Success factors for gift card launches in new markets

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By: Wise Marketer Staff |

Posted on August 16, 2007

Success factors for gift card launches in new markets

Moving into new markets with pre-paid gift cards or loyalty cards may seem like an attractive proposition but there are several success factors that are often overlooked, according to Giftex Prepay, which has compiled a case study to show how a new market strategy should be planned and executed.

This is a case study of one of the Giftex Prepay network's member companies, TXNPlus Global, which set about planning its entry into a new country that seemed to show great potential by applying its knowledge of three main success factors to produce a winning campaign.

Although Asia is often cited as the next "great frontier" in the prepaid and gift card industry, many providers have been reluctant to expand into the region. A variety of factors, including religious, cultural, and bank processing differences, have contributed to a lack of prepay services in the region. But TXNPlus reports having made significant inroads in this market during the past year.

Prepay success factors The company actually specialises in loyalty programmes built around debit, credit and prepaid cards, and decided to expand its international horizons from its existing client base in Australia by moving into Hong Kong and China, and later on into Thailand and the USA.

  1. Success factor: Cultural understanding Company founder, Jan McGrath, comes from Australia and has lived and worked in Hong Kong (with HSBC), which gave her an opportunity to work in China and to experience the consumer culture first-hand. The culture, or rather the variety of cultures in Asian countries, may be part of the reason why western companies have been slow to enter the market, McGrath suggests. For example, most of the company's business focuses on prepaid cards because many Asians refuse to use credit for either cultural or religious reasons, and of course because many simply do not qualify for debit or credit cards.

    Moreover, the general sense of time and relationship building are also different in most Asian cultures, and business tends to move much more slowly than in Western culture - as does the process of building consumer relationships. This is partly due to the fact that the element of trust is extremely important in Asian culture, and that takes time to build.  

  2. Success factor: Technology infrastructure Technology infrastructure plays an important role in the establishment of the gift and prepaid card industry in any country, and the sophistication of the established infrastructure - particularly in terms of telephone systems - varies widely not only from country to country, but even from one province to another.  
  3. Success factor: Security and fraud protection The security of gift and prepaid cards is still a factor that is open to debate in some markets. In Asia, McGrath reports, fraud has been quite prevalent and has recently led to a legal requirement that all credit cards have identification chips. In fact, fraud may be one of the biggest factors to consider in new markets, and any prepaid systems implemented must be capable of detecting and countering any possible fraudulent usage.

Market education also needed But beyond all of the technology, security, and culture, most untapped markets will need a good deal of consumer education if gift card acceptance is to become widespread. In the case of Asia, that education is not only for consumers (who are familiar with prepaid cards because of telephone and public transport cards) but also for companies that need to understand regional gift-giving rituals and occasions.

"Gift-giving is different among all the countries," concluded McGrath. "It would be too presumptuous to say what works in one country will work in the next." TXNPlus has already begin setting up tests and listening to consumers with the aim of determining when people in each tend to give gifts, and what is acceptable for gift giving, and what types of gifts are given on those occasions.

So, despite a number of potential obstacles to growing a successful prepaid business in a new market, the company has its eye on the number of consumers, the potential for large transaction volumes, a lack of experienced competition, and the opportunity to grow consumer acceptance and usage of prepaid cards. McGrath concluded: "Convenience is not enough. Consumers really want to know what is in it for them. If they believe there is something in it for them, they might participate."

Note: Giftex Prepay runs a monthly e-mail newsletter on the topics of gift cards, loyalty, and prepay - click here.

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