When customers buy natural beauty products at 100% Pure, an Oakland, Calif.-based retailer, they don’t need wallets; they simply tap their phone on a point-of-sale machine. Within seconds the transaction is complete, thanks to near field communication technology. A tiny chip stored in a laminated plastic sticker or embedded in the phone acts as an all-in-one debit and loyalty card and transmitting tool.
This year, the tiny chip will enter the U.S. market in a big way, experts believe, as more and more mobile phones carry the new NFC technology. As such, retailers are wise to get in the game. This technology allows you to learn more about your customers and develop highly tailored and measurable marketing programs for a minimal price.
Tag, your store is it
One example of NFC is BlingTag by Palo Alto, Calif.-based Bling Nation. BlingTag customers place a tag on the back of their cell phone that is embedded with a radio-frequency identification chip that validates transactions with PayPal or the customer’s bank. The cost of the transaction is 30 percent to 50 percent less than debit- and credit-card transaction fees, says Brad Rose, vice president of information technology at State Bank in La Junta, Colo. “For small-business owners, those fees can be a large chunk of change,” he says.
Rose has noticed a renewed interest in local shopping due to BlingTag. Merchants are signing up because shoppers ask about it, he says. More than half the bank’s customers use BlingTag to buy from the 23 local merchants who have signed up so far.
Many natural products stores faced with intense competition from mass channels can ill afford major marketing initiatives. But NFC programs like Bling Nation allow even the smallest retailers to try a very cutting-edge marketing technology. “Our built-in loyalty program helps any size merchant connect with consumers through customizable rewards programs and robust analytics on customer behavior that are perceived by the customer as cool and innovative,” says Meyer Malka, co-CEO of Bling Nation.
Not only do NFC programs let retailers know what shoppers buy in real time, but they can also engage customers with in-store offers rather than after-sale coupons. “A mobile phone embedded with NFC technology can enable businesses to connect with consumers, with applications not previously possible,” says Vivek Khandelwal, vice president of marketing and business development at Verayo, an NFC chip-making company in San Jose, Calif. This year, he says more mobile phones will include chips that can store coupons, loyalty points and payment information.
Information gathering is another benefit of NFC technology. Customers can wave their phones over shelf tags and posters to get product information, and a supplement label or cosmetics box can hold instant coupons.
NFC programs also encourage customers to use coupons. MoLo Rewards, a mobile-app coupon program, reports that its redemption rate is a minimum of 15 percent, compared with 0.5 percent for paper coupons. Coupon programs like Groupon, Living Social and MoLo are particularly attractive to reward junkies and customers keen on new technologies.
But is this technology safe for retailers and consumers? The Smart Card Alliance, a Princeton Junction, N.J.-based nonprofit that educates poeple about proper uses of smart-card technology, says mobile phone NFC transactions actually reduce the incidence of fraud. The magnetic stripe on debit cards is often cloned and the cardholder data stolen. This type of theft isn’t possible with NFC technology because it uses encrypted codes that are constantly changing.
Before your customers ask if they can pay for groceries with their phones, you’ll need to get comfortable with the technology. For more information, download a guide from smartcardalliance.org.