Kiosk defined
Frost & Sullivan defines an interactive kiosk as a self-service
computer-based unit, housed in an enclosure, whose primary interface with the
customer is a monitor that may or may not be touchscreen based. The kiosk can
be stand-alone or networked, and the monitor may or may not be touchscreen based.
The accent is on self-service and interactivity of the unit.
The year 2003 marked
the beginning of the revival of the fortunes of the interactive kiosk industry.
Recent syndicated research estimated the market at $464 million, a surge of
over 21 percent from 2002. Applications such as airline self-check in, retail
self-checkout, ticketing, online banking, car rental return, bill payment and
product information kiosks are driving usage of kiosks and, as a corollary,
augmenting ROI and encouraging investment in the self-service industry.
This article examines
the suitability of kiosks for vending prepaid services by evaluating the relevant
methods of distribution such as POSA, online, ATM and SMS. For this article,
prepaid services encompass prepaid long distance cards, replenishment of prepaid
wireless accounts, activation of loyalty cards and retailer store cards, and
reloading of stored value cards such as gift cards and prepaid debit cards.
Traditionally
While the traditional
points of distribution for prepaid long distance services have been the bodega,
convenience store, liquor store or cafeteria, for prepaid wireless it has been
the wireless carrier’s store, as the initial candidate was a consumer
who had been turned down for a postpaid cellular account.
The demographics
of the prepaid user is changing from the credit-stressed and unbanked to include
low or sporadic users and contract-averse segments such as tourists, business
travelers and those with limited discretionary income such as youth. Accordingly,
electronic stores, convenience stores, pharmacies, bookstores and grocery stores
now offer prepaid services.
When it comes to
distribution models, scratch cards approximate 22 percent of purchases in the
prepaid services market. Scratch cards are easily concealable, prompting a high
incidence of customer and employee pilferage.
These cards also
involve high manufacturing and distribution costs and are printed in large batches.
As a result, they may remain in circulation for an indeterminate period of time,
preventing service providers from adopting uniform marketing strategies, such
as the launch of a new brand, for example. Consequently, this is a rapidly declining
model.
Point-of-sale activation
(POSA) that uses point-of-sale (POS) terminals to activate or recharge prepaid
services is estimated to represent 73 percent of prepaid card and prepaid wireless
purchases. The terminals usually connect via dial-up to the POSA host and, depending
on the technology used by the service provider, the cashier either swipes a
card with an inactive PIN for activation or requests the PIN and usage information
that is printed on a receipt for the customer.
In Europe, prepaid
service providers also issue magnetic-stripe cards that are swiped for recharge
against the amount rendered at the register. Another method of recharge uses
offline POSA devices that print PINs onto blank cards.
POS convergence
of debit, credit and prepaid service activation in a single terminal is rapidly
increasing, notwithstanding the additional investment required from the retailer.
However, Frost & Sullivan expects the share of this method of distribution
to decline steadily over the medium to long term of the forecast period in favor
of kiosks, online, ATM and SMS-based replenishment, in that order.
Recharge
trends
Online replenishment
currently accounts for around 2.5 percent of prepaid card and prepaid wireless
purchases, while SMS, ATM and kiosk-based replenishments account for less than
1 percent each.
The proportion
of online and SMS replenishment is expected to increase, albeit marginally,
over the medium to long term. Most prepaid users are unbanked and unable to
take advantage of e-commerce or m-commerce. In addition, e-commerce demands
e-literacy, and m-commerce is yet to cross a number of technological hurdles.
Currently, European mobile service providers including Cesky Mobile (Czech Republic),
Sunrise (Switzerland), Telefort (Netherlands) and France Telecom offer SMS recharge
service.
Past studies have
shown that a cashier prompting the customer to replenish his wireless account
significantly influences his decision. A timely cue to the customer in the form
of an SMS message informing him of his prepaid account balance and suggesting
replenishment can be similarly effective.
Payment processors
EWI Prepaid, Euronet and Boston Communications Group (bcgi) have developed PinExpress,
PaySpot and Wallet Watch, respectively, to enable replenishment of prepaid wireless
accounts at ATMs. E*Trade Access is provided service by bcgi, while Euronet
is partnering with ATM manufacturers such as Tidel and Triton. EWI prepaid has
two major U.S. banks readying for deployment of ATMs supporting prepaid wireless
services. Co-OP Network and U.S. Bank currently offer prepaid services through
their ATMs.
Though ATMs occupy
prime real estate, most do not have cash acceptors, and while this barrier is
not insurmountable, easing it involves considerable capital outlay and is unlikely
in the short to medium term.
Why kiosks?
Kiosks not only
combine the advantages of the distribution routes discussed above but also minimize
the disadvantages that each pose. As with online, SMS and ATM routes, kiosks
lower distribution costs for the prepaid service provider while providing the
benefit of cash transactions.
As with POSA, kiosks
offer unlimited virtual shelf space, eliminate inventory and card production
and delivery costs, minimize customer and employee pilferage, provide real-time
sales activity reports and facilitate offering products of multiple service
providers.
They also can act
as information repositories answering questions such as: "The best card
to …?" "What are the connection fees?" "Do you have
a card with no surcharges?" "How many minutes does this card have?"
In a retail environment,
the cashier is focused on ringing sales and moving the customer through the
transaction as quickly as possible. Also, high turnover of customer-facing employees
leaves minimal time for product training.
Kiosks also provide
up-sell and cross-sell opportunities to customers in a nonintrusive way. They
can be available 24/7 and provide a consistent customer experience while reducing
lines at the cash counter. Kiosk interface can be designed to interact with
a customer in his native language. For example, the Blackstone portal has both
Spanish and English interfaces.
Typically, kiosks
tend to be located in high-traffic areas such as grocery stores, malls, airports,
larger convenience stores and big-box retailers that are convenient touch points
for the customer. In locations like malls, airports and university campuses
that don’t always have a store with a cashier, the kiosk becomes the store.
In addition, kiosks
can function as a conduit for delivering focused promotional campaigns. Because
payment is made up front by the prepaid customer and the segment was not considered
lucrative until recently, service providers have not concentrated on gathering
contact information or drawing a psychographic profile of this particular segment.
However, the northbound
ARPU of prepaid customers and high rate of churn has created an insatiable appetite
for wireless service providers to know more about this segment. Customers can
be persuaded through promotions to register at the kiosk, and the information
can be used toward targeted communication to establish brand loyalty or educate
customers on value-added services such as SMS that swell ARPU.
The prepaid kiosk
can also be used to print coupons earned by the customer for redemption at the
store by swiping the loyalty card. The customer no longer needs to hang on to
the mailed coupons. Eventually, customers used to swiping their loyalty cards
at the kiosk to check for coupons earned will minimize mailing costs. Mailing
costs cannot be totally nullified as certain levels of direct marketing need
to be continued in order to maintain a personalized relationship with the customer.
The third-party
model
Partnering with
third-party kiosk networks such as Coinstar, Blackstone or retail store-owned
kiosk networks such as Circle K’s Zaplink and 7-Eleven’s Vcom kiosks
is an ideal option for prepaid service providers.
First, building
a network of kiosks involves significant capital outlay. The cost per kiosk
that has a custom-built enclosure, custom application and industrial grade components
ranges between $8,000 and $12,000.
Second, considering
that the key target segment for prepaid services is the cash-based customer,
these kiosks need to be fitted with bill and coin acceptors. Among the challenges
posed are maintaining the unattended kiosks and ensuring maximum uptime.
Coinstar
Centers
The Coinstar Center
is a prime example of the third-party kiosk model for prepaid services. Coinstar,
the dominant player in the coins-to-cash niche of the kiosk industry, is retrofitting
its nearly 11,000 centrally networked coin-counting kiosks with modular hardware
and software components into a flexible and convenient distribution point for
a wide range of customer self-service transactions under the brand name Coinstar
Centers.
Customers can replenish
prepaid wireless accounts of Alltel, AT&T Wireless, Cingular, T-Mobile and
Verizon and reload prepaid Truth MasterCard cards. Employees of participating
companies can obtain printed wage statements, balance inquiry and payroll cash
vouchers.
In compliance with
the "know your customer" standards, card association-branded cards
such as Truth MasterCard are embossed with the cardholder’s name in order
to tie every transaction to a known cardholder. Accordingly, the cards are mailed
to the customer and not dispensed at the kiosk. Since the Coinstar Centers are
used for loading and not unloading cash, the fraud exposure is expected to be
significantly lower.
Currently, nearly
700 Coinstar Centers located primarily in supermarkets offer prepaid services.
New smaller footprint versions of the Coinstar Center, ideal for tighter retail
spaces, focus on prepaid services without coin counting. Over 150 Coinstar Prepaid
Centers have been installed in c-stores, check-cashing outlets and college campuses.
The Coinstar kiosks
do not return change to the customer. For the Truth MasterCard card, the inserted
amount is credited to the customer’s account after deducting the applicable
fee. For prepaid wireless, prepaid long distance, mobile phone ring tones and
graphics and prepaid online games, the purchases are made in set denominations.
After tax, Coinstar accepts the amount to the nearest dollar as a convenience
fee, and the balance is given to the customer on a receipt as a credit toward
the next purchase. This restraint is not expected to significantly influence
sales at the kiosk.
Coinstar’s
platform flexibility enables its kiosks to adapt to new product categories that
are important to consumers and retailers. The company’s strategic plan
is to be a universal replenishment location for all prepaid services, including
prepaid cash cards, gift cards, prepaid long distance and other stored value
cards.
Blackstone
portal
Another turnkey
prepaid services kiosk vendor is Miami-based Blackstone, a distributor of prepaid
long distance, stored value and prepaid wireless products through over 300,000
retail locations and a marketer of POS terminals.
Blackstone uses
a variety of business models for its Prepaid Stop kiosk that include leases,
purchases, rentals or shared revenues. Apart from vending magnetic-stripe prepaid
gift and store cards via an attached dispensing unit, the Blackstone Prepaid
Stop can also print prepaid gift and store cards onto thermal cards. The kiosk
can return change to the customer when available.
The Prepaid Stop
offers prepaid wireless services of AT&T, Cingular, T-Mobile, TracFone and
Verizon, and regional carriers AirVoice, AllTell, Beyond Wireless, Boost, Hargray,
i-wireless and Omni Prepaid. The service has been deployed in supermarkets,
drug stores and larger convenience stores along the East Coast over the past
year. All machines come with a one-year manufacturer’s warranty on parts
and, after the initial year, the terms of the service agreement take over.
Evaluating
methods of distributing prepaid services |
|
Distribution
methods |
|
ATM |
Web |
SMS |
POSA |
Kiosks |
Caterers to the
needs of cash-based |
N |
N |
N |
Y |
Y |
Frees employee
resources |
Y |
Y |
Y |
N |
Y |
Eliminates needs
for training employees on the product |
Y |
Y |
Y |
N |
Y |
Eliminates queues |
Y |
Y |
Y |
N |
Y |
Available 24/7 |
Y |
Y |
Y |
N |
Y |
Can interact
with the customer in several languages |
Y |
Y |
Y |
N |
Y |
Serves as a channel
for focused media campaigns |
Y |
Y |
Y |
N |
Y |
Presents up-sell
oportunities to the customer |
Y |
Y |
Y |
N |
Y |
|
Two-pronged
strategy
Prepaid service
providers need to adopt a two-pronged kiosk strategy where they use in-store
kiosks to influence branding and use third-party kiosk networks to ensure adequate
reach of their product offerings.
AT&T Wireless
is already doing this. The AT&T Digital Messaging System designed by Mercury
Online Solutions and Frank Mayer & Associates is a web-based network of
more than 4,000 kiosks in over 900 AT&T Wireless stores throughout the United
States. Depending on the store size and traffic, up to four types of kiosks
are installed in each store to demonstrate AT&T products, register store
visitors, allow purchases or replay dynamic content to customers based on their
interests through an interactive plasma screen. To ensure mass reach of its
prepaid products, AT&T Wireless has partnered with Coinstar and Blackstone.
Final thoughts
The success of
a kiosk project hinges on the smooth interplay between enclosure manufacturers,
software firms, hardware component vendors, integrators and maintenance service
providers. These individual suppliers often sell products rather than complete
solutions. Barring a handful of turnkey players, there are few ‘keeper
of the keys’ or project specialists in the market. Retailers should therefore
build turnkey project management into their service level agreements with kiosk
operators.
The kiosk interface
needs to be user-friendly, especially for kiosks providing prepaid services.
That’s because typical users include the unbanked who are likely to be
technology neophytes. Repeated usage of kiosks can be accomplished only when
the customer realizes the benefits of using it. The customer needs to be enticed
in some way to approach the kiosk, and free talk time could prove to be a successful
incentive. It is recommended that personnel at the site guide customers toward
the kiosks in the initial stages of deployment. Such a strategy has significantly
influenced kiosk project success, as has been the case with airline self-check
in kiosks and retail self-checkout kiosks.
Past experience
shows that a single instance of a nonfunctioning kiosk deters customers from
approaching the unit a second time. Use of remote management software and regular
maintenance schedules is imperative to avoid malfunctioning printers, unclaimed
receipts lying around unattended kiosks and keyboards rendered unusable by stains
or missing keys.
Once the benefits
of interacting with the kiosk have been instilled in the customer, a shift in
his behavioral pattern will occur — the customer now looks around the
store for a kiosk instead of the store assistant. This is the "moment of
truth." The retailer now has control of unlimited shelf space to sell services
through the kiosks, graduating from offering prepaid to financial services such
as insurance, mutual funds and loans — the possibilities are endless.ICN
The author
is an industry analyst for Frost & Sullivan, an international marketing
consulting and research firm. Visit the company’s website at www.frost.com.
Intelecard News Online | By the Numbers
Posted by Craig at June 11, 2004 02:31 PM