As the widespread adoption of the Starbucks mobile app suggests, coffee shops lend themselves particularly well to mobile payments. Coffee is a recurring purchase by people who want to move quickly, so the convenience of shaving a few seconds off transaction times is appealing. And the prospect of loyalty rewards is an extra sweetener, even for those who take their java black.
After a pilot project, Dunn Bros Coffee, a Minneapolis-based chain with 80 locations, recently deployed a mobile payments and loyalty app franchise-wide. Laura Radewald, the company's CMO, discussed the rollout via email.
Mobile Payments Today: Talk about your mobile payment and loyalty app. How does it operate?
Laura Radewald: The Dunn Bros mobile payment and loyalty app is packed with tools and rewards to benefit our customers' experience. In addition to being a quick, safe and easy way to pay (customers simply scan a QR code on the app at checkout), users can also use the app to see shop locations closest to them, view our menu and earn loyalty rewards. We are also donating 1 percent of sales made through the app in 2013 to food shelves in the communities where our shops reside. The app also includes a loyalty progress chart, which displays how close a customer is to unlocking a loyalty reward. For example, for each $50 spent, a $3 reward is earned.
Mobile Payments Today: Who built it?
Laura Radewald: Our app is built on LevelUp's mobile payment infrastructure, which made the process of building it very simple. Each franchisee benefits from accessing customer data, utilizing engagement tools and saving on lower payment processing fees, all powered by LevelUp.
Mobile Payments Today: When did you decide to go this route?
Laura Radewald: Last spring, a customer survey revealed the need for a loyalty program, so we started exploring different options. We had used a card-based program in the past, but it was difficult to measure results because there was little data available to measure its impact. We looked for an option that would show us clear results, so we could truly know if the program was effective in driving loyalty. By the summer, we made a commitment to build a LevelUp-powered app.
Mobile Payments Today: How long did it take to build the app, and what kind of financial investment did it require?
Laura Radewald: We experienced a quick turnaround from our initial meeting with LevelUp — it took only a few months to build the app, and cost hundreds of thousands of dollars less than building a mobile payment app and infrastructure from scratch. We can't disclose specific financial information, but choosing LevelUp White-Label saved us a lot of time and money.
Mobile Payments Today: Why is having a mobile payment/loyalty app important to your business?
Laura Radewald: We care a lot about the relationship we have with our customers. An app that benefits them — and us — strengthens that relationship. Technology is a huge part of our customers' daily lives, so it's important we acknowledge this by providing a high-tech payment and loyalty experience.
Mobile Payments Today: Which part of the app — the payment feature or the loyalty — do you expect to be more enticing initially? Do you think that will change over time?
Laura Radewald: The loyalty program is especially important to our business, as coffee is a frequently purchased product. We want to make Dunn Bros a part of our customers' daily routine — we want them choosing us because they enjoy their experience at our stores. Our customers care about convenience — but saving money is also priority for them. Being able to pay with a simple barcode scan cuts down on checkout time, so busy customers can scan and go. Each time a customer pays, they can watch their progress chart fill up, so they know exactly how much they need to spend to unlock the next reward. Initially, the speedy checkout and convenience is the most appealing — but once customers save money and gain rewards through the loyalty program, that aspect of the app becomes more important.
Mobile Payments Today: Do you think the average person still faces a learning curve?
Laura Radwald: Our customers are generally very tech-savvy, and for those who aren't, the app is simple and easy to use, so they've picked it up quickly. At this point we aren't running across many people who don't know how to download an app — Millennials just do it much more quickly. We've seen a lot of repeat usage, even more than expected, which shows that consumers are quickly adapting to our new payment option. In some of our stores, it has reached a 10 percent share of payments after just a few months.
Mobile Payments Today: Is this aimed at younger consumers? What are you hearing from older demographics?
Laura Radewald: The app is a way for us to be more relevant to Millennials. Younger consumers are eager to adopt the latest technology trends, so our app caters to their tech-savvy, digital lifestyles. However, we purposely made the app very simple and intuitive, so our older customers can use it, too. We are seeing a pretty even distribution across age groups at this point.
Mobile Payments Today: What will you look for to gauge success/traction?
Laura Radewald: Our app gives us more data than we've ever had before to gauge success. We have access to data that lets us know who is paying with the app and how often they use it. We can compare the average ticket of app users vs. non-app users, look at purchase trends and visit frequency over time to see the effect that the app is having on driving new behaviors.
Mobile Payments Today: How do you gauge ROI — are you looking for a direct relationship or do you see it as an intangible part of your larger processes?
Laura Radewald: We are expecting to be able to improve our marketing to the point where we can demonstrate that the increased sales more than offset the cost of the rewards. The app is an important part of our overall business process because it improves our customers' in-store experience. Over time we're looking to the app to deepen our customers' connection to our brand, as we add new features and functionalities that are useful and highlight our key points of differentiation.
Mobile Payments Today: What would you suggest others in the QSR space who are thinking of adding mobile payments and/or mobile loyalty? Is this a must, a maybe or something in between? Is it highly dependent on the nature of the business?
Laura Radewald: If you want to stay relevant to your customers, it's important to adapt to new technologies. The world is changing rapidly, and while it might have been OK to stay on the sidelines a few years ago, today I believe that it's important to act and iterate. Being an early adopter has enabled us to play a role in shaping this technology that is so important to our industry. I strongly encourage anyone considering a mobile payment and loyalty app to explore different options. We've been very pleased with the process of launching our app and our results to date, and are very glad we took the leap forward to adopt this new technology.