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The benefits (or are they features?) of smart cards are widely recognised:
Security - they can be programmed to make copying impossible
Resilience - unlike a magnetic stripe card, which can easily be corrupted with a magnet or scratched, smart cards cannot lose their data under any normal circumstances Data storage - there is no theoretical limit to their capacity except, of course, the cost Multi-purpose use - this benefit is questionable since all cards can be made to be acceptable for multiple use, and all cards run up against the same problem of getting different organisations or parties to co-operate
The real question is whether these features are of any significance to the design of a loyalty programme.
Taking sides
This paper is delivered in two parts to ensure that whatever the pre-conceptions of any reader about the use of smart cards in loyalty systems, at least one half of the paper will address their beliefs!
Part I - considers smart cards as an unnecessary expense - this is targeted at those who understand how to design an effective loyalty scheme and those who find it convenient to dismiss smart cards because they may not have the courage to invest in the future.
Part II - looks at when and where they can be used in loyalty systems, is designed to keep a smile on the face of the suppliers of smart card technology, who believe that in loyalty schemes, they have finally found a problem for which their products can provide a solution.
Smart Cards - Part I
Firstly, let's examine two extreme views that retailers hold:
"I want a Smart Card loyalty system"
When faced with this demand from a retailer, it is best to take the placatory approach and believe that it is borne out of ignorance rather than a real understanding of the technology.
The phrase Smart Card has almost become a generic term for electronic points collection schemes. Mobil, for example, launched their Premier Points scheme as a ?smart card' but as we all know it is based on magnetic stripe cards. Far from being a loyalty system, in my opinion it is really only electronic ?Green Shield Stamps'.
Perhaps Shell fell into this trap. It is difficult to see what real reason motivated them to use a smart card for their scheme. Their card has limited data capacity and certainly a lot less than a traditional 3-track magnetic stripe card. From a marketing point of view, Shell may well have believed that using ?genuine' smart cards was good for their image - clearly placing them in the premier league of petrol retailers.
Regardless of the basic technology used, both schemes have been highly successful. The Shell scheme is much closer to the way that I would define a true loyalty system - and this has nothing to do with the card technology used - but more of that later.
"I want a loyalty scheme, with no card"
The retailer who demands this type of scheme is, like Shell perhaps, concerned with his image. He appreciates that a loyalty scheme does, in fact, not need a card at all. The most likely reason for wanting to adopt this approach is a concern that ?elite' customers will not want to be bothered with more bits of plastic in their wallets and purses.
However, although technically it is true that a loyalty system does not need a card, there is a role for a card (or at least some kind of identification). This will be discussed later in Part II as I seek to appease the smart card manufacturers and suppliers who may have started to think that loyalty is not the pot of gold they had hoped for.
Who doesn't need a loyalty scheme?
Before getting embroiled in a discussion about ?what card' or ?no card', let us first look at the type of organisations who can benefit from loyalty schemes. And to tackle this, I'd like to take a moment to look at those most fortunate of retailers who can cheerfully ignore all the current loyalty activity.
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