merchant funded rewards programs
DESCRIPTION
If you like this infographic you can see more at http://www.mindfulinsights.com Financial Institutions are always in search of new, innovative products for their customers. Finding an idea that passes the business case test is no small feat – customer-facing ideas have to show how they will advance the customer-centric service model, monetize customer interactions while enriching the customer experience at the same time, provide for a new revenue stream at the right margin, play nicely with the standing IT strategy, support the evolving the business model, etc., etc. This is a tall order as there just are not many ways to do all this without being completely disruptive to the current business. A well-crafted Merchant Funded Rewards (MFR) program may just be one of the ideas that can pass the uber-hurdles we set for ourselves. For the FI, the right MFR program drives new, incremental, net income. For the merchant (remember, the one ‘funding’ the rewards program), they have the potential to gain access to highly targeted customers for a pre-determined cost. Plus, as merchants are extremely conscious of the potentially negative link between their brand and discounts, coupons and the like, a relationship with an FI where the reward comes through the internet banking site can provide value to both parties without negative side effects to the merchant’s brand. And don’t forget the FI’s participating customers – they benefit through receiving targeted rewards (incentives, discounts, etc.), relevant to them. What’s the upside? Working with vendors and FIs, we’ve locked onto some interesting stats including: - Rewards averaging $100-$200 per year for a typical consumer, with no cap on how much can be achieved, all funded by the merchant community; - Average merchant transaction size increasing by as much as 10%; - An active base of over 250,000 retailers already integrated with one or more MFR providers; - $115 billion in total gross dollar transaction volume estimated by 2015; and - 1 in 3 (30%) consumers participating turn into repeat customers. How do the programs work? We’ve crafted a view of the MFR ecosystem and the interactions among the players. Some of the providers listed here may have similar, but subtly different models and value propositions or may play different roles in any one MFR program. One or more of them might be the right partner(s) to use to get your program up and running quickly, but making that determination will require mapping their pedigree to the goals and the ultimate design of your program.TRANSCRIPT
Merc
han
ts
National
Local
E-store
Web
Portals\Mall Banners Statements Email Search
Mo
bile
SMS Email Geo-location
Tra
ditio
nal Statements Direct Mail Newspaper
Co
nsu
mer
Tra
nsactio
n
Portals In-store
Re
de
em
O
ffer
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Merchant Funded
Reward programs:
An Introduction
Mindful Insights, LLC
1750 SW Skyline Boulevard, Suite 224
Portland, OR 97221
Phone: (503) 297-5128
E-Mail: [email protected]
How do MFR programs work?
Who are the Rewards Vendors?
What does a successful program need
to deliver?
13 14
The Consumer is enrolled,
and their spending habits are
tracked through their card
transactions.
1
The FI anonymizes the
Consumer information and
presents the data to the
Rewards Vendor.
2
The Rewards Vendor uses
analytics to interpret the data,
and presents segmentation
options to the Merchant.
3
The Merchant defines a
marketing campaign through
the Rewards Vendor for their
target market.
4
The Rewards Vendor
coordinates the marketing
channels for the campaign.
5
The offer is presented using
mobile channels such as geo-
location or text messages.
6
The offer is presented using
Web channels such as reward
mall, in-line statements or a
offer summary page.
7
The Merchant sends fees for
redeemed offers to the
Rewards Vendor.
14
The offer is presented using
traditional channels such as a
physical coupon or catalog.
8
The offer is made for a type of
discount: a flat dollar discount,
a percent off discount or gift.
9
The Consumer redeems the
offer through offer activation,
pre-purchase coupons or
point-of-sale redemptions.
10
The payment information for
the purchase is captured by
the FI.
11
The FI settles the payment
and sends the data to the
Rewards Vendor.
12
The Rewards Vendor
requests fees for redeemed
offers from the Merchant.
13
The Rewards Vendor sends
the FI their share of the fee
revenue (although this is not
always the case).
15
Launch 2012
Launch 2012
Reward
Vendor
Tools
In-Statement
Rewards Mobile Apps
Geo-
Location
Tracking
Local Offers Impression
Fees
Redemption
Fees
Real-Time
Rebate
Cash
Rewards
Bank
Rewards
> 30 Days
Rebate
Targeted
Virtual
Coupons
Reward
Portals
POS
Discounts
Redemption
Reporting
Social
Networking
Not Available
Rew
ard
s V
en
do
r
Trends
Value
Demographics
Merchants
Fin
an
cia
l
Institu
tion
(FI)
Debits Cards Credit Cards
Bill Payment Mobile Payments
Well-designed mobile apps
Fast or real-time redemption
Social network integration
Geo-location targeting
In statement offers
Reward portals
Local offers
The Right Offer
at the Right
Time
Multiple Channels
Meaningful Offers
Privacy Education
Deep Discounts
High Value Offers
Management
Reports
Reward
Vendor
Financial
Institution
Consumer Merchant
Multiple distribution channels
Measurement and reporting
Audience segmentation
Pay for performance
Marketing services
Affiliate marketing
Implementation support
Integration with FI’s web presence
Strong relationships with merchants
Revenue sharing/shared commissions
Integration with existing rewards program
Attract new customers
Increase loyalty
Reduce program costs
Increase interchange income
Easy, low-cost launch &
support
Start You want to start a Merchant Funded Rewards Program but don’t know where to begin…
This may help with what you need to think about.
There are many Rewards Vendors, and they each have a slightly different model with their own advantages.
We’ve illustrated generally how the information flows, but don’t assume all models will work exactly like this.
Impressions
Interchange
Revenue Take-up Rates
Redemption
Rates
Click-
through
Rates
#
Web/Mobile
Bankers
# FI
Customers
Brand
Recognition
Returned Value from the MFR Program
Po
pu
larity
of th
e M
FR
Pro
gra
m
Relative Value Relative Quantity
Loyalty
What do you need to measure?
Poor
Reception
Un-
motivated
Maximum
Success!
Early
Interest
Consumer
Value
Cold,
hard
cash!
Valuable
Consumer
Market
Value
Product
Sales
Financial Institutions want
Finish
Lots to think about? Put it this way…
It’s about wins for consumers, for merchants and for FIs, and it’s a big opportunity...
1.68 billion transactions by 2015* is a big opportunity.
*PaymentsSource | June 21, 2011
This information was gathered in December 2011 and January 2012 by interviewing the vendors directly.
(BillShrink)
Launch 2012
©Mindful Insights 2012