Dairy Queen’s Mobile Coupon Experiment: “Look, Ma. No Phone!”

Written by Evan Schuman
June 4th, 2009

For the last two weeks, consumers walking into the Dairy Queen in Rochester, Indiana, have been offered something beyond ice cream and hamburgers: A pile of identical tiny RFID tags, each with peel-off adhesive strips, sitting right next to the waffle cones.

But when those consumers return to that Dairy Queen with those tags stuck to their wallets, their watchbands or the back of their cellphones, identical those tags shall be no more. Given the differing purchase histories of each customer, the tags will deliver sharply different discounts and offers. In effect, the tags will serve as digital coupons as well as makeshift CRM/loyalty programs.

The 69-year-old $2.6 billion dessert merchant has about 5,700 locations in Canada and 49 states in the U.S. (their store in Vermont shut down), billing itself as the “treat industry leader,” beating out rivals Baskin-Robbins, Cold Stone Creamery and Maggie Moos, said Dean Peters, PR director for chain owner American Dairy Queen Corporation, which itself is owned by Warren Buffet’s Berkshire Hathaway.

(Related Story: Burger King, Victoria’s Secret, Unilever, ShopRite Go Mobile Coupon)
The RFID tag trial, which is expected to last through the end of the year, is certainly not the chain’s first CRM program nor its first attempt at digital coupons. That would be the chain’s E-mail-based 2.2-million-member “fan club,” which also distributes discount coupons.

But the chain is seeing the same drawbacks with coupons—digital as well as dead-tree versions—that all chains are seeing: Customers see the coupons when they’re opening their snailmail or on their computer. And yet, when those consumers are in a position to use those coupons—such as when they drive past a Dairy Queen on their way home—they invariably don’t have the coupons with them.

The RFID tag trial “is much more spontaneous,” said Jamie Guse, the chain’s Web site manager. The consumer attaches the tiny tag to something they always have with them—a cellphone is suggested but hardly required—and can use it when they happen to be near a Dairy Queen. For the duration of the trial, though, it’s only available at that single location in Rochester.

Here’s how the system is supposed to work. After the consumer picks up a tag, they need to activate it by texting the number on the tag (the letters DQ followed by about 5 digits). That text message goes to systems controlled by an Indianapolis RFID vendor called Tetherball, which associates that tag with that customer’s identification. Tetherball is working with Vivotech. As purchases are made, the CRM database expands and coupon recommendations get customized.

Short-duration offers are then messaged to that consumer. “It might be a dollar off a small sundae. The offers are only for one time, such as today between 2-4 o’clock,” Guse said.


11 Comments | Read Dairy Queen’s Mobile Coupon Experiment: “Look, Ma. No Phone!”

  1. Mark F Says:

    I do not beleive the IT people beleive that a large portion of the buying public DO NOT TEXT. A smaller group do not use a cell phone. But most have a computer. The tag is a good idea, look at Speedway’s and Petco’s keytag system.

  2. Matthew Says:

    I would choose Dairy Queen hands down over Cold Stone.

  3. Bob LeMay Says:

    And what happens when 10 other retailers use the same system–RFID tags stuck all over my wallet, phone, watch, etc.? While I go to the grocery store and the gas station regularly enough to justify a tag on my key chain (since I am offered discounts and specials to do so), I don’t visit Dairy Queen (or dozens of other retailers) often enough to warrant carrying another RFID tag with me.

    One of the payment processors needs to get smart and develop a tag that their systems recognize, that can be affixed to a credit/debit card, to allow multiple retailers to “piggy-back” on one RFID chip.

  4. alejandro padron Says:

    The sucess for this resides in an agregator providing services to all, allowing the customer to benefit in most of loyalty / cupons programs, using a single loyalty card (preferable one associated with a major credit card,

  5. Evan Schuman Says:

    Editor’s Note: This is a note we posted on a reference to this story on RetailWire:
    The Dairy Queen project is interesting because it has chosen to sidestep the phone itself and is really using it as a makeshift CRM program.

    But the bigger issue is whether this will change consumer behavior. When we talked with the same Dairy Queen people, the key concern was whether or not the ever-present nature of the tag stuck to a phone or wallet (or anywhere else) would make it more likely consumers will use the coupons?

    Also, how effective will Dairy Queen be at using the information to customize offers? If they start factoring in flavor preferences, who attends with kids (and their rough ages) and the hours of typical attendance, this could be hugely powerful. Will the system point out that Tuesday evening visits at 7 PM are “drive home from work pick-me-up” visits as opposed to Saturday afternoon “outing with kids” visits and issue different kinds of coupons? Or will it merely look at the items purchased?

    DQ is taking a bit of a chance by going it alone. The idea of handing out RFID tags to stick on the back of a phone will work initially, but what if this program is a success? What happens when every retailer in the region starts doing it? How many stickers are people expected to carry? If it works, it’s going to have be standardized, with the device coming from a processor or even a cardbrand and it would hold data for a hundred (sometimes competing) retailers. What then?

  6. Steve rgFriedbe Says:

    Evan, you nailed the future with your last note. Think back 50 years to all the store credit cards that were available. You could easily fill your wallet with every card to every store. American Express and Diner’s Club had a great idea…develop a chain of stores that would honor the same card. BankAmericard and MasterCharge followed suit.

    And so it will be with the RFID tag. It won’t happen overnight, but one or two companies will come along and aggregate multiple vendors on one tag.

    So, they’ll collect the data and understand you and your buying habits far more than you understand them yourself. Add to that, as you’ve previously mentioned, that the tag can be linked with other information about what TV shows you’re watching, and which TV ads you’ve seen…and marketers will be able to market to you on a true one-to-one basis. The DQ ad hoc coupons are just the start.

  7. Evan Schuman Says:

    Steve, I wonder if the cardbrands themselves will, yet again, play that consolidation role with chips and coupons/giftcards/loyalty cards? It would close the circle nicely and get them back into the value-add role they used to play.
    If not, it’s not hard to imagine a future where Visa and the other brands may have a very limited raison d’etre.

  8. Todd Ablowitz Says:

    A point in this story that is very interesting is the suggestion that the card brands are performing deja vu by aggregating many closed loop systems into a high value, two-sided open loop system. I expect that in this case, while that may certainly happen, in this case it will be technology that will drive the consolidation.

    As this concept catches on and a consumer begins to have – as Bob says – 10 different retailer’s tags, the good news is they will very likely have a far more sophisticated option to manage them… the NFC-enabled mobile phone. Now the consumer can manage all their offerings – Payment, Coupon, Loyalty, Tickets, etc. all using the software interface on their phone. So, as a consumer, I can have the benefit of one tag (this time built into the phone), but limitless value – directly with a merchant OR through an open-loop consortium put together by one of the card brands or someone else.

    Even better, now a retailer has a way to interact with an intelligent device in the consumer’s had – remotely the way they can today, AND at the point of sale, which will be enabled with two-way contactless communication to the NFC mobile phone.

    Lastly, all those tags that are being issued today like the Tetherball tag or the Go-Tag will seamlessly be transferrable into the NFC phone through software, so as you transfer from your current phone with a sticker to your NFC enabled phone in the future.

  9. Evan Schuman Says:

    Appreciate your thoughts, Todd, but you skipped over the part where Dairy Queen–and they’re VERY far from alone on this point–opted to proceed as they did specifically to AVOID all of the issues dealing with carriers and phone manufacturers and all of the other players likely to be involved.
    The NFC approach you’re described would place retailers right in the middle of that mess, a position many would like to avoid.
    NFC has a definite role to play, but I’d argue that the digital coupon arena is perhaps best handled by an alternative approach.
    P.S. The story didn’t say that the card brands were aggregating these systems, but merely wondering if they would and suggesting that perhaps they should.

  10. Todd Ablowitz Says:

    Touche, Evan.

    I unintentionally mis-stated your comment about card-brand aggregation, but my point was that it would be extremely interesting.

    On the NFC point, I think there is still time to see how the NFC ecosystem will evolve. I don’t dispute that there are valid business and operational concerns for retailers whenever any emerging technology is introduced, but there is still plenty of opportunity for the NFC pie to be baked properly from the retailer perspective.

    The retailers I speak with are tremendously interested in the capabilities – provided their business issues are covered. I believe the real reason that everyone is doing stickers is just simply that there are still not substantial phones available. Just watch – as the phones come out, they will come.

  11. Todd Michaud Says:

    A little late to this conversation, but what I think is funny is the concept of multiple tags and hence the need to aggregate multiple tags. A unique identifier is all that is really needed, regardless of payment type, loyalty program, coupon, etc. A merchant needs to identify the customer and determine which “account” to process the transaction against. The rest should be done “in the cloud”, not on a sticker, phone or POS. The electronic wallet that everyone is excited about for NFC phones in my mind should be done above-store on the network somewhere. If I am an Acquirer, this is where I focus my energies today.

    The reason that we are in this place of talking about multiple stickers, etc. is because the merchants don’t want to share their data with others? Can’t this also be done in the cloud?

    My two cents: If this transformation is going to happen, I think everyone needs to stop thinking about “converting plastic” and start thinking about processing transactions.


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