Mobile loyalty applications can provide a rich user experience, but their proliferation threatens to make them as unappealing to consumers as the physical cards they seek to replace, causing some marketers to explore alternatives such as wallet-based programs, which have a more limited set of benefits.

The ability to save a digital loyalty card to a mobile wallet is not new, but the strategy held little appeal for marketers until recently because the adoption of wallets was so low. While this is starting to change now that a number of Android phones will soon come with Google Wallet preloaded on them and use of Apple Passbook continues to grow, this option offers a minimalistic loyalty experience that may not be right for all marketers.

“With the proliferation of loyalty programs, consumers have become inundated with plastic loyalty cards and smartphone loyalty apps,” said Ken Morris, principal at Boston Retail Partners. “Unless a consumer is a very frequent shopper, they won’t invest the effort to download a retailer’s loyalty app; and those that downloaded several apps are reaching the point of app fatigue.

“App-free loyalty programs are the way of the future, as it simplifies the adoption and use of loyalty programs.”

App proliferation
The expectation with loyalty applications has been that, by eliminating the need for a physical card and having the program live on the smartphones that consumers carry around everywhere, this would increase the interest in signing up for brands’ programs.

This expectation is one reason why so many marketers have introduced loyalty apps over the past couple of years, some of them a brand’s first entry into loyalty.

However, as the number of loyalty apps has proliferated, it is not clear that consumers’ interest is keeping pace.

“Fifty percent of consumers say they want to engage with programs via mobile,” said Sean Claessen, executive vice president of strategy and executive creative director at Bond Brand Loyalty. “However, there is a bit of mobile apathy.

“Twelve percent of consumers have downloaded a mobile loyalty program, almost double what it was last year,” he said. “Still 61 percent of smartphones owners who are also loyalty program participants are not even aware if the loyalty programs they are enrolled in offer an app.

“This could signal low interest. It definitely signals that there is low awareness around this.”

Loyalty fatigue
Mr. Claessen reports that Bond Brand Loyalty has had discussions with a number of marketers recently about whether or not they need a loyalty app.

“As a marketer, you just want to take stock of whether or not there is app fatigue,” Mr. Claessen said. “If you don’t have enough utility to your mobile app, and enough frequency, then making it to one of the 7 apps on consumers’ phones, if you don’t make it into that mix, I am not sure that you, as a marketer, are going to see the return on that investment.”

One marketer that has chosen to go app-free is burrito chain Currito, which has 18 locations across Massachusetts, Maryland, Ohio, Kentucky, New Jersey and Pennsylvania. The chain recently began offering an app-free loyalty program, with members able to save the digital loyalty card to Passbook or Google Wallet.

One of the benefits of this strategy is that consumers do not need to take the extra step of downloading an app. At the same time, the marketer does not need to make the significant financial investment required to develop and maintain an app.

App-free
Going app-free may make sense for some marketers but not others.

For example, for a chain such as Starbucks, whose loyal customers tend to visit frequently, if not every day, having a well-rounded app that offers loyalty as well as other features and functionalities has proven to be successful.

In fact, Starbucks continues to build out functionality for its app, recently partnering with Spotify to integrate the music service’s streaming with My Starbucks Rewards, enabling customers to curate playlists for Starbucks stores (see story).

But, for marketers such as Currito that do not expect customers to return so frequently, a lighter mobile loyalty experience could be worth considering.

Besides greater adoption of mobile wallets, the marketing opportunities around wallets continues to improve, another reason marketers may be giving them a second look.

For example, SIM Partners and Vibes recently partnered to enable hyperlocal offers. After an offer is saved to Apple Passbook, marketers can trigger notifications when a consumer is within 100 meters of a location and/or use iBeacons to send messages and information to customers based on their proximity to, or position within, a location.

Offer channel
There are some drawbacks to going app-free that marketers should keep in mind.

For now, the strategy is still predominantly only going to reach iOS users. However, as the number of Android phones with Google Wallet preinstalled on them increase, this will change.

Marketers are also not able to gather as much rich user data through wallets that they can with an app.

There are also some limitations in terms of the number of offers marketers can provide in wallets.

“Are those wallets, really just a unique identifier repository or an offer channel,” Mr. Claessen said. “You can change the creative on the virtual card in Passbook but it doesn’t act like an offer channel like a loyalty app.”

Mobile wallets and apps are not the only options for mobile loyalty. Some marketers are also leveraging Wi-Fi, beacons and SMS to drive customer loyalty.

Still, much of the interest now appears to be around wallets and apps.

Some marketers may even consider offering both a mobile app and a wallet-based program for their loyalty strategy.

“Wallet-based mobile loyalty programs give consumers another choice in how they interact with a retailer’s loyalty program,” Boston Retail Partners’ Mr. Morris said. “Loyalty mobile apps will still appeal to very frequent shoppers of brands, as they enable expanded features like gamification, geolocation and use of consumers’ photo capabilities on their phone.

“Savvy retailers will continue to offer multiple interaction models for their loyalty program – physical cards, apps and wallet-based mobile programs – so consumers can choose the method that works best for them,” he said.

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