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Dairy Queen Pilots RFID-Based Mobile Marketing Platform

Dairy Queen is testing a new customer loyalty and discount system that uses an RFID tag to authenticate customers that have received coupons via text message on their mobile phones.
Jun 08, 2009This article was originally published by RFID Update.

June 8, 2009—Dairy Queen is testing an RFID-based customer loyalty program in one of its Indiana locations. Customers who sign up for the program receive coupons on their mobile phones via text message, then redeem the coupons using RFID labels attached to the phones.

The RFID system, designed by Carmel, Indiana-based mobile marketing specialist Tetherball, was deployed several weeks ago.

Dairy Queen had already deployed the text message-based coupon system from Tetherball in its Indianapolis and Philadelphia marketing regions, and has been using that system since last year. Customers who join the program receive discount offers via text message that can be used at their local Dairy Queen. Using the system, the restaurants can offer coupons to specific customers based on past purchases, and track the success of their promotions. The discounts can be limited to certain days or times so Dairy Queen franchisees can see how much customer traffic they generate by timing the coupons.

Tetherball's Mobiquitous web-based reporting system then delivers detailed visibility and analytics into coupon redemption rates and overall program performance.

The existing system, however, requires customers to show their cell phones to the cashiers in order to redeem their coupons, and does not provide real-time feedback on the success of the promotion.

The RFID version of the system adds a 13.56 MHz RFID "Tetherball Tag" attached to the phone (or the customer's wallet or purse) that authenticates the customer before redeeming the coupon. Customers joining the program provide their mobile phone number and zip code so that promotions can be targeted to the Dairy Queen closest to the customer's home.

When customers arrive at the restaurant to cash in their coupon, they either present the RFID tag to a reader at the point of sale (using a standard contactless payment reader), or take their phones to a standalone kiosk where they can print out a paper coupon. The customer ID number is automatically transmitted to the Mobiquitous system.

"RFID will allow for better tracking for Dairy Queen and for the franchise owner," says Jamie Guse, website manager for International Dairy Queen. "We can see how many times a customer has come to the store. We can track customer behavior and get more demographic information. We also have real-time voiding of the coupon as it's scanned, so if the offer only lasts for an hour the customer can only redeem it one time."

A number of other restaurant chains and retailers have deployed mobile marketing, taking a wide variety of approaches. Burger King, for example, requires a dedicated application for the Apple iPhone.

According to Jay Highley, president and COO of Tetherball, the company has been working on an RFID solution for at least 18 months. "We've explored a number of ways to approach mobile marketing, but the key inhibitor of mass adoption has been measurement," Highly says. "How do you track performance, report on it, and prevent fraud? We believe we've solved that problem."

Highley says that other methods of authenticating customers -- including scanning bar codes off the screens of their mobile phones -- have proven too cumbersome or costly to deploy on a wide scale. "But RFID provides 100 percent accuracy and real-time reporting at the time of redemption," Highley says. "It can't be copied, forwarded or sold on the Internet."

Using an RFID tag combined with text messaging also eliminates the need for customers to download applications to their mobile phones. "When you have to download apps to a phone to make something work you lose about 90 percent of the mass market in the U.S.," Highley says. "And even when they do download something, there are all these compatibility issues. Pushing those image-based coupons to the phone can also lead to incremental costs for the user."

Dairy Queen is currently testing the RFID system at one of its Rochester, Indiana, locations. Guse says the pilot has only been live for three weeks, so it's too early to tell how well the system is working. If the test is successful, however, the company plans to expand the system to other locations.

"The key measurement will be store traffic," Guse says. "Can the owner drive traffic to the store and boost sales? Is there loyalty being created? Obviously they'll know it's worked if they see a spike in traffic after sending the text message. With a traditional advertisement, you might see people coming in with the coupon for a month and a half. Text message offers have a short life span. We want to force that immediate reaction with them, and keep the restaurants top of mind with those customers."

Tetherball has teamed with ViVOtech on the reader systems and kiosks. The RFID tags are based on the ISO 14443 proximity card standard.

The RFID tags could also be embedded in a customer loyalty card instead of attached to a phone. "The only reason we chose the phone is that it's with most users 24/7," Highley says. "It's a convenient way to have the tag with you at all times for quick redemption."

Highley says that Tetherball's non-RFID programs have a relatively low opt-out rate of approximately 6 percent, with coupon redemption rates that average between 10 and 15 percent on an ongoing basis.

Other Tetherball customers include McDonalds, Hot Box Pizza, Blockbuster, Telemundo and the Florida Department of Health. Dairy Queen is the only company currently testing the RFID system, but Highley says several other clients plan to pilot the solution as well.
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