or email [email protected] for further information.

  • Anonymous

    Gift SMS – Mobile Gift Vouchers can be sent instantly via SMS to mobile phones for redemption inside participating retail outlets.

    Sending Gift Vouchers via sms is giving instant gratification and also a great way to help the environment giving plastic cards the back door.
    Many benefits to using Gift SMS is being able to re-send lost or deleted vouchers, track your sent and received SMS Gift Vouchers and our vouchers are secure providing a unique GCODE:(voucher code) which you give to the retailer upon redeeming your voucher.

    Late & forgotten Birthdays are now a thing of the past.

    Visit http://www.giftsms.com.au and check us out!

  • david discount codes

    redemption codes can be found at http://www.expressdiscountcodes.co.uk in the uk 

  • Not that I have seen

  • Adrian Roe

    Most modern EPoS systems have the ability to print bitmaps to the receipt (retailer logos etc.) and there are countless libraries that will generate an in-memory bitmaps of QR Codes.  We were doing this to print QR codes to the till receipt for a top-up system we developed back in 2003 as one means of entering the top-up number…

  • Alter_G

    Steve, I’m interested in your coupon redemption and tracking product. Can you please email me: [email protected]