By: Seshu Madabushi, Founder & CEO of mKonnekt

Tobacco scandata programs were introduced at a time when manufacturers were losing access to many traditional marketing channels and needed a better way to reach out to tobacco customers. Over the years, however, scandata has evolved well beyond a reporting requirement. Manufacturers are increasingly using transaction data to better understand consumers, evaluate promotions and support more sophisticated engagement programs. 

Four factors in particular are driving this change:

1. Market dynamics are changing. New products are entering the market beyond traditional cigarettes, regulations continue to evolve and manufacturers have fewer marketing channels available to them.
2. Manufacturers are looking at scandata differently. It is increasingly being used as a customer insights and analytics tool rather than simply a reporting mechanism, allowing manufacturers to design more sophisticated and personalized promotional programs.
3. Consumer expectations are changing. Shoppers are becoming accustomed to personalized experiences and increasingly expect relevant offers rather than catch-all discounts at the POS.
4. Retailers are expecting more from scandata. They increasingly view it as infrastructure that helps them execute promotions, protect manufacturer-funded revenue and participate in more sophisticated customer engagement programs.

For POS companies, these changes create an important question: should every POS provider build and maintain all of these capabilities internally? 

1. The Tobacco Market Is Changing, Not Disappearing

The U.S. tobacco market remains substantial – over the years the composition of the tobacco customers has evolved as new products have entered the market.

• Approximately 55.5 million adult tobacco consumers across cigarettes, oral tobacco, cigars and e-vapor products
• Of the 55.5 million consumers 
  • 31.4M adults smoke cigarettes and some of this segment overlap in usage of other tobacco products
  • 6.2M exclusively use oral tobacco products
  • 5.3M smoke cigars only
  • 14.2M use e-vapor products
• According to NACS CSX benchmarking, cigarettes have declined from 30.9% of c-store in-store sales in 2015 to 18.8% in 2024 whereas other tobacco products increased from 4.2% to 7.6%
• Over the years, manufacturers available channels to promote their products have changed and currently their only option is to promote tobacco products within the store & at the POS
• Significant amounts are being spent by manufacturers at the POS system providing discounts – in 2022 around $5.74B was spent on customer discounts out of $8.01B marketing budget

What this means for POS providers?

As product categories and manufacturer programs expand, so does the amount of logic that must be maintained. A POS provider can certainly build and support that internally, but doing so means keeping pace with multiple manufacturers, changing program rules, new products and reporting requirements. 

2. Scandata Is Moving Beyond Reporting

We have seen one of the more significant developments in this market from manufacturer’s perspective – shift of scandata program from reactive reporting towards more active consumer engagement. 

• Scandata programs are being viewed as a broader model involving personalization, app engagement and complex promotional offers
• A case in point is the recent introduction of Altria DTP Tier 4 requirements which talks about P+ (personalization +) – building 1-1 relationships with tobacco consumer
• The traditional model can be summarized as:
  • Transaction → Report → Reimbursement
• The emerging model increasingly looks more like:
  • Identify → Offer → Transact → Measure → Re-engage

What this means for POS providers?

Scandata is being viewed as a power tool that is becoming part of a broader relationship between the manufacturer, retailer and consumer than documenting a completed tobacco sale. The discount complexity is becoming a real technology challenge with the ability to apply discounts at several levels for a given transaction. Scandata program should be able to support multiple manufacturers current discount logic and future enhancements as well. It is not just the discount logic but also the reporting that has to be done at the end of each week and the support that goes with it. 

3. Customer Expectations Are Changing

With the advent of social media and mobile phones, over the years the tobacco consumer behavior has changed – they are increasingly expecting retailers and brands to recognize them and provide offers that are relevant to them. 

• 71% of consumers expect companies to deliver personalized experiences
• Lower prices, loyalty programs and loyalty discounts are the top three factors that influence a tobacco customer to visit a store
• Customers make frequent trips and are willing to provide their phone numbers at retailers locations that participate in multiple scandata programs
• Brands that use targeted promotions can see a 1 to 2% lift in sales

What this means for POS providers?

Today’s scandata program workflow requires  systems to evaluate transactions against criteria such as brand, pack configuration, quantity thresholds, promotional dates and transaction limits before applying a qualifying discount. As personalization becomes a greater part of manufacturer programs, that transaction can become more customer-centric as well. The technology may need to understand not only what is being purchased, but also which offer applies to this transaction.

4. Retailers Are Demanding More

Retailers sit in the middle of these changes. They have to manage a changing product mix, participate in manufacturer programs, apply the correct discounts and keep the checkout process straightforward for employees and customers. As a result, their expectations of scandata technology are increasing.

• Retailers want a reliable technology partner that allows them to participate in as many manufacturer funded scandata programs (this ties directly to the fact that customers prefer to visit stores that participate in multiple scandata programs)
• Retailers want to participate in established manufacturer programs while managing other tobacco products
• A clear and accurate reporting that helps retailers understand the manufacturer reimbursements for the discounts being given in a reporting period. 
• A reconciliation report that can help identify any gaps between what the retailer was expected to receive and what was ultimately paid
• For retailers, scan data increasingly supports three connected outcomes: revenue, execution and customer relationships.

What this means for POS providers?

Retailers already evaluate POS platforms across a long list of capabilities, including payments, reporting, inventory, loyalty, integrations and support. Scandata adds another specialized requirement, and manufacturer requirements do not remain static. Promotions change, specifications change and new programs are introduced.

Instead of recreating every manufacturer program inside the POS, providers can integrate with a specialist that manages the manufacturer-side complexity. This gives the retailer access to the programs it needs while allowing the POS provider to continue focusing on the broader transaction and retail experience.

Why a Dedicated Scandata Partner Makes Sense

A dedicated scandata provider can focus on areas such as manufacturer integrations, discount logic, file formatting, scheduled reporting, transmission monitoring, rejected transactions, program updates and reimbursement reconciliation.  This separation matters because errors can have direct financial consequences for the retailer. If the wrong promotion is applied, the retailer may absorb a discount that should have been manufacturer-funded. If a reporting transmission fails, reimbursement may be delayed or lost. If payments are never reconciled, the retailer may never know whether it received what it was entitled to receive. 

For POS providers, that leads to a fairly straightforward conclusion. They do not have to become scandata companies, but they do need to recognize that scandata is becoming more important to the retailers they serve. As the tobacco market changes, manufacturer programs become more sophisticated and customer expectations continue to move toward personalization, the practical opportunity for the POS industry is not to rebuild all of that complexity internally. It is to make sure retailers can connect to it effectively.

About mKonnekt
mKonnekt provides customer engagement and back-office technology for restaurant and retail businesses. Its solutions connect customer interactions, operational data and multi-location back-office functions through a centralized platform. mKonnekt also supports tobacco scandata programs for retailers and POS providers. To learn more, visit www.skandata.net.