The Dumpling Dilemma

A couple of weeks ago, the little dumpling place across the street from my apartment started up a consumer loyalty program. Nothing fancy, mind, just the standard buy-10-get-one-free plan using business cards and a rubber stamp.

I was thinking about it yesterday because I just wrote an article for next week’s Potentials & Incentive Gift Card Newsletter about the Subway Rewards Card—a combination loyalty program and gift card—coming in the next month or so from the people who brought you The Jared Diet. A while back Subway discontinued its original customer loyalty program, which was exactly the same as the one run now by Dumpling Man—a single take-out and counter joint offering nothing more that a selection of a half dozen dumplings (pork, shrimp, etc.), made in front of your eyes all day long by a crew of middle-aged women who appear to speak no English at all—even the order slips print out in Chinese.

A large national chain, Subway will get a lot more bang for its buck from the new loyalty program, which uses a stored-value card that has three functions: it acts as a reloadable payment card, can be given as a gift card and will track purchases and automatically give out points good for free food. Subway Rewards Points users will register online, providing out demographic information that should prove invaluable to the company.

But, that isn’t why Subway made the pricy decision to install a stored-value card system. It discontinued its low-tech but perfectly serviceable loyalty program because of fraud. Anyone with access to a laser printer (available now for a few hundred dollars) and a few hours to play with the simple photo-editing software that comes with many printers and digital cameras could reproduce both the cards and the stamps.

Which brings me back to Dumpling Man. It is always packed, and the glowing reviews from media outlets like New York Magazine and the Daily News are beginning to obscure the front window. It’s directly across from where I live, so I found it early, and talked to the youngish owner several times when he first opened, before the crowds made chatting impossible. I’ve been thinking about bringing him a few articles about the prevalence of fraud in this type of loyalty program, and suggesting that he kill it before so many regulars sign up that ending the program causes problems.

And yet I’ve held off, and not just because I’m closing in on a free six-piece order of seared pork dumplings. For one thing, in the short time it’s been open Dumpling Man has already attracted one copycat joint and dumplings are springing up on neighborhood menus. For another, even though it’s a small place with a growing reputation, it has a high rent (in Manhattan’s East Village, even tiny stores are expensive) and plenty of employees—the overhead must be fierce—so they need to pull in the crowds to survive. And finally, carrying that card in my wallet does get me thinking about dumplings more often than I might otherwise.

Which is to say, I’m not sure that a bit of fraud isn’t worth it as Dumpling Man’s reputation grows. When the owner has a dozen locations some years down the line, it’ll be time to rethink the loyalty program. But for a small place relying on word-of-mouth, I think the cards are probably worth the risk.