Five types of offer stacking and how to beat them
What exactly is offer stacking?
Offer stacking occurs when people combine deals or rewards in a way that isn't intended by either the manufacturer or the merchant who issued the coupon. With new forms of payment, loyalty programs and location-based deals proliferating among consumers, so is the potential for offer stacking. And, as is the case with any new technology, people will always try to push the limits of the system to extract as much value as possible, which can lead to detrimental consequences for merchants and payments providers alike.
But while it is inevitable — and in fact desirable — for consumers to continue adopting mobile payments, offer stacking can be combated if you know what to look for and how to respond.
At Merchant Warehouse, we've been studying offer stacking closely over the last year, since the introduction of our newest technology platform, Genius. We have identified the primary types of offer stacking that merchants and processors are most likely to see out of the gate.
Below are the five types explained in detail, along with some thoughts on how merchants can best defeat them.
1. Loyalty Squared
This type of offer stacking occurs when two different loyalty programs are used at the same time. For example, a consumer might use the LevelUp app alongside a store's loyalty card. Each offers similar benefits, but they are not meant to be stacked. The best way to combat this is to use a payment technology platform that can limit the amount or number of loyalty rewards applied to any one transaction. This way, merchants have the support of back-end capabilities to ensure that only one loyalty card or app is applied to each transaction. Then they will not be left with double-reward redemptions or be forced to manually track the data.
2. The Bottomless Coupon
In some cases, single-use coupons can be redeemed multiple times, and consumers may take advantage of this, intentionally or not. The best solution is for merchants to use a unified platform for their online and brick-and-mortar retail presence that delivers centralized control and management of coupon redemption for each customer, regardless of what medium they are shopping from.
There is also a new challenge arising here: What happens when merchants leverage more than one mobile wallet or commerce app to push out coupons and deals? This opens the door for consumers to "double-dip" and use a single offer code multiple times through various mobile apps. Again, the best way to combat this is to leverage a unified payment technology that restricts offer redemption to one-time use or to a specific mobile wallet or commerce application.
3. Digital Wallet + Analog Wallet
Of course, offer stacking is not just a digital or mobile problem; it can take place in the analog world as well, particularly with a traditional mag stripe credit card that has embedded offers or rewards. This can be particularly problematic when analog (traditional) and mobile methods are used in tandem. For example, a merchant may choose to use an offers platform that ties merchant-funded coupons to a traditional credit card and at the same time also issue NFC coupons. If a consumer were to use offers tied to a card within an NFC wallet, they might also be able to redeem an NFC coupon at the same time. Using a payment technology that delivers a holistic view of all activity is a great option to combat this, enabling merchants to build logic into the transaction and ensuring only one offer can be redeemed at a time.
A similar issue can arise when consumers figure out how to combine rewards across different types of mobile applications. Some mobile apps are in the "wallet" style, while others, like Belly or LevelUp, are more of a loyalty or rewards program. Many of these do not cross-communicate, and this can cause havoc for a merchant who does not employ a payment technology that can track potential conflicts and minimize them.
4. Like the First Time ... Every Time
Many merchants offer a "first-time customer" discount on products or services, which is a great way to entice new customers to try out your business and bring in incremental sales. If merchants are using multiple wallet or payment providers to issue deals and offers, they will need to understand the potential pitfalls (and lost revenues) associated with offering a parallel deal across more than one payment medium. Basically, customers may pose as "first-time" users several times if they use different payment options. One option for merchants to defeat this is to use first-time offers and discounts with only one mobile wallet. This would help to drive wallet preference, steering consumers to the preferred wallet, where merchants can more easily control which offers they distribute to which consumers.
Many merchants offer coupons for consumer packaged goods that manufacturers also offer coupons for. Essentially, you have two parties funding offers for the same product. As with any offer, the ultimate goal is driving sales, so the decision is really up to the merchant as to whether they want to add a monetary incentive to a product that is already being discounted by the manufacturer. For some merchants, this may be a smart decision as it may drive preference and bring in additional customers who will not only purchase the discounted product but other items as well.
However, SKU-based centralized tracking can help merchants who want to insulate themselves from manufacturer-stacked-on-merchant offers in a simple and streamlined fashion.
These are the five primary types of offer stacking, but of course, there are many more. As new types of payments proliferate, so will opportunities to offer stack. Merchants should remain vigilant and look for opportunities to leverage technology that can help them deliver better experiences for customers — without negative effects on their bottom line.
Are you encountering offer stacking? What are you doing to combat it?