Interacting, not Transacting

In a previous post regarding trends in the hospitality space, I wrote of four high level technology concepts which are coming to the Fast Casual and QSR market: Tablet Craze, Mobile Ordering, Payments Security and Interacting, not Transacting. These four trends are enabled by fundamental technology advancements and shifts in the market. In this post, I will be discussing the last trend in more detail.

Let’s first talk about the status quo of the consumer marketing and ultimate transaction experience in the market today. Traditional marketing in the restaurant arena has taken the form of coupons in the mail to entire zip codes or punch card products for a free coffee after 20 visits. These programs, while productive, do not provide individual identification of consumers and provide little in the area of data to the marketers themselves.

Continuing along that the thread of traditional approaches to operations, the vast majority of interactions between a restaurant’s staff and a patron are transaction based. Essentially there are a series of fundamental tasks that have to be completed in a particular sequence and the most efficient completion of those tasks is often the preferred methods for both the staff and the patrons. An extreme example of this in action was the Soup Nazi skit from Seinfeld – “No soup for you!”

Getting back to the point, the technology updates alluded to above have fundamentally changed the game. The technology components which will have the biggest impact on the consumer experience are: broad adoption of smart phones within the consumer base, expansion and enhancement of mobile marketing technologies, ‘smarter’ multi-purpose terminals, and the continuing evolution of CRM systems.

Regarding smart phones, it is estimated that over 460 million smart phones were shipped in 2011 and another 600 million will be shipped in 2012. With more than a billion smart phones shipped by the end of this calendar year, consumer connectivity will be at an all-time high. Just of note, connectivity is a loose term. In this case, I mean that consumers will not only have the ability to surf the web, and check Facebook, but will be able to receive discounts, offers, and coupons in real time and in relation to their actual location in the world. Further, and this is critical, these devices provide the ability for the consumer to transmit information to the merchant. As pointed out above, paper coupons can only carry so much information, where as a quick data burst from a phone can provide very specific details about the user and the offer that is being redeemed.

The discounts, offers, and coupons mentioned above don’t materialize out of thin air like Kramer, rather they are distributed by sophisticated marketing companies which specifically focus on delivery of offers to consumers’ mobile devices. The products of these companies allow merchants to create and distribute offers to their known clientele base through the application of specific rules. For instance, one could design a program where known clients who are within five miles of a specific location are sent an offer just before lunch. Likewise, merchants could send an offer to a broader segment for an upcoming special event. In either case, offers delivered in this engaged approach (requiring active participation from the consumer) are very effective and lead to a much higher redemption rate.

Closing the marketing offer to redemption data loop is key. With traditional marketing programs, this meant handing a coupon over to the clerk and they would scan the coupon or push a button and the transaction would be modified. Offer presentment via NFC on a smart phone to an accepting terminal is a completely different event. First, the transmission of the offer itself can be a very data rich event. This can possibly include a unique identifier that tracks the offer back to the specific marketing campaign and the specific consumer the offer was sent to. From this data, a merchant can immediately measure the effectiveness of their campaigns and make specific adjustments to appeal to various demographics.

Closing the data loop is ultimately made possible by the smarter and more engaging set of terminals that are being brought to the market. A perfect example of this is the just released VeriFone MX 925. This device is a true multi-purpose device perfectly suited to be not only the terminal where payments are initiated, but the order confirmation display, in-transaction marketing platform (bacon button!) and NFC transmitted offer acceptance device. These devices also have the capability to format and transmit data to a variety of end points and, likewise, receive data from a variety of sources. This last capability may become quite useful as moving data through the traditional in-store systems may require considerable changes without providing any more value than directly acquiring the data from the multi-purpose device.

Finally, CRM systems are being brought into the hospitality industry to specifically track purchases and provide data for the purposes of designing new offers and marketing programs. The good news is that these sophisticated systems have evolved in other industries so many lessons learned can be applied to the hospitality space.

All in all, this is a very exciting time in the hospitality technology space. All of the technologies discussed above are real and ready for merchants to start designing and implementing interacting solutions. I just know that the resulting solutions will be much more creative than I can even imagine.



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