Online Voucher Distribution

Online Voucher Distribution

Maximising the rewards & managing the risks with secure digital vouchers.

Background

Use of secure digital vouchers is growing quickly, especially in industries such as FMCG, newspapers, utilities and ticketing. The advantages of digital vouchers are clear: instant, low-cost distribution combined with consumer convenience and instantaneous feedback.

One of these strengths also poses a considerable threat however; being easy to distribute makes digital vouchers easy to duplicate. Vouchers are after all a form of currency and a valuable offer can spread virally, creating financial exposure for both the voucher issuer and the redeemer. One technique to control the risk posed by any voucher campaign, paper or digital, is to buy promotional insurance. While this option may be viable for national promotions featuring a single offer, the bespoke nature of such policies make them unsuitable for online voucher sites with many offers that are often regionalised or only promoted at certain times. Such sites have seen massive growth in the last two years, especially those designed to sell a merchant’s excess capacity or to “fine-tune” demand.

Insight

The best solution to prevent voucher fraud and to accurately and quickly measure the effectiveness of promotions is to redeem vouchers electronically at the point they are used. With this technology, the voucher can be used only as many times as intended, at the right times at the right outlets, and automatically expire at the end of the campaign.

i-movo has pioneered secure validation of digital vouchers using existing point-of-sale systems e.g. card payment terminals, mobile top-up terminals and Electronic Point of Sale (EPoS) systems. i-movo presently dominates this market, having processed over 4 million voucher transactions worth £10million, by treating a digital voucher as a form of electronic payment. For many retailers, this is the only viable method to accept digital vouchers as currency as all retailers, from the largest supermarket to the local store, need a full audit trail to account for revenue and stock, and to prevent fraud.

However, many other retailers and service providers do not accept card payments or are unlikely to have terminals offering a voucher validation service. Those that accept card payments such as restaurants, bars, hairdressers and so on will all have card payment terminals but inevitably from a range different banks and service providers. While all such terminals can easily be configured for processing secure digital vouchers, attempts to coordinate all terminal owners to adopt a scheme such as i-movo are unlikely to succeed in the foreseeable future. The gap in coverage left as a result is huge.

Finally, self-employed professionals such sports coaches, personal trainers and beauticians rarely accept credit cards tending to accept payments by cheque and in cash.

Solution

IOVOX have teamed up with i-movo to allow merchants and service providers to validate digital voucher codes instantly using any fixed-line or mobile telephone. The addition of the telephone as a redemption device to the i-movo solution makes digital vouchers available to any business, anywhere in the world. There is no hardware or software required, the vendor simply makes a freephone telephone call then enters the voucher code into the keypad to validate it. Full reporting is available instantly showing which codes were redeemed by which venue, at what time and on what day.

Examples of businesses needing such as service are as follows:

  • A fitness coach might want to attract new customers by offering a first session free. A loss-leader is justified in this context but not if the same people try the offer multiple times or demand is so great that full-rate paying customers are crowded out.
  • National and independent restaurants have been quick to use online vouchers to fill their restaurants at off-peak times. The intention is to selling the remaining 30% of tables with “two-for-the-price-of-one” offers but if every diner has a voucher they had printed off from the internet for such a generous offer the effect on margins could be disastrous.

There are two online voucher propositions available for businesses with requirements like these: “Paid-For” and “Free-to-Consumer” voucher sites.

Paid-For Vouchers

An example of this is Groupon who market vouchers from a number of sources directly to consumers who purchase them online, print them out and then present them at the service or retailer accepting them. An example offer is a £150 beauty treatment sold for £30 or less. Clearly these are valuable vouchers and so security of redemption is required to prevent duplicates from circulating freely with the consequence that customers will simply not bother to purchase them from the voucher site. Secondly, the companies accepting the vouchers tend to offer deep-discounted offers on the basis that they have limited inventory available at this price-point. Consequently, they do not wish to see their margins eroded by any abuse involving duplicate vouchers.

Free-to-Consumer Vouchers

Vouchercodes.com is an example of this type of service. Vouchers are free to consumers and advertisers pay depending on the number of consumers who download and print them. The “cost per impression” (CPI) is correspondingly low as there is no guarantee that the consumer will actually use the voucher and no proof when they have done so. This is being addressed by new entrants offering a “cost per acquisition” (CPA) model whereby advertisers only pay when the voucher results in a customer visit. This represents a “no-lose” situation for the advertiser and potentially high returns for the voucher site but is only viable if it can be proved that a customer transaction occurred at a specific time and place.

The Virtuous Circle

The benefits of secure redemption are clear in both models for the online voucher site, but with the CPA model each validation would result in a charge to the redeemer. Leaving aside ethical questions, such a CPA model introduces a significant risk insofar as the redeemer has an incentive not to validate the voucher and therefore get the advertising for free.

One possible answer is to charge on a CPI basis but then rebate some of the fee to the advertiser for each acquisition represented by a digital voucher validation. This creates positive incentives for advertisers to promote the best offers they have and declare when a customer has used the offer, as their costs will reduce as a result. The net effect is to lower the cost of the most successful promotions with customers offered the best possible choice and value which will in turn drive higher redemption rates.

And Finally…

The accounting profession and tax authorities are taking an increasing interest in the use of vouchers as they can represent a shortfall of revenue to merchants and service providers that is otherwise taxable. A voucher that is freely available and can be printed off at will and in volume is unlikely to be accepted as a substitute for the corresponding turnover as the potential for abuse is considerable. However an itemised list of unique vouchers together with time, date and place of redemption with a means of tracing it back to the customer to whom it was issued should pass the sternest of audits.

Results

The solution offered by IOVOX and i-movo means that for the first time valuable vouchers can be issued electronically and safely by anyone, and redeemed securely with a quick telephone call meaning the dangers associated with the power of digital vouchers are completely removed. Retailers, service providers, consumers and online voucher sites can all benefit from this service which is available today. For more information, please use the contact details below.

About i-movo

i-movo provide a digital voucher service, allowing secure digital vouchers to be distributed by SMS, email, letter or contactless card, and then validated in real-time using existing retail technology.

For further details, please send an email to info@i-movo.com.

About IOVOX

IOVOX is a UK-based technology company providing an easy-to-use voice platform which offers a flexible and feature-rich tool set for developing voice products and services, for stand-alone as well as web-based environments.