The Heinrich Report Blog

Strategies, insights and tactics for today's marketer

Archive for the ‘Payment Card Marketing’ Category

Rethinking Rewards: A New Look at Merchant-Funded Rewards

January 18th, 2011 by

Let’s face it. We’ve trained our customers to expect rewards across nearly every industry. Initially made popular by airline frequent flier programs, the idea of rewards to garner loyalty and brand preference now extends to retailers, hotels, restaurants and even consumer packaged goods (think myCoke rewards).

There’s a price to such ubiquity; rewards are expected instead of special, and have now become an inevitable cost of doing business. Consider this:

If you’re a business, it’s hard to compete unless you have a rewards program. And if you’re a debit card issuer, you know that it’s about to become even more costly. Recent and proposed federal regulations will have a big impact on revenue, and complicate your ability to keep a debit card rewards program alive.

We’re here to remind you that there are alternatives. Merchant-funded rewards programs have always been there, but now they’re gaining popularity as financial institutions in particular look for ways to cut costs and boost loyalty at the same time. Let’s take a new look at merchant-funded rewards programs, and see how they can help you market smart in 2011.

Generate loyalty; create revenue

The right merchant-funded rewards program supports a business ecosystem that can benefit the bottom lines of all involved.

Customers: They apply their payment card to a rewards program, and earn cash back and/or discounts at participating merchants every time they use the card.

Merchants: The rewards they offer for purchases make them more attractive to new customers, and help retain current ones.

Banks: A rewards program can be a great marketing tool that encourages customers to use a card often. It’s a great solution, because banks don’t pay for the rewards, merchants do.

Indeed, a white paper from Cartera.com notes that once a merchant-funded rewards program is in place, a bank could see incremental spending on debit cards rise to $40,000,000, averaging $280,000 per two million debit card holders, per year.

Expanding the silver lining of a recovering economy

The right partners can make all the difference in the dynamics of your merchant-funded rewards ecosystem. While engaging with such a program might represent a dramatic shift for a financial institution — regarding both partnership efforts and marketing — the change of approach can result in new opportunities to engage customers, and motivate them to spend again.

One merchant-funded rewards program had the foresight to anticipate this new-look economy, and now it stands out in the field as a result: Rainbow Rewards. Here’s how it works:

  • Members of Rainbow Rewards add their payment card to the program to earn cash back at participating merchants. Right now, that list includes 20,000 businesses — and it’s growing.
  • Rainbow Rewards partners not only with national brands, but also with local merchants so customers can support their community.
  • On top of that, Rainbow Rewards donates to charities based on the amount customers spend on their cards. Using the card more at participating merchants helps others more, too.

Rainbow Rewards: An approach that sets it apart

CMO/EVP of Rainbow Rewards Jen Sanning notes that the economic downturn and legislation like the Durbin Amendment has fostered innovation among financial institutions. “We’ve definitely seen bank partners getting more and more creative in how they offer rewards to their customers, and more often consider merchant-funded as the solution.”

In her view, the economy has also created a new kind of customer:

  • They value savings more than they used to. “Recession has made savings the new cool,” says Jen, “so we see consumers who want to do more with their money. They want to save, but they want to be more conscious about their spending too.”
  • They want to help others during tough times. Rainbow Rewards offers its members the chance to donate some of their earnings to good causes.
  • They want to support their local community. Rainbow Rewards works hard to team up with local merchants, not just big companies.

In all, the emphasis on local business and charitable giving strikes an emotional chord with members, one that resonates. Rainbow Rewards makes it OK for people to feel good about shopping, and about getting something back for themselves, as well.

Merchant-funded rewards programs can bring in new customers

Merchant-funded rewards programs can be a practical solution for your company, and even more so for financial institutions struggling with the new federal regulations on debit cards. But as Rainbow Rewards demonstrates, such programs can have an impact on the big picture, too. Programs like this can open the door to new customers and new merchant relationships, plus help support a marketing strategy that resonates and produces positive results.

Billshrink Cardlytics Cartera Commerce MasterCard Marketplace
Category:  Loyalty / Rewards Marketing, Payment Card Marketing  |  Tags: , , ,   |  No Comments

Reach Three Imperative Audiences in the Prepaid Market

September 29th, 2010 by

In today’s economic environment, “new audiences” are hard to find. But we can tell you about three big audience segments out there — and they’re only going to continue growing. One has been in the news a lot lately: the college student. With student debt surpassing that of revolving consumer debt, and tuition rising at rates beyond that of inflation, parents and students alike are looking for ways to continue an education without digging an even deeper hole.

Enter the prepaid card. As a method of payment, use of prepaid cards is expected to double by 2014. (Javelin Strategy and Research). And that’s not including gift cards. It’s the “open loop” prepaid card that’s a low-risk way to reach financially challenged segments of the population, and make them loyal customers.

Why prepaid works. With a prepaid card in-hand, consumers without a bank account of their own can still get by in today’s electronic world.  To avoid overdrawing, they can add a finite amount of funds to the card, and use it for payment and purchases. It’s a cash-only approach to spending that avoids credit, and keeps budgets in check — ideal for the debt-ridden student, and for two other key audiences, as well.

Three growing prepaid audiences you can capture and keep

1) The college student (and the parents!)
Marketing prepaid to this segment is like a two-in-one opportunity. After all, it’s the parents who are starting to recognize the prepaid card as a handy budgeting tool when they send the kids off to college, and who fund the cards. With your brand’s name on the card, you’re establishing brand trust to an active banking consumer and one who will have his or her own bank account and economic independence soon enough. Wal-Mart leads the way in its two-fold marketing approach to this segment. Its Student Money Card program issues cards to the student and the parent, to make it easier for parents to keep track of spending and add money. (Read it at WSJ)  

2) The Hispanic market

Hispanics are the largest and fastest-growing minority group in
America, according to the U.S. Census Bureau. People of Hispanic origin make up about 15% of the U.S. population; and that ratio is expected to grow to 30% by 2050. Roughly 20 million of this segment are among the “underbanked,” without a bank account or credit. Companies like MoneyGram International and MasterCard recognized the opportunity and recently re-focused their marketing initiatives.

  • Just last month, MoneyGram joined with Univision Communications to make prepaid an easy option for Hispanics. Says Greg Waltz, vice president and general manager of payment products at MoneyGram, “With Univision’s strong brand loyalty and MoneyGram’s large number of reload locations across the country… the alliance will provide Univision consumers with a convenient option for reloading.” (Read it at www.portada-online.com) 
  • In 2009, MasterCard embarked on a huge marketing and educational initiative to Hispanics, recognizing them as “an untapped market” because, as Chris Jogis, SVP, U.S. Consumer Marketing at MasterCard explains, “They’re much more used to cash, and in this campaign we are showing and educating them about the benefits of electronic payments.” (Read it at AdWeek) 

Prepaid cards offer an opportunity to target this audience with a relevant product, and foster brand trust and loyalty that could last a lifetime.

3) The “underbanked”

According to Javelin Strategy and Research more than one in every five American households is “unbanked or underbanked…meaning they lack a traditional checking and/or savings account.” In the post-housing fallout world, difficulties qualifying for a traditional credit card and negative perceptions about banks might cause these numbers to increase by the end of the year. For this audience, prepaid cards might offer the additional benefit of empowerment through convenience and accessibility.

Is prepaid right for your marketing strategy?

If you already market to any of these three audiences, you need to consider prepaid cards as a strategy. Prepaid cards offer a powerful trifecta of benefits: a revenue stream (based on fees per usage), lead generation and loyalty building. And with audience segments that will only continue to grow and/or mature financially, prepaid cards are a smart way to plan for your business’s future.

Whether you’re just thinking about getting involved in prepaid or are ready to jump right in, let’s talk. Here at Heinrich Marketing, we’ve got the experience and know-how to ease you in and help you find success. Email us today.

<<Back to the Heinrich Report

Category:  Hispanic Marketing, Marketing Research, Payment Card Marketing  |  Tags: , ,   |  No Comments

Personalization: Responding to Consumers with Relevance

June 9th, 2010 by


The “R” word is pretty hot these days. Whether it’s your blog, your book or your tweet, it’s gotta be relevant to today’s consumer. But when it comes to marketing, it’s about getting it right on multiple levels. The right message, the right channel, the right timing and the right features. When you do this, consumers feel like your offer has been designed specifically for them, and that’s real relevance.

Credit cards are a perfect product to lead the charge, so to speak. Consumers are spending again, albeit cautiously. Mintel Compremedia, a direct-mail tracing company reported that lenders sent out 398.5 million credit card offers in Q4 of ’09 — a 46% increase over the third quarter.

As you start marketing again, keep in mind that consumers are calling the shots in a whole new way. In an age of choice, they know they can find a product to suit them perfectly. Amidst economic chaos, they know they can demand a deeper level of communication and trust. But perhaps convenience is their highest priority — keeping it all at their fingertips with smart tools is absolutely crucial. Because if you don’t deliver, someone else will.  

Three Points to Personalization

1. Crack customer intelligence. Whether it’s an urban single who buys dry clean-only suits and organic dog food, or an empty-nester who relies on your line of cosmetics, anticipate their activities and be there when they buy.

2. Identify benefits in a new light. Make features and benefits speak more directly to your     customers and deliver rewards in a more meaningful, relevant way. How can your tools work for the engaged girl who needs a low interest rate on her gown, text message alerts reminding her about the deposit for the caterer and rewards points to cash in on for the honeymoon flight to the Poconos?  

3. Create a connection. This means marketing to a smaller set of customers, but when it feels more 1:1, they’re more likely to listen. This is where innovative CRM tools such as print on demand come in.

Recognizing Your Customers. Responding to Your Customers.
Like putting a face to a name, personas translate numbers into needs. They inspire genuine empathy for the people who buy your products and force you to prepare multiple approaches. At all levels, your response says: We know you, we understand you, we’re there for you. Three personas here show you the way:

Frugalista: Ready for Benefits, Rewards and Real Value
This hip chick is still shopping, but she’s now far more attuned to maximizing rewards. She avoids annual fees, but earns points like a pro. Frugalista puts energy into finding the best price-value match. For her, there’s even a sense of pride to her task. When making a decision, she breezes right past the standard messages in search of bonus benefits. We know she shops. Make her want to shop with you.

Watchful One: Prudent and Waiting for the Perfect Offer
Like a late adopter, this consumer is cautious, but observant. He’s focused on keeping his credit score, building his savings account and staying smart, so he’ll likely respond to a low interest rate and honest, direct messages. A solid sign-up discount or first-purchase reward presented at just the right moment could help him ease into smart, yet steady card usage. Slow and steady wins this consumer. He will spend again.  

A Couple of Leisure: Liberated and Living Well
These two have worked hard and feel like they deserve the rewards, vacations and an occasional splurge that come with retirement. They pay off their credit card monthly, so low interest rates aren’t important. But purchasing power is huge. Miles, points and access to upscale spas and hotels encourage the Couple of Leisure to choose your card.  If luxury at a low cost is available, they’re interested.

 

<<Back to The Heinrich Report

Category:  Copywriting / Creative, Customer Acquisition / Retention, Integrated Direct Marketing, Payment Card Marketing, Segmentation  |  No Comments

5 Steps to Making Prepaid Cards Work for You

December 17th, 2009 by

Learn why the time is right for prepaid cards vs. credit cards — and get a five-step guide to dressing your prepaid program for success.

Looking for a game-changer? The prepaid card transaction market is expected to reach $257 billion this year, up from $63 billion in 2004. Prepaid is where the growth is when it comes to payment methods —and it’s not just for gift cards and phone cards anymore.

Whether you’re a retail chain, a bank or a service organization, prepaid cards hold huge new revenue and profit opportunities for a wide range of industries and brands.

We asked prepaid card expert Keith Rose, Heinrich’s strategic partner, president of Peak Results Marketing, to share his best advice to marketers looking for innovative ways to generate new revenue streams.

What is a prepaid card?

From gift cards and reloadable Visa and MasterCard credit-alternative cards to transit-fare cards, there are as many types of prepaid cards as there are industries reaping their benefits today.

Also known as a stored value card, a prepaid card is “a trackable alternative to cash that’s less expensive to process than a check,” says Rose. And unlike a credit card, it’s easy to get. “Anyone can have a prepaid  card. You just go to a store to pick it up.”

That’s a big reason reloadable prepaid cards have begun attracting more attention over the course of the recession — even though the concept has been around for about a decade, its benefits have new relevance for consumers whose job and credit options have shrunk.

According to the 2009 prepaid cards industry forecast report by the Center for Financial Services Innovation, more than one-third of the 40 million underbanked individuals in the United States would rather use a prepaid card than a checking account for basic financial transactions if costs were equal. Defined by the FDIC as the 10 million households in America without an account at a financial institution, underbanked and unbanked consumers say they appreciate the convenience, transparency, and privacy of prepaid cards.

How Wal-Mart turned a profit on reloadable prepaid cards

When Heinrich and Peak Results developed positioning strategy for the Wal-Mart Money Card, “We were challenged with increasing awareness, acquisition and reloads,” says Rose. “But the first hurdle was, how do we articulate a very complex thing in a very simple way?”

“We helped Wal-Mart come up with the Money Card concept that took a lot of confusion out of a very complex product,” says Rose. “We built messaging and creative using very straightforward language and graphics that focus on the core benefits — especially the fact that you can reload this card, putting money back in and reusing it.”

Another key to WalMart’s success with prepaid cards: a maverick fee structure geared aggressively toward incentivizing ongoing usage.

Some brands have struggled with the profitability of prepaid cards because the fees to use and reload the card were so prohibitive, many consumers would toss them after one use.

“But Wal-Mart really streamlined the pricing,” says Rose, noting WalMart’s low transaction fees and simple, automated pricing structure — every reload costs $3. “The strategy is, reloading brings people into the store every time.”

5 steps to success with a reloadable prepaid card

“The numbers are going up,” says Rose, pointing to the overall growth of prepaid card transaction volume. “And there’s going to be a shake-out in the industry as to who’s providing the service.” The key to being one of those providers, he says, is starting with these five strategic moves — the keys to making your prepaid card program stand out, take hold and make money.

1. Define your segmentation plan.

“Who are you going after and how do you want to connect with them?” Rose asks. “Travel, gifting, reloadable credit card alternative? People who can’t get credit?”

“Prepaid cards serve different purposes for different consumers,” notes a Center for Financial Services Innovation report, underscoring Rose’s advice. “Developing a successful prepaid card program requires segmenting the large, diverse underbanked market and matching the marketing and distribution strategy to the market segment.”

Within the reloadable prepaid card market alone, Heinrich Marketing has identified nine sub-groups to target — from the underbanked and credit-challenged to students away at college and families looking for practical gift options and ways to help support family members financially.

2. Make user education a top priority.

“User education, especially via point-of-sale signage and direct marketing, is crucial,” says Rose. He advises clients interested in prepaid card programs to keep messaging in point-of-sale signage, direct mail and other touchpoints simple, visual and straightforward. For example, while the benefits of the prepaid concept are numerous, Heinrich guides new prepaid clients to prioritize the best three benefits in creative messaging and graphics.

 

“Many brands are also getting away from paper,” Rose points out, “using text messages and email to increase ongoing usage, retention and reload rates.”

3. Sidestep sticker shock.

“It’s crucial that you automate and minimize reloadable card fees to increase total usage,” says Rose.  He advises taking a cue from Wal-Mart by setting up a fee structure aimed at maximizing reload volume and lifecycle. “The longer that card gets actively used, the more profitable it becomes for your company,” Rose explains.

4. Customize your creative and messaging by segment.

Positioning, imagery, messaging and offer/pricing should all be uniquely targeted to specific segments. Rose says this is your ticket to higher cumulative revenue and profitability of your prepaid card program.

For example, to make the benefits of a prepaid card crystal-clear for a multilingual customer base, Rose and Heinrich developed point of sale signage versions emphasizing iconic graphical representations of reloading the card and reusing it.

Keep in mind that while your creative should be tailored, format and templates can be common across the segments — that’s one way you’ll gain cost-efficiency, though multiple uses of each card should still form the core of your ROI logic.

5. Get your team up to speed before you launch.

Consider this a hand-in-hand aspect of customer education — it’s essential to train your retail and customer-facing employees on exactly how your prepaid card program works, and how it’s different from other payment methods. Market the card to your teams with materials that highlight the benefits in clear, simple terms. All your representatives need to a) understand the product and program, so they can quickly and clearly answer customer questions; and b) get excited about it, so they’ll suggest it to customers.

 

Heinrich Marketing can help you optimize a prepaid card strategy for your brand and find the best ways to communicate its benefits to distinctly different customer segments. Read our case studies or contact us for more information or a prepaid card program scenario tailored to your goals and audiences.

 

 

Category:  Payment Card Marketing, Segmentation  |  No Comments