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Dairy Queen’s Mobile Coupon Experiment: “Look, Ma. No Phone!”
When the customer walks into the store, he/she waives the tag by a contactless reader, which communicates with both Tetherball and the chain’s payments processor, First Data.
As is typical, the retailer is paying only the smallest percent of the costs of the trial, with Tetherball handling all of the technology costs, including wiring the store. The only Dairy Queen costs were some marketing dollars to let customers know about the program, making signs and sending the text messages, Guse said.
The program is intended to deliver the benefit of a mobile payment system (the ever-present nature of the cellphone) without the hardware and software integration challenges of having to deal with multiple phone manufacturers and competing carriers.
“Mass adoption of mobile marketing using barcoded coupons just hasn’t happened because it’s far too complicated with a plethora of technical and user issues at the point of redemption,” said Tetherball President Jay Highley.
In the Dairy Queen trial, the phone is little more than a prop, a piece of plastic that can house the RFID tag.
The tags in this trial contain hardly any information beyond a unique identifier. All of the customized purchase history data—along with the various offers being made and which one is available for that particular target at this particular time—is stored on a Tetherball server. In theory, this could later be expanded—with the help of First Data—to also be a payment device.
Much of retail is struggling with finding a way to make contactless payment, mobile payment and RFID tag coupons work. The technology issues are not the hurdle, as the systems generally work well, but can consumers be motivated to use them? The upsell potential of coupons only works to the extent the coupons are redeemed and redeemed in a trackable manner. Subway has started toying with a contactless system in Canada only, but Subway is showing something less than unbridled enthusiasm. And the convenience claim of contactless payment hasn’t worked well in many consumer trials.
But the Dairy Queen trial could prove to be much more successful as it’s leveraging the only element that consistently has proven effective at changing consumer behavior: money. The knock against contactless payment (and, for that matter, self-checkout) has been that consumers are rarely if ever given a financial incentive to try it, as in “this bread will cost you 10 percent less if you pay for it using self-checkout (or contactless).” The Dairy Queen trial does precisely that, offering customized discounts only available through the RFID tag.
-Marc
June 4th, 2009 at 8:18 am
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.
June 4th, 2009 at 9:36 am
I would choose Dairy Queen hands down over Cold Stone.
June 4th, 2009 at 1:51 pm
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.
June 5th, 2009 at 11:13 am
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,
June 5th, 2009 at 11:31 am
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?
June 12th, 2009 at 7:56 am
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.
June 12th, 2009 at 8:09 am
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.
June 17th, 2009 at 11:11 pm
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.
June 17th, 2009 at 11:26 pm
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.
June 18th, 2009 at 2:36 pm
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.
July 16th, 2009 at 10:49 am
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.