Mobile loyalty and mobile payments offerings are often two separate strategies, but it is becoming increasingly apparent that each needs the other in order to provide a strong user experience that will support wider adoption.

Google said recently that it will discontinue its Punchd application, which works like a loyalty punch card on a smartphone. The news is an example of how mobile loyalty needs to be part of a more fully rounder customer experience, with Google likely to integrate Punchd’s features into Google Wallet, its mobile payments offering.

“While more of a strategic move on the part of Google to eliminate competition for Google Wallet, killing Punchd does reflect the way the industry is heading,” said Michael Hemsey, president of Kobie Marketing, St. Petersburg, FL.

“Mobile punch card apps are great stepping stone into mobile loyalty, but the core functionality of collecting punches to achieve a goal – such as a free meal – limits a brand’s potential interactions with consumers, as most will only refer to the app at the point-of-sale,” he said.

“As consumers become more and more connected, marketers need to do a better job of making mobile a part of the entire loyalty lifecycle.”

Loyalty, payments converge
Marketers increasingly recognize that mobile loyalty can influence in-store transactions.

However, the missing link in loyalty rewards from a transactional perspective has been mobile payments.

Google may be trying to address this need by eliminating Punchd as a standalone app and integrating its features into its mobile wallet.

“In terms of both acquisition and long-term retention of users for both itself and its customers, it’s in Google’s best interest to simplify the user experience of mobile payment and loyalty applications,” said Tom Nawara, vice president of emerging solutions and innovation at Acquity Group, Chicago. “Mobile wallets will need to move beyond pure payment transactions in order to attain mass adoption.

“Loyalty features – whether via punch card type activities or more advanced functionality – will go a long way toward enticing users to move to mobile wallets,” he said.

Driving in-store activity
One of the biggest success stories in mobile loyalty this year was Apple’s Passbook application, which launched in September and has signed on more than 20 merchants and brands.

The app enables users to collect loyalty cards and offers from different merchants in one location for easy access. It also notifies users when they are in a store have offers that can be redeemed.

“We are beginning to see the influence of proactive in-app push notifications with POS-redeemable offers executed through Apple’s Passbook, which effectively illustrates how mobility can be a powerful catalyst for the synchronization of the off-premise and on-premise consumer experience with the brand,” said Scott Forshay, mobile and emerging technologies strategist at Acquity Group.

“This trend will only increase in the coming year, creating an on-going value-driven communications continuum between brand and consumer, serving to further blur the lines of demarcation between the digital and physical experience for consumers,” he said.

Jersey Mike’s sandwich shops is another example of how mobile loyalty can drive in-store activity.

This year, the chain replaced paper punch cards with a mobile-based program enabling customers to participate via an app or NFC stickers on a phone.

The Jersey Mike’s mobile loyalty program has averaged 100,000 new users per month since its inception and driving additional store visits, which members being 57 percent more likely to come into a Jersey Mike’s location three or more times per month.

Influencing choice
Looking ahead, mobile payments and mobile loyalty will begin to converge as standards continue to emerge and investment in infrastructure to support mobile payments takes place more broadly. This, in turn, will drive greater success for mobile loyalty programs.

While merchants and brands are becoming more aware of the importance of mobile loyalty, the next challenge will be maximizing the channel.

For example, given the limited real estate on a smartphone screen, marketers should look to include their loyalty pitch throughout their apps and mobile sites.

Merchants also need to leverage customer data from across channels to bring greater personalization to loyal customers.

 “We are witnessing an evolution from traditional unidirectional brand-to-consumer engagement to a model where consumers have assumed a significant amount of control, in essence, an evolution from B2C to a C2B model, where choice is influenced by always-on accessibility, immediate gratification, contextual relevance, and reward for engagement,” Acquity Group’s Mr. Forshay said.

“Those marketers who fail to acknowledge this shift in consumer behavior are in danger of facing relevancy extinction in the eyes of this new breed of connected consumer,” he said.

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York