Coca-Cola Seeks to Increase Use of Mobile Phones for Payments and Rewards at Vending Machines

As it seeks to reduce the number of coins and notes consumers pop into its vending machines, the Coca-Cola Co. is counting on more consumers to pay for their bottles of Coke with cards and mobile phones in coming years.

The soft drink giant, which is participating in the trial of the Isis Mobile Wallet and earlier helped promote the launch of Google Wallet, predicts mobile payment will account for 5% to 10% of transactions at the company’s U.S. vending machines by 2017, and that figure will increase to 10% to 20% by 2020, said consultant Rick Kanemasu, who heads Coca-Cola’s vending technology strategy.

Mobile payment will “grow slowly over time,” he predicted.

Kanemasu, speaking in a Webinar last week with a representative from Isis, said credit card payment at vending machines would also likely grow, at least through 2017, when it could make up to 30% of transactions, up from 20% at present. But by 2020, it might account for only 25% of transactions or less, as mobile takes up a larger share. Cash transactions would still make up 50% to 60% of transactions in 2020, down from 80% today, he said.

Coca-Cola has said it would expand its acceptance of cards to tens of thousands of more vending machines in the U.S. this year, which are also expected to accept contactless payment. At present, about 15% of Coca-Cola’s machines accept cards and about half of these also accept contactless payment. The company is believed to have hundreds of thousands of machines rolled out in the U.S.

For the Isis trial, Coca-Cola has installed advanced payment features on 200 vending machines deployed in Austin, Texas. The machines are equipped to handle payment along with the beverage company’s My Coke Rewards program.

Kanemasu spoke in the Webinar with Jim Stapleton, chief sales officer for the Isis joint venture, though neither released figures on actual use of the Isis Mobile Wallet at the vending machines. But Kanemasu did say that 34% of the Isis users in Austin added the My Coke Rewards loyalty card to their Isis wallets, and “most of those people are new My Coke Rewards members.” The Isis trial, which is also being held in Salt Lake City, Utah, launched in late October.

The 200 Coke vending machines in Austin are located in malls, on college campuses, in workplaces and at retail stores of Verizon Wireless. Verizon owns the Isis joint venture along with AT&T Mobility and T-Mobile USA.

Each of the 200 machines is equipped to accept conventional payment cards and contactless payment from cards and phones, supporting applications from Visa, MasterCard Worldwide, American Express and Discover Financial Services. A 4-inch touchscreen on the front of each vending machine plays a 30-second commercial promoting the rewards program, and customers use the screen to select drinks and redeem reward points.

Isis users store their My Coke Rewards loyalty card in the Isis wallet. New My Coke Rewards members can register for the program via Isis and when they do, they receive enough reward points for a free 20-ounce (567-gram) bottled drink.

Seeking Redemption
Isis backers say the mobile wallet makes it a lot easier to redeem rewards with the Coke loyalty program. Without it, users have to collect codes found on product cases and bottle caps. They have to log into a Website to enter the codes to accumulate points, then choose a reward from the site’s catalog. Rewards include sweepstakes entries, free Coke products and gift cards for stores such as Best Buy.

Most people choose the free 20-ounce drink, said Kanemasu during the Webinar, which was held March 20 and organized by the Morrissey Group. After ordering the rewards online, customers have to wait up to eight weeks for a paper coupon, which they can exchange for a bottled drink at most stores.

“That’s not a great experience, having to wait that long, said Kanemasu, calling it a “very cumbersome process.” He suggested that the long waits and inconvenient process might account for the low number of active consumers among the My Coke Rewards program’s roughly 20 million members.

Isis is offering users an additional incentive to use the program, shaving 10 points off the 40 points usually necessary to earn a free drink.

If the customer has enough points for a free drink, the touchscreen prompts them to redeem their points. They can choose not to redeem at that time, and the new drink purchase would add points to their balance.

Coca-Cola stores the points on the network and users can redeem them at the machine or on the loyalty program’s Web site. They redeem the points at the machine by tapping their Isis wallet phones or by swiping a magnetic-stripe loyalty card Coca-Cola issues to employees at some of its corporate venues.

Kanemasu said Coca-Cola notices high use of the My Coke Rewards mag-stripe card when it issues it to employees for use in Coke machines on corporate campuses and other enterprise locations.

But distributing physical magnetic-stripe cards to consumers would be expensive and difficult to manage. So Coca-Cola is hoping for a growing use of devices for mobile commerce by consumers in coming years, which would enable it to deliver the loyalty program and rewards over the network.

But it remains unclear how many of the thousands of Coke vending machines that will be equipped this year to accept contactless payment in the U.S. will support the Isis Mobile Wallet.

While Isis is expected to expand to more cities this year, it has declined to say where or when and remains coy about its plans for a nationwide launch.

Shift to Cashless
The new vending machines are part of Coca-Cola’s shift toward cashless vending.

One of the most frequent consumer complaints about vending machines, according to the company, is that most machines do not accept debit or credit cards, while fewer and fewer people carry cash. Moreover, vending machines usually accept only dollar bills and quarters, not larger bills or smaller coins.

In an informal poll he conducted during the Mar. 20 Webinar, Kanemasu found that only 57% of attendees had the right change in their pockets to buy a bottle of Coke from a vending machine–either a dollar bill and two quarters or two dollar bills.

“That means that 43% of our consumers may walk up to a Coke machine and not be able to purchase a Coke because they don't have the right currency in their wallet or change in their pocket,” he said.

Over the past 15 months, Coca-Cola has increased credit and debit card acceptance on its vending machines from 5% to 15% and that 15% now accounts for 30% of the company’s vending machine sales volume in the U.S.

A vending machine credit card reader costs between $100 and $130, according to Kanemasu, and “on average, when we put a credit card reader on a machine, we’re getting at least a 6% volume lift on that machine.”

The average card reader-equipped vending machine sees about 30% of its transactions completed with credit or debit cards, while 70% still use cash. In “key channels” for cashless vending, such as lodging, college campuses and military bases, about 70% of transactions come from credit or debit cards on machines with card readers.

The touchscreen-equipped vending machines will enable Coca-Cola to offer other forms of marketing. From the touchscreen, for example, users could donate to a charity, Kanemasu said, or the company could “do a program where you friend someone a Coke.” All or most of the machines with the new card-acceptance equipment the company is rolling out this year will have the touchscreen.

“Once you put a machine online, the possibilities for marketers are pretty endless,” he said.

Coca-Cola also expects to offer cross-channel promotions through the mobile wallet loyalty cards, such as coupons or rewards for buying Coke products at quick-service restaurants.

Isis: Reaching People Before They Pay
Coca-Cola is one of the national merchants Isis has signed up for its pilot. Others include Academy Sports, Aéropostale, Aramark, Champs Sports, Foot Locker, Jamba Juice, Macy’s and Whataburger. That’s in addition to a number of local merchants.

Overall, about 10,000 points of sale in Austin and Salt Lake City accept Isis, though most are stores that already accepted contactless payment from cards.

Isis’ Stapleton said the mix offers “a good diversity and quantity of places” at which consumers could use the mobile wallet.

As he has said in other recent public statements about the trial, Stapleton noted that the “most engaged” Isis users pay with the mobile wallet about five times a week, and merchants that offer loyalty, rewards and marketing programs through the wallet tend to see twice the level of engagement of those who do not. He again did not release figures of actual use, however.

“Payment is good,” Stapleton said. “But what it’s really about is the ability to reach their consumers before they even get to that point-of-sale interaction.”

In the future, Isis plans to include gift cards, store credit cards and transit and event ticketing in the mobile wallet, he added.

 

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