Digitalizing Loyalty Cards in Tourism
a
a
a
a
a
Wolfram Höpken ， Philipp Deubele ， Gerhard Höll ， Jörn Kuppe ， Dominik Schorpp ，
Roger Olides Zapata Licones ， and Matthias Fuchs
a
b
a
Business Informatics Group， University of Applied Sciences Ravensburg-Weingarten，
Germany {wolfram.hoepken， deubelph， hoellge， kuppe ， schorpdo，
zapatalr}@hs-weingarten.de
b
The European Tourism Research Institute (ETOUR)， Mid-Sweden University， Sweden
matthias.fuchs@miun.se
Abstract
Loyalty cards play an important role in modern customer relationship management， especially in tourism.
The most common way to implement loyalty card systems is to use plastic cards，
e.g. in form of magnetic cards or chip cards. However， considerable obstacles of current loyalty card
systems are high hardware investments for participating retailers， which are even more noticeable in tourism
due to the great diversity of potential participants in tourism destinations. This paper presents an approach for
digitalizing loyalty cards based on quick response (QR) codes. Both， customer and retailer make use of their
mobile phone to present and validate the QR code as digital customer card and offer corresponding discounts
and (e.g. tourism or information) services， without the need for additional hardware investments. A
prototypical implementation has been evaluated in a real life scenario in a German tourism destination.
Key'ords: digital loyalty card， QR code， mobile application， CRM
1. Introduction
Loyalty cards offer companies a popular opportunity to improve customer relationship management
(CRM) (Mauri， 2003). Currently， loyalty cards are mostly available as plastic cards， e.g. in
the form of magnetic cards or chip cards. These cards are particularly used to increase customer
loyalty and to attract new customers by offering discounted services in case of repeated purchase
(discount card)， special benefits or services for registered customers (bonus or club card) and
payment services. Next to these customer benefits， loyalty card programs typically generate a
huge amount of customer transaction data， constituting a valuable input to f urther CRM
activities and market intelligence， like customer profiling and consumer behaviour analysis
(Zilliani & Bellini， 2004). Due to raising customer expectations and decreasing customer loyalty
a strong need for intensified customer relationship management emerged (Pan & Lee， 2003)，
thus， especially tourism destinations intensified the use of loyalty card programs in recent years
， e.g. Zell am See-Kaprun card (Stärz， 2010)， Freizeitticket Tirol (Schroll， 2010) or
Mieminger Plateau card (Lampe ， 2010). However ， particularly in a tourism context ，
traditional loyalty card systems exhibit serious obstacles. First， magnetic cards or chip cards
typically lead t o high investment costs for the technical infrastructure， especially card reading
devices at the variety of points of sale (POS) (Wittbrodt， 1995). Second， the usage of separate
plastic cards by different loyalty card systems leads to inconveniences for customers and，
consequently to reduced user acceptance.
M. Fuchs et al. (eds.), Information and Communication Technologies in Tourism 2012
© Springer-Verlag/Wien 2012
This paper presents an approach to overcome above obstacles by digitalizing traditional loyalty
cards through the combined use of quick response codes (QRcodes) and mobile phones. Both，
customer and retailer make use of their mobile phone to (1) present the QR code as digital customer
card to the retailer and (2) validate the QR code and offer corresponding discounts and services.
The digital customer card does not need any hardware investments and significantly
improvescustomer-side handling. Based on a mobile application on the retailers' mobile phone， a
flexible management and redeeming of various types of coupons is supported.
The paper is structured as follows. Section two gives a brief description of loyalty cards in tourism
as well as QR codes and typical applications. The third section presents the concept and the
architecture of the digital loyalty card system. It shows the general work flow， the concept of
coupons and the technical infrastructure. Section four is about the prototypical implementation and
evaluation of the digital loyalty card system in a tourism destination. The last section summarizes
the results and gives an outlook on future research activities.
2. Background
2.1 QR Codes
Traditional (one-dimensional) bar codes evolved to 2D codes in order to increase reading speed，
accuracy and data capacity (Lenk， 2002). Different types of 2D codes are composite codes，
stacked codes， dot codes and matrix codes. QR codes are a kind of matrix code developed by
Denso Wave in 1994 and first used by the Japanese automobile industry for identifying car parts in
the production line. Key features of QR codes (established as an ISO standard ISO/IEC18004) are
high capacity encodingof data， small printout size， resistance to dirt and damage and 3600
readability (Denso， 2010).
The QR code structure consists of three patterns for position detection， a pattern for alignment
and a data area. The patterns for position detection and alignment allow rapid identification and
omnidirectional readability of QR codes (Soon， 2008). QRcodes can be divided into up to 16 data
areas， increasing the data capacity by a smallprinting size. The data area itself consists of control
zones for tact， version and format and reserved areas for user data and error correction. Based on
the format and version identifiers， the code type and size are recognized. The actual data block is
divided into sections for user data and error checking and correction (ECC)， depending on the
chosen ECC level. Error checking and correction is typically based on the Reed-Solomon algorithm
(Lenk， 2002). Examples of QR codes with one (left) or several data areas (right) are shown in
Fig. 1.
Fig. 1. Examples of QR codes
2.2 Applications of QR Codes inTourism
Typically， QR codes serve the purpose of providing encoded information for authentication
(mobile couponing) or linking internet resources with physical ob ects (mobile tagging). The
encoded information can be captured with handheld scanners， fix-placed charge couple devices
(CCD) and especially mobile phones. The use of the latter grounds the variety of application
scenarios for QR codes especially in tourism(Canadi et al.， 2010; Chen & Weng， 2010).
For example， the city of Alberta (CAN) uses QR codes to link to videos that bring to life various
Canadiandestinations， cultural experiences and vacation packages(McBurney， 2011). The Fort
Smith National Historic Site in Arkansas uses QR codes to link printed advertising material or
points of interest with additional information onthe Web (Woerner， 2010).
3. Digital Loyalty Card System Architecture
3.1. General Concept
With the digital loyalty card system， a technical solution is offered， which allows agroup of
retailers to form a marketing alliance and， by offering bonuses and benefits， acquire new
customers and increase customer loyalty. The digital loyalty card system replaces existing plastic
cards by a QR code provided on the customer's mobile phone and corresponding specific reading
devices by a mobile application on theretailer's mobile phone (cf. Canadi， 2011).
Fig. 2 illustrates the general usage scenario of the digital loyalty card.
Fig. 2. Digital loyalty card usage scenario
(1) Customers oin the loyalty program by registering on a portal page.
(2) At any time， customers can get information on available bonuses and benefits.
(3) Customers download a personal QR-code onto theirmobile devices， which represents the
digital loyalty card.
(4) At thePOS， customers issue their digital loyalty card for authentication by presenting the QR
code (as a stored picture or MMS) on their mobile phone.
(5) The retailer authenticates the customer by scanning the QR code using his mobilephone，
offers the available bonuses and benefits to the customer and books the bought products or used
services.
(6) The collected purchase data is sent to the portal back-end system as input to update available
bonuses and benefits or for consecutive analysis of customers' purchase behaviour. As the backend
system centrally collects purchase data of allcustomers， several or all suppliers can co-create
certain bonuses or benefits， e.g. in the case of a points system.
The proposed approach of the digital loyalty card overcomes the limitations of traditional loyalty
cards described in the introduction and， moreover， offers significant additional advantages.
First， plastic cards are replaced by QR codes and only marginally costs occur for their production
and distribution to the customer.Additionally， handling (especially multiple) loyalty cards by the
customer issimplified and， thus， will significantly increase user acceptance.
n
o
Second， hardware investments into specific reading devices at the POS arenecessary， while，
at the same time， securing a comfortable and robust authentication process based on QR codes.
Finally， especially compared to offline loyalty programs， the digital loyalty card system
enables a flexible and dynamic management of bonuses and benefits by each single retailer.
3.2. Technical Architecture
The technical architecture of the digital loyalty card system is shown in Fig. 3.
Fig. 3. Technical architecture of the digital loyalty card system
The可rontend layer consists of the online portal page (cf. section 0) used by the customer to
register to the loyalty program and gain access to information aboutavailable bonuses and benefits
， and the retailer client (app)(cf. section0)， a mobileapplication for retailers to scan customers'
QR codes， inform about available bonuses and benefits and book purchased products and
services. The backend layer consists of the bene可it system(cf. section 3.3)， enabling the flexible
management of bonuses andbenefits， and the database， storing operational data as well as
non-operational data for consecutive analyses.
Online Portal
As outlined， the online portal serves as customers' main entrance point to the loyalty cardsystem
， offering functions， like maintain customerprofile， view available bonuses and benefits and
provide information on special events and news. The online portal is implemented by ob
ect-oriented PHP5 and offers a customized layoutstructure for mobile devices identified by their
user agent. After registration， based ona double-opt-in mechanism， the personal QR code is
generated and displayed as part of the customer profile.
The customer can transfer the QR code to his mobile phone by (1) simply taking a picture and
storing the QR code picture on the mobile phone， (2) requesting the QR code to be send by MMS
or email or (3) access the online portal directly via mobile phone.
Retailer Client
Each retailer participating in the loyalty program needs a device to authenticatecustomers by
scanning and verifying the customer's QR code， get information about bonuses and benefits
available for a specific customer and book purchased productsand services. In order to avoid any
additional hardware investments， this functionality is provided by a mobile application executed
on the mobile phone of the retailer.
Fig. 4 illustrates the architecture of the retailer client， implemented as an Android application.
The controller manages the communication between the graphical user interface (GUI)， the
service module and the QR code reader.
As QR code reader an external application from the Android Market is used ， which is
automatically downloaded if necessary. The access of the retailer client to the corresponding
functionality of the backend system for managing bonuses and benefitsis realised by web services，
implemented based on a REST architecture (managing services via HTTP GET requests) and JSON
as platform-independent message format. The ser ice module provides the web services'
functionalities within the client environment. The following services are available�
� setup� Initialization of the client on the back-end system using a client identifier (mobile
device) and a retailer's identifier.
� get�ouchers� Request all vouchers (bonuses and benefits) available for a specific
customer and retailer.
� redeem�oucher� Redeem a voucher after consumption by the customer.
Fig. 4. Architecture of the retailer client
3.3. Benefit System
The benefit system manages the different types of benefits and offers its functionality to the
different components of the frontend layer (cf. Fig. 3). Benefits are represented as rules，
following the concept of ECA rules (Beer， 200�)， enabling their flexible andpowerful
definition. Rules for benefits consist of different components， illustrated in Fig. 5.
Fig. 5. Components of rules for bonuses and benefits
The first component of a rule specifies the endor (i.e. retailer) who provides thebenefit. Usually a
benefit is provided by one vendor. However， it is also conceivablethat several vendors participate
in providing a benefit. For example， a points system， offering a benefit based on points
consecutively collected over several purchases at atourism destination， would typically involve
multiple vendors. The second component of a rule specifies the products， triggering the benefit，
in form of single products， a range of products as well as complex Boolean expressions.
Conditions of a ruleenable to specify pre-conditions in form of "if -then -else" expressions，
enabling thevendor to restrict the availability of benefits to certain context parameters， e.g. time
or customer characteristics. The action of a rule specifies the benefit the customer isgranted by the
vendor， like a discount， free service or points within a point system. Actions are triggered by
conditions and can be arranged in a timely manner.
The presented rule-based approach for managing bonuses and benefits enables thebenefit system to
be highly flexible and powerful. Consequently， a variety of different types of benefits can be
modelled to fit the retailers' needs. Benefits can be defined and ad usted easily and at any time.
4. Evaluation
4.1. Focus Group Intervie'
As first step of evaluation the presented digital loyalty card system has been tested and discussed in
the course of a focus group interview. Focus group interviews are a well-known method in usability
engineering to obtain sub ective but valuable knowledge on the users'perception of an IT application
， based on an interactivegroup discussion (Nielsen 1993) The focus group consisted of 5 students
(three male，two female) enrolled in a course in information technology in tourism， with an
agebetween 22 and 25 and fairly good technical backgrounds and， thus， represents the target
segment for the digital loyalty card system (i.e. early adopters) well.
The focus group interview started with an introduction to the general approach of the digital loyalty
card system and its prototypical implementation. The focus group members then experienced the
prototype by executing several real-life usagescenarios， both from a customer as well as a retailer
perspective. The experiment has been observed by the pro ect team to gain first insights into
usability and possibleusage barriers. Afterwards， the focus group members evaluated the system
based on aprepared questionnaire (cf. Table 3). Finally， a moderated focus group discussion has
been executed to identify ma or strengths and weaknesses of the presented approach and gain
insights into reasons and motivations for the qualitative udgements concerning usability
andusefulness， already quantitatively expressed within the questionnaire.
Table 3 presents the obtained questionnaire results. For each role， retailer (R) andcustomer (C)，
questions are segmented into three topics� user registration and log-in(T1)， main work flow
(T2) and， finally， general questions and individual udgements (T3). Answers were given on a
five-point scale ranging from 0 (i.e. strong disagreement) to 5 (i.e. strong agreement). Although the
gathered quantitative results cannot be considered as representative due to the small number of
probands typically involved in focusgroup discussions， results clearly indicate that usability and
usefulness are consistently udged as high and satisfactory. Q1� (R-T2) achieves anaverage value
of 4.0 and ， although still high ， marks the relatively lowest average result throughout
thequestionnaire， indicating that a potential disturbance or retardation of the selling process at the
POS may constitute the likely biggest threat to the system's acceptance by the retailers.
Table 3. Results of focus group questionnaire
Roles & Topics C -T1 C -T1 C -T1 C -T1 C -T1 C -T2
C -T2 C -T3
C -T3 C -T3 C -T3 C -T3 R -T1 R -T1 R -T2
R -T2 R -T2 R -T3
R -T3
Statements
Av. Rating
Q1� I had no problems to register on the portal. 4.8 Q2� I had no problems to log-in and log-out. 4.8
Q3� I could insert my master data without any problems. 4.8 Q4� I had no problems to view available
benefits 4.5 Q5� I had no doubt to insert my personal data. 4.4 Q6 I had no problems to photograph the
QR code with my 4.6
smartphone.
Q� I had no problems to find the QR code on my smartphone. 5.0 Q8� The mobile digital loyalty card is a
reasonable alternative to 4.8 the old plastic cards. Q9� I can imagine registering to other digital loyalty card
programs. 4.5
Q10� I had no problems with the storage of the transactions. 4.3 Q11� I had no problems to get along
on this website. 4.8 Q12� I had no problems with the identification with my QR-code. 4.8 Q13� I had
no problems to find and start the app quickly. 4.8 Q14� I had no problems to login with my device. 4.6
Q15� The scanning process of customer's QR code did not make 4.4
any problems. Q16� I had no problems to redeem the coupons on my smartphone. 5.0
Q1�� The scanning process did not bother the selling process. 4.0 Q18� Mobile digital loyalty cards
are a reasonable alternative to old 4.6 plastic cards. Q19 I can imagine using the digital loyalty card system
4.4 permanently.
The moderated discussion， as main part of the focus group interview， revealed further
interesting insights into the perception of the digital loyalty cardsystem， thus， explaining or
underpinning the quantitative results in Table 3. In general， the overall application (online portal
and retailer client) is udged very positive and as comfortable to use by all focus group members.
Specifically from a customer's perspective the following udgements were most frequently stated
The registration and log-in process as well as the download and handling of QR codes for
authentication at the POS have been udged as reasonable and very easy to use.
The application is perceived as usable even on older mobile phones. Thus， this specific
form of QR code usage is not restricted to modern or expensive smart phones.
At the same time， the application is considered as impractical for older people or users
without a minimum of technical background. Although aprint function for the QR code to
be used without a mobile phone is offered， the focus group members doubt that older
people are willing to use such a system. However， and qualifying the statement， this
is not viewed as a specific problem of the presented system but of most technical
innovations.
From a retailer'sperspective， the focus group members stated the following udgements
As no additional hardware investments for retailers are needed (as one of themain
advantages of the proposed system)， no costs for using the systemshould arise for
retailers， which is especially important in the context of tourism destinations with a
variety of small-and micro-sized retailers as potential participants (although the retailer
client is currently only availableas Android application， it can be provided for a wide
variety of even older mobile phones in principal).
The overall effort for setting up and maintaining the central system is viewed as
problematic for a single retailer but as reasonable for a group of retailersforming a
marketing alliance， what typically occurs in a tourism destination context.
Specifically， for restaurants or bars， the loyalty card system should be integrated
intomobile order terminals， as using two different devices is viewed as impractical.
4.2. Pilot Application
The presented digital loyalty card system has been instantiated and implemented for the German
tourism destination “Bierkulturstadt Ehingen" and is in use since 1 ofJuly 2011. Bierkulturstadt
Ehingen is a theme-oriented marketing alliance， supporting local breweries and associated service
providers， like restaurants， beer gardens or gift shops and linking them with cultural activities.
Collaborating retailers have been introduced to the digital loyalty card system and corresponding
benefits (in form of rules presented in section 3.3) have been defined. Fig. 6 shows the instance of
the online portal developed for Bierkulturstadt Ehingen with the dialog displaying the customer's
QR code. Fig. shows the main screen of the developed retailer client. The participating retailers
successfully use the retailer client application on different types of Android-based mobile phones.
The retailers either use a direct Internet connection via a cellular network or an existing WLAN
hotspot to connect to the central system. The retailer client and the underlying work flow proofed
feasible for the retailers and has not been perceived as retarding the sales process so far.
st
Fig. 6. Online portal with QR code
Fig. 7. Retailer client main screen
5.
Conclusion
and Outlook
5.1. Conclusion
The
paper
presented
an
approach
for
digitalising loyalty
card systems by
making useof QR
codes and mobile phones instead of traditional plastic cards， like magnetic cards or chip cards. A
technical framework， consisting of an online portal and a mobile retailer client as front-end
components and a benefit system and database as back-end components has been developed and a
pilot system for the German tourism destination “Bierkulturstadt Ehingen" has been instantiated.
It could be shown that the proposed concept of using QR codes and mobile phones is suitable in a
real-world scenario. A focus group interview revealed that the handling of all system components is
easy and fast and the process of customer authentication and redeeming of benefits is smooth and
without any difficulties. However， the risk of retarding the sales process is seen as most
dangerous obstacle to retailers' systemacceptance. A pilot phase in the destination of Ehingen，
starting at the 1 of July 2011， confirmed the positive results of the focus group interview.
Unfortunately， alack of marketing activities led to a limited number of users， so far， which
can be identified a general obstacle of introducing technical innovations to tourism
st
a
s
destinations. Participating stakeholders ， like retailers in thiscase ， tend towards a
moreobservant and reactive behaviour due to a lack of IT affinity (Fuchs et al.， 2010). Local
authorities， like DMOs， often don't have the power and access to the market to sufficiently
attract potential customers.
Overall， the approach of using QR codes and mobile phones for digitalizing loyalty card systems
has proofed as a reasonable alternative to traditional plastic cards. Nohardware investments at each
POS are necessary， giving even small retailers the chance to participate as overall costs for
implementing and operating the digital loyalty card system are comparably low.Finally， from a
customer perspective the approach convinces by a comfortable handling of the digital loyalty card.
5.2. Outlook
Currently， a full functional digital loyalty card system is available and in operation aspilot
application in Ehingen (Germany). Of course ， after completion of the pilottest ， more
information on usage behaviour and user acceptance will be available for further analyses. In
parallel， the digital loyalty card system will be further improved byextended features. (1)
Although， the online portal adapts itself to mobile devices， aspecific mobile application (as
Android app) for customers is planned， to simplifycustomers' interaction with the loyalty card
system and offer additional functionality， like a location-based service， visualising surrounding
participating retailers in a map(Höpken et al. 2008; Chen & Weng， 2010). (2) The benefit system
will be extended by a rule engine， encapsulating the handling of rules for bonuses and benefits，
and enabling easier and more powerful definition and maintenance of rules. The
a
n
applicationof extended versions of the digital loyalty card system is planned forfurther tourism
destinations， like the region of Upper Swabia (Germany).
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