How Brands Can Utilize The Power Of Branded Currencies
While economists have traditionally defined currency as consisting of two parts — a store of value via a medium of exchange — one thing that they didn’t quite factor into the equation was the dynamic nature in which currency has evolved throughout the digital era. In today’s ever-increasingly digitalized age, currency has transformed from something tangible into something far more abstract: electronic currency, that is. By switching over from physical to more digitalized forms, currency takes on the ability to become a far more efficient medium of exchange — meaning it becomes subject to “quantify value in multiple ways, which in turn makes it easier to create new, valid forms of currency” (CNN).
A recent article in Harvard Business Review suggests that branded currency will evolve in three waves.
The first wave of branded currency came in the form of tried-and-true payment services like gift cards, coupons and loyalty points issued by brands. These early forms of payments were successful because they equipped consumers with the tools they needed to make more informed decisions about their purchases, helping to influence purchasing decisions by increasing consumers’ purchasing power. However, their medium of exchange was ultimately somewhat limited due to the manual upkeep required, often resulting in consumers misplacing or losing their deals in long-forgotten wallets or drawers.The more that these forms of payment became digitalized, the more they grew into something that was increasingly accessible for consumers.
The second wave of the currency revolution saw greater convenience in the form of mobile tools like Apple’s Passbook, allowing users to collect their rewards in one place without the physical restrictions of a wallet. While such innovations were promising in terms of convenience, they still ultimately required consumers to have to manually figure out what rewards could and could not be combined with one another — an ultimately long and cumbersome process.
As these forms of digital currency continue to evolve, brands that hope to keep a competitive edge in the market must look to utilize branded payments in new, more innovative ways that allow for the combination of multiple forms of currency. Starbucks, for instance, utilizes its mobile app to allow consumers to purchase items with either cash or “Stars”, aka reward points accumulated through using the Starbucks card.
By creating a branded currency like Stars that allows users to utilize several types of non-cash payments, Starbucks has managed to successfully set up a system for itself in which one in three interactions at the till doesn’t involve cash. The implications of this system are substantial: by facilitating the medium of exchange for consumers and transforming their gift cards into mobile payment cards reloadable through the app, Starbucks ensures that their currency is as convenient as it is mobile-friendly, with “…more than 7 million people use Starbucks’ mobile app to make 4.5 million payments a week, accounting for at least 10 percent of the coffee chain’s total U.S. revenue” (CNN).
Other enterprising brands have followed suit to create a more integrated approach to branded currency. The sports retailer Nike, for instance, recently set up a series of vending machines available only to users of their wearable fitness monitor, the Nike Fuelband. Consumers could only purchase items from the machine using Nike’s branded points — which could only be generated through physical activity registered through the Fuelband. As a result, Nike managed to create a more unique, memorable brand experience for their consumers that allows for not only more increased user visits, but yields happier, more loyal consumers, too, a realization we discovered in our “How to Build Memorable Experiences With Digital Rewards” piece.
Given the fact that millennials today view currency differently than their predecessors — with “36% of 25 to 34-year-olds in the United States finding it more useful to receive change in the form of mobile credit than the equivalent value in dollars and coins” (Contagious) — marketers looking to keep up with trends in branded currency should look to follow a few useful tips:
- Don’t work in a vacuum: In order for branded currency systems to be truly successful, retailers needs to unite themselves internally (adopting an “omnichannel” approach to sales) so that they can work in perfect tandem to meet consumers’ wants and needs.
- Know how to utilize third party applications to your benefit: While brands may be shaky about the idea of taking to a third party to implement a branded currency reward system, the most innovative players in the field will be those who successfully manage to “work with other third-party platforms and wallets, but not be beholden to them” (Harvard Business Review).
- Convenience, convenience, convenience: The more simplified the medium of exchange, the better the customer engagement. Brands that manage to put mobile at center and “aggregate deals, offers, payments, and loyalty; unify online and offline” (Harvard Business Review) will among those that set the tone for advancements to come.
