Mobile NFC to impact tomorrow's loyalty strategy

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By: Wise Marketer Staff |

Posted on February 2, 2011

Mobile NFC to impact tomorrow's loyalty strategy

The next generation of mobile phones equipped with near field communication (NFC) chips will not only change the way consumers decide what to buy, where to buy, and how to pay, but also how brands and their loyalty programmes reach consumers on a daily basis, according to a report by SJB Research, publisher of NFC World.

The report, entitled 'NFC Business Models', concludes that whichever company successfully provides consumers with a mobile NFC platform can also generate revenue by leasing space on the chip to other businesses that want to offer next-generation mobile services.

The NFC phones contain a secure chip (known as a 'secure element') which acts like an electronic wallet and can be used to replace tokens from credit cards and loyalty cards to bus and train tickets, library cards, door keys, coupons and even cash.

These tiny chips can be placed almost anywhere: they can be built into mobile phones and other devices by the manufacturer, or they can be integrated into SIM cards issued by mobile networks, or they can be added to existing phones via special microSD memory cards, or even embedded in stickers issued, for example, by a bank.

According to Sarah Clark, author of the report, "Mobile network operators, banks, handset manufacturers and technology providers around the world are all planning to create major new revenue streams by providing consumers with these mobile wallets. But understanding of the business models that are most likely to succeed is still in its early days."

Where loyalty meets technology The benefits for loyalty programme operators are quite significant at first glance, boosting both member acquisition and loyalty programme participation in several ways:

  • Easy sign-ups With an NFC device, consumers will be able to sign up for a merchant's loyalty programme by simply touching their phone to an NFC tag located in an outlet or by touching their phone at a POS terminal or multimedia kiosk. No forms will need to be filled in and sign-up will be instant.  
  • More wallet space An NFC wallet has the ability to store many more 'cards' than can be accommodated easily in a physical wallet. This means that consumers will not have to stop and think about whether they can be bothered to find room for a merchants' loyalty card in their wallet with the result that even infrequent customers will be more willing to sign up for a programme.  
  • Ease of use Merchant terminals can be configured to automatically recognise if a customer is a member of a loyalty programme so that the consumer does not need to remember their card or remember to bring it out at the time of making a purchase.  
  • Turn-key loyalty platforms For independent retailers who aren't currently able to justify their own electronic loyalty programme, the expected arrival of loyalty programmes delivered through contactless POS terminals will provide a first opportunity to offer such services.

Where branding meets technology Apart from the potential to deliver tightly targeted offers, NFC also offers brands a number of new ways to improve the way they currently market themselves to consumers. For example:

  • NFC tags placed on products and shelf edges can be used to easily direct the consumer to a product page on the internet that provides detailed information on the product, access to customer reviews and even special promotions. While the current US$1 plus cost of a tag may restrict this option to providers of high value products now, printed RFID technology due to come onto the market in the near future is expected to reduce the cost of NFC tags to only a few cents - putting it within reach of even fast moving consumer goods (FMCG) providers.

    As well as enabling brands to communicate directly with consumers, these tags could be used to provide calorie counting and daily nutritional analysis services and, in combination with flexible OLEDs (see could provide automatic indicators that a product has passed its sell-by date.  

  • Product tags can also be used to verify the authenticity of a product, using silicon biometrics processes such as those developed by Verayo. Here, the same process could be performed via an RFID reader located at the point of sale, but putting the verification process into the hands of the consumer could improve trust in the product's authenticity substantially.  
  • Product tags can also be used to register the purchase with the brand, enabling the issue and management of guarantees, warranties and licenses to be greatly simplified and providing the brand with a direct line of communication with the customer. This type of service could also be used for market research surveys and services, to generate feedback from consumers and to sign them up for customer communications.  
  • Augmented print applications that combine printed materials such as a product catalogue, promotional mailer or magazine advert with 2D barcodes and RFID tags will enable consumers to easily access further information, reduce print costs and enable readers to be directed to a product's sales page on an ecommerce site.

Key strategies The report also explains the latest thinking on how to implement the five fundamental building blocks required to make an NFC service a success: the core infrastructure that will form the backbone upon which NFC services are delivered; the business models available to the mobile network operators, banks and handset manufacturers who will provide consumers with their mobile wallets; the issues involved and strategies for success in the NFC payments market; gaining buy-in from consumers and from service providers; and the launch strategies that are most likely to succeed.

At the same time a number of key questions are addressed, such as:

  • How can merchants be persuaded to adopt the contactless payments terminals required to support NFC transactions?  
  • What are the benefits to banks of providing NFC services - and do the benefits outweigh the costs involved?  
  • What kind of pricing models will need to be offered to service providers - and will they be sufficient to cover the costs of developing and making available an NFC service delivery platform and of issuing NFC devices to consumers?  
  • Will consumers be willing to pay for an NFC mobile wallet? And what kind of services will they want to use?

"Many companies are looking to profit from NFC," said Clark. "But success will rely on meeting the needs of three key groups: consumers, merchants and the widest possible range of service providers. The companies that succeed will be those that take the time to gain an understanding of the needs of each of the parties involved and then design an infrastructure that provides a win:win:win solution for all."

The 170-page NFC Business Models report is available for purchase online (for £797) directly from NFC World's publisher, SJB Research - click here to order the report online.

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