Hitmetrix - User behavior analytics & recording

Why Wimpy likes prepaid cards

Loyalty marketers talk of getting customers to “raise their hands” – to volunteer to participate in the value exchange that drives loyalty efforts. You reward best customers for their patronage; they reward you with permission to track their transactions so you can learn more not only about individual customers but also about your customer base as a whole.

In the retail environment, tracking the hand-raising and subsequent transactions can take many forms, such as:

• Loyalty program card. “I’m a member of your ‘club,’ and I identify myself as a member when I shop so I can receive rewards or other benefits.”

• Co-branded credit card. “I’m associating with your brand by using the credit card you issue in partnership with the card issuer.” Here the branding is an affinity device, a component of the retailer-issuer partnership that makes transactional data available to the retailer.

• Private-label credit card. Here, the affinity, loyalty and data collection exist within a closed-loop environment. The retailer gets all the benefit of the loyalty play and doesn’t have to share the customer’s attention with the issuing bank or card association, but must assume 100 percent of the program’s expense.

• Branded preloaded value storage card. In essence, “I will gladly pay you today for hamburgers I’ll receive next Tuesday” (with apologies to Popeye’s pal J. Wellington Wimpy). Let’s discuss this particular mechanism in greater detail.

Think of a preloaded card as a gift card you give yourself. You load the card, and when you buy later, the cost of the product is deducted from the load at point of sale. Why would anyone pay in advance? Convenience, for one thing. Running low on cash? Want to speed your regular transactions at a retailer you frequent regularly? A swipe of the card, and off you go.

But more important to Wimpy is that using the preloaded card might mean freebies. That’s why he probably paid attention when coffee chain Tully’s introduced its Tully’s Loyalty Card in June.

On the surface, there’s nothing groundbreaking about the Tully’s card, which is a carbon copy of the Starbucks stored-value card. One might be tempted to say that the card is a simple case of me-tooism. But unless you’re the first to launch a value proposition in your space, as Starbucks was, then any loyalty card, stored value or otherwise, can be seen as an also-ran.

The challenge for Tully’s, and any quick-service retailer that launches a stored-value card program, is to differentiate itself through leveraging the card as a marketing platform for data capture and communications. Now that the stored-value model is a standard tool, the challenge becomes to use that tool more effectively than your competition. A preloaded purchase card can establish a beneficial exchange of value for both consumers and marketers:

• Consumers, in the Tully’s case, receive value at least in the form of a regular coffee discount and the convenience that made the Starbucks card such a success long before the company added a loyalty component. Tully’s sweetens the deal with other benefits, such as a sweepstakes entry each time you reload the card with $5 or more (example prize: free lattes for a year). It also delivers random instant rewards at point of sale, such as coupons and free coffee. These added hard and soft benefits build relationship and dialogue between the consumer and the Tully’s brand.

• Marketers see hands being raised. Provided customers see enough benefit to registering their cards online, Tully’s can identify them and link individual cardholders to transactional data. The company then can target offers to customer segments. Instant rewards can introduce customers to related products, a kind of “hey, sample this” gesture.

The challenge for marketers in such programs, one that Tully’s has equipped itself to address, is to use the hand-raising that the stored-value environment allows to continue to show customers that the brand understands them better than the competition. With stored-value cards becoming a standard play in the industry, parity is a danger.

Still, we see strong potential in preloaded purchase cards for high-volume restaurants and retailers, and others in frequent-purchase/low-value categories – provided that marketers understand that the card is first and foremost a marketing device. An investment in such a program today just might pay off in hamburgers for marketers on Tuesday.

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