So many retailers are shooting to emulate Starbucks' loyalty program. But they're falling short. Way short. Why is that?
On the Tradestreaming Podcast this week, I speak with the founder and CEO of Sionic Mobile, Ronald Herman. Sionic is a mobile commerce platform provider and a fast-growing loyalty marketplace. We chat about the challenges and opportunities for SMBs to really embrace mobile commerce and how his firm designed a solution to minimize this friction. We talk about how e-gift card rails weren't designed for large loyalty programs. Lastly, we discuss the industry's struggles with a payment consortium and how a marketplace structure could be a better mousetrap.
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Below are highlights, edited for clarity, from the episode.
Loyalty and mobile commerce: two sides of the same coin
We actually define mobile commerce a little differently than the rest of the market does. We tie rewards and customer rewards to the amount spent inside a shop, restaurant, and service place. But we also bundle that with advertising, special offers, and soon, with digital couponing that's personalized down to the location of the mobile device. Very big retailers have very loyal and enthusiastic customers but for secondary tier and SMBs that can't afford a big loyalty program, we can help augment their operations through our loyalty marketplace.
The difference between enterprise retail and SMBs
We started Sionic Mobile six years ago with the same chicken and egg scenario most entrepreneurs face: how do we get users onto a platform without inventory? For us, inventory is the ability to pay with your phone and collect rewards. We decided to go down the e-gift card rail. Our backend actually goes out and buys a digital gift card for the exact amount of purchase, presents it on the phone at the point of sale, and then turn around and credit rewards to the customer. Our whole goal is to create a big, rich marketplace where you can use an existing app on your device, accrue points, and spend them at any of the partners on the marketplace. No need to carry 27 loyalty punchcards.
It's been really successful but as we get larger partners on the network, it's a very costly proposition for companies like Staples and Lowes. So, now we still manage the payment but we integrate it through the payment terminals like Ingenico and Verifone or directly into large retailers' POS systems. This way we cut out the expensive e-gift card rail which wasn't developed for this purpose.
What's coming down the pike for mobile commerce and loyalty.
My very first company back in '92 used artificial intelligence to convert hand printed information into digital. I have AI in my blood. Recently, my friends at GM coined the term "cognitive commerce." Cars are smart, know if you're low on fuel, what the weather's late and the last time it was servcies. IBM Watson will analyze these car habits, along with driving habits and soon, shopping habits. The dashboard and infotainment buttons will change based on what the car believes you'd be interested along the roof.
What happens when passengers leave the vehicle? You're kind of in a black hole. What we're doing, with the same IBM Watson backend, picks up where you leave the vehicle and takes customers round trip through the IBM cognitive commerce engine. You'll have a much better dining and shopping experience based on the history of your habits.
