Insights from Cards & Payments 2009

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By: Wise Marketer Staff |

Posted on December 15, 2009

Source Media's second annual 'Cards and Payments' loyalty conference was held in New York earlier this month, addressing the theme of 'the intersection of cost management and rewards programme repositioning', as detailed here by The Wise Marketer's contributing editor, Bill Hanifin.

The proceedings began with Rob Rosenblatt of Chase Card Services, who presented an overview of Chases' new flagship rewards programme, 'Ultimate Rewards', which is offered on Chase Freedom as well as the new Chase Sapphire and Chase Ink (small business) products. Launched earlier in 2009, Ultimate Rewards was built as a unified platform that would help drive customer engagement while improving operating efficiency and also strengthening the brand.

An expert panel debated cost-per-point reduction strategies, with experts from SunTrust Banks, Merrill Lynch, Wyndham Hotels and US Bank explaining a variety of techniques that can be used to lower cost-per-point while keeping programme members engaged with the brand. The panel concluded that forming strategic partnerships with providers, using redemption targeting campaigns, and fine tuning programme rules should all lead to positive results even in a tough economy.

Crista Dewire and John Kryczka of PriceWaterhouseCoopers offered an in-depth discussion of loyalty programme liability management, outlining the actuarial methods used to project redemption rates and help programme operators manage liability. They pointed out that, while no conclusions have yet been reached on the treatment of loyalty liability within Generally Accepted Accounting Principles (GAAP), another body - the International Financial Reporting Standards (IFRIC) - has issued guidelines for currency management that are quite restrictive and could potentially impact the future of the loyalty industry.

Indeed, loyalty operators in Singapore, New Zealand, and Australia have already felt the effects of the IFRIC standards as they must now account for points on a "fair value" basis rather than actual internal cost. In addition, the guidelines mean that companies must account separately for the award portion of each sales transaction. The end result of these guidelines is to defer revenue and increase point cost, squeezing margins for loyalty marketers. It was concluded that loyalty software suppliers will also feel the impact of these guidelines because they will need to track every point issued with a time/date stamp, and be able to process redeemed points on a FIFO (first-in-first-out) basis.

Geri Green of Barclaycard US shared a number of loyalty strategies that should not be forgotten in tough economic times, including the principles of transparency, consistency, value, messaging, and trust. Rick Ferguson of Colloquy and Andrew Pyper of Saks Fifth Avenue presented a case study showing how retailers can use store charge cards as points-earning accelerators for programme members.

US Bank senior vice president Bob Daly explained how the bank reacted to the merger of Delta and Northwest Airlines by launching 'Flexperks' - a travel rewards programme designed to retain its portfolio of cardholders from the Northwest Worldperks programme that was being closed down. Daly noted how the bank had included benefits specifically to help cardholders with unbundled air travel, such as offering an 'allowance' with a redeemed ticket to help pay for baggage and seat selection charges. He also mentioned that employee training in the call centre had been a subtle but important key to the success of the programme.

The event ended with a discussion of the proliferation of debit card rewards programmes. According to research from First Annapolis, 53% of the top 100 debit card issuers already have debit rewards programmes, although there is a contrast in penetration by bank size (90% of the top 20 issuers offer debit rewards, while only 35% of the remaining 80 issuers do so).

The structure of debit rewards is also evolving along a line that begins with generic rewards (e.g. points or cash-back) and heads toward cobranded rewards (e.g. with airlines) and relationship rewards. It seems clear that US debit card issuers are anticipating the continued growth of debit card transaction growth and sales volume, and are crafting increasingly sophisticated rewards programmes to help drive consumer engagement, card usage, and to gather deposits.

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