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McDonald’s leads QSRs in leveraging mobile for in-store engagement

McDonald’s is testing different mobile payment and loyalty programs in the United States as the quick-service restaurant chain likely looks to gain insights that will be used to develop a wider scale mobile payment offering in the future.

McDonald’s is testing loyalty-based app Front Flip in one region of the U.S. and is also working with Isis on a mobile payment trial. Mobile payments have grown substantially for QSRs in the U.S. in the past year as more brands look to the technology not only for convenience but also for building loyalty.

“Often times large restaurant chains will test payment initiatives in key markets and gauge their success and ROI,” said Jordan McKee, an analyst at Yankee Group, Boston.

“If McDonald’s realizes meaningful benefits, there is potential for a wider roll out,” he said.

“For a large chain like McDonald’s, rolling out on a large scale can be challenging. Creating a repeatable experience from restaurant to restaurant is difficult to do, and employee training is paramount to success. If employees aren’t properly trained to assist customers and promote the benefits, the initiative will undoubtedly be a flop.”

McDonald’s confirmed that Front Flip is being used in one region within the U.S., but did not comment further.

Front Flip did not meet press deadline.

Mobile offers
McDonald’s franchisees are using the Front Flip app to push out promotions for new menu items, such as pumpkin spice lattes, to make up for recent sluggish sales.

For example, a store in New York is pushing an offer for a buy-one-get-one-free Quarter Pounder or a free pie for buying a McCafe Frappe or smoothie. Consumers receive the offers by scanning in-store QR codes.

Front Flip works with brands to engage diners in restaurants with rewards that are aimed at driving repeat traffic.

The emphasis on loyalty could be significantly important in how McDonald’s continues to build a mobile payment offering that differentiates itself from its competitors.

Starbucks for instance has built up its strong mobile presence with an app that lets consumers rack up rewards that can be redeemed for free food and drinks as an incentive for consumers to pay via mobile.

Although there are a growing number of mobile payment services available to consumers, the value proposition is still relatively small since using a mobile device requires more effort than simply swiping a credit card.

Other brands that have worked with Front Flip include Bud Light and Ponderosa Steak House in addition to similar quick-service restaurants such as Wendy’s and Papa Murphy’s Pizza.

“The Front Flip app is heavily rooted in loyalty and engagement whereas Isis still remains very much payments focused,” Mr. McKee said.

“I see Front Flip appealing to a younger demographic, which is a key segment for QSRs like McDonald’s,” he said.

“The Front Flip app also does not require an NFC-enabled device whereas Isis does. With Yankee Group’s consumer survey showing just 18 percent of device owners have an NFC-enabled phone, QSRs want to ensure the initiatives they are deploying have a largest reach possible.”

At the same time, McDonald’s is also piloting a test with Isis in Austin, TX and Salt Lake City, UT.

Consumers can use the Isis mobile app to pay for food and drink items while on the go at participating locations, although two recent trips from an Austin-based mobile consultant suggest that the process of paying via mobile still has a ways to go (see story).

Isis is making a big bid for retailers as it looks to roll out more broadly, and given the popularity of mobile payments for small items, McDonald’s is a natural partner for the company.

“Experimenting with Isis for NFC also makes a lot of sense, since Isis is seeking early adopters and will likely provide a great deal of consultative assistance,” said Wilson Kerr, vice president of business development and sales at Unbound Commerce, Boston.

“While Apple has not embraced NFC yet, ABI Research predicts that 270 million NFC-enabled devices will ship this year, a figure up 15 percent from previous predictions,” he said.

Firing up mobile payments
In general, fast food chains have started to embrace mobile payments. However, there is still a lot undecided in terms of which mobile payments solutions will gain consumer adoption so McDonald’s is smart to be testing different options.

Wendy’s is testing mobile payments within its own branded app in Portland, Albuquerque and Austin (see story).

Burger King, KFC and Subway are only a handful of other restaurants also experimenting with mobile payments to appeal to younger consumers that skew younger in age.

“Brands like McDonald’s benefit from the fact that they have repeat, loyal customers who often engage with the brand,” Mr. Kerr said.

“Their Monopoly game is a great example,” he said. “It features a contest that required a purchase to play and rewards the consumer with discounts on products they have to return to purchase. Taking this into a mobile context makes a lot of sense.”

Final Take
Lauren Johnson is associate reporter on Mobile Commerce Daily, New York