technology sinks sub clubs

Posted by: Girlie

technology sinks sub clubs - 09/22/05 04:44 AM

For years, Subway regular Brandy Littleton kept business-size cards with tiny stamps on them in her purse. She loved the Sub Club, a reward system that allowed studious customers to earn free meals every time a card filled up with stamps.

"I eat here all the time," she said. "It made sense. I collected them for years, and I was upset when they were gone."

A few months ago she learned that her collected fortunes had become worthless. The Sub Club was phased out, and the San Bernardino, California, woman found herself paying full price every time she wanted a sandwich artist to prepare her a meal.

It was a situation clerks have faced again and again: customers upset by the discontinuation of rewards programs at franchises. But business owners say the programs simply cannot continue.

The reason: fraud.

In a world of home laser printers and multimedia PCs, counterfeiting has become increasingly easy. With materials available at any office supply store, those with a cursory knowledge of photo-editing software can duplicate the business-card-size rewards cards once punched at Cold Stone Creamery or the stamps once given out at Subway sandwich shops.

"I guess when I think about what people can do with technology now, it doesn't surprise me at all," Littleton said.

Still, officials with the Subway chain were a bit startled at the lengths people were going to in order to abuse the stamp program.

"Somebody told us you could buy our stamps on eBay," said Subway spokesman Kevin Kane. "We didn't believe it. But sure enough, they were there."

Cold Stone Creamery also recently decided to discontinue its punch-card system.

Since the store opened its first franchise in 1995, it has provided cards allowing customers to get a free ice cream serving for every 10th purchase. But like Subway, the company had to discontinue the system because of false coupons.

"We were hearing about it from all over the country," said Anne Christenson, public relations manager for Cold Stone. "It just seemed to be a real problem for our franchise owners."

The end of these programs has sometimes resulted in loud outcries from consumers. People rage to clerks and lament on blogs. Some especially anguished Subway fans have even started an online petition to bring the Sub Club back.

But as technology ruins the viability of these promotions, companies are also hoping to exploit modern advances to create new programs less prone to crime.

Kane said Subway was already considering abandoning its stamp program and exploring more updated rewards systems, but that the trading of stamps online and the creation of fake stamps sped up that process.

"This kind of widespread fraud really hurt our franchisees, and that's significant to us," he said. "They were accepting these stamps on good faith that somebody had bought a sandwich at a Subway store before, even if that wasn't the case."

Subway started phasing out the Sub Club stamp program in January. In its place, the corporation is offering franchises a magnetic reward card system in its place.

The new system is the largest in retail history, the restaurant chain claims, with more than 20,600 locations participating in the new promotion.

Kane said the new system is more flexible, allowing customers to trade reward points for cookies and other foods, and to store money as a prepaid credit card useable in the stores. This replaces gift certificates, another offer ripe for counterfeit abuse.

Cold Stone recently announced it would start a similar program using the VeriFone Omni 3750 system, scheduled to hit the marble slabs within a couple months.

Establishing a nationwide card-identification network is a costly and tedious process, Christenson said. But company officials have estimated far more was being lost through fraud while the reward cards were still in play.

And while the new system's upfront costs might be high, it may reap larger rewards for the companies in the long run. As grocery stores have learned, the market research gleaned through establishing databases while handing o source ut discounts can turn swipe cards into a winning formula very quickly.