Mark Marinacci of EDO Interactive guest-writes for Loyalty 360's State of the Industry series:
Merchants looking for new ways to increase loyalty among their customer base should consider card-connected offers. Card-connected offers are those that customers can redeem simply by swiping their credit, debit or prepaid card from a participating bank at the merchant point of sale.
This new promotional channel gives merchants instant access to tens of millions of existing (and new) customers-without having to invest a penny in point of sale systems, loyalty cards or old-fashioned paper punch cards. New technologies and programs can now make any plastic card a merchant's most powerful loyalty device.
How it works: Banks now know more than practically anyone about consumer spending behaviors and they are stepping into the digital marketing and local commerce game. Financial institutions such as Ally Bank (Ally Perks), Fifth Third Bank (5/3 Prewards) and American Express (Link Like Love) already have rolled out programs that leverage technology to offer customers deals from top merchants via their existing credit or debit cards.
Because banks have existing relationships with both merchants and consumers, they have unique access to a waterfall of information from each side. A technology provider acts as an intermediary, understanding tokenized consumer spending data and helping merchants and marketers use those insights to design campaigns that hyper-target customers and deliver deals to them via web portal, mobile app, email or SMS text. Deals are often structured to drive loyalty outcomes such as an increase in frequency or overall basket size. And, unlike other recent loyalty innovations (apps that transfer loyalty card to a smart phones, etc.) card-connected offers don't require the merchant to make any changes to the POS or require the consumer to download yet another app. Loyalty resides on the back of today's cards-tens of millions of them.
Making this option even more attractive is "pay for performance" pricing. Merchants pay a redemption fee to the technology provider only if the offer drives a purchasing behavior (the technology provider then shares a portion of that fee with the issuer). And, with marketing budgets still in the process of bouncing back, the pay for performance structure enables merchants and advertisers to run imminently sustainable and containable marketing campaigns.
Analytics talks, anecdotes walk.
What makes card connected deals so powerful for the merchant-especially in terms of loyalty-are the analytics. Analytics enable merchants to see and track not only new and repeat business but also bumps in basket size, time of day, spending across categories and more. Some examples:
- A major home improvement store on the Prewards program ran an offer of $5 of $50. The redemption rate was a modest 2.7% but the average ticket size more than doubled-from $63 to $129.
- A national grocery chain's average ticket size was around $44. An offer of $5 off $50 generated a 24% redemption rate (not surprising, given the category). But, the average ticket size on Prewards redemptions was $84, nearly twice the typical transaction amount.
- A national chain of sub shops with typical transaction of $8 ran an offer of $1 off $7. The Prewards campaign generated an average redemption ticket of $11.60 (about 50% above average) with an impressive 13% redemption rate.
We know based on transaction data that cardholders enrolled in our Prewards program are more active in terms of transaction number and amount. For example, we studied data from bank partner Fifth Third Bank over four months and discovered that cardholders made about 17% more purchases and spent about 3% more per purchase, spending 22% more in total after enrolling in Prewards than before they were enrolled.
It's time for merchants to take advantage of the burgeoning analytics and existing payment devices that can nurture loyalty, not only with customers already holding branded loyalty cards, but also with less actively engaged customers holding any bank's credit, debit or prepaid card. Those that don't may find themselves scrambling to retain a stream of customers that will ultimately flow to those that do.