Posts Tagged ‘direct marketing’
Q: What do you think will be the impact of the Durbin Amendment on
A: There will be significant pressure to scale back debit rewards programs – Chase has already announced that it will cut debit rewards for new customers in anticipation of the new rules. Also, I think the new rules will accelerate the trend towards relationship banking which was initially fuelled by the regulatory squeeze on overdraft fees. In an interesting twist we are now seeing consumers sign up for overdraft fees which might help the industry weather the potential reduction in debit card revenues.
Q: How is social media shaping loyalty marketing?
A: In my webinar we discussed the changing landscape for loyalty marketing and the fiercely competitive environment. Consumers are ruthless and will use the loyalty program with the highest cash back rate or the most points per dollar. These days consumers have easier access to information than ever before via the internet. The rapid growth of social media sites during the past two years means they also have access to vast array of recommendations and referrals. This represents a huge threat to loyalty marketers but, at the same time, it also presents an opportunity if positive news about your loyalty program goes viral.
Q: How can a card issuer build relationships if it doesn’t have a full
suite of banking products?
A: Focus on other touch points such as customer service, communications and branding. The best examples of this are American Express and Discover. Both have focused on customer service. Both compete aggressively for customer service awards so that they can promote this as a competitive advantage in their marketing materials.
Q: How can you create a loyalty program that is valuable to the consumer and something they will actually engage with and use?
A: Consumers want rewards for items they already purchase and they want instant redemption. The issuer that can crack instant redemption will be on to a winner.
Q: What features of the rewards program drives the decision to enroll and then engage – bonus at time of enrollment, bonus in certain merchant categories, earn rate, redemption options, point expiration, etc.?
A: In our research we found that the most powerful incentive for usage is simply being able to get more rewards for the dollar or the highest cash back rate. This was followed by the ability to redeem instantly which you can with many merchant (non credit card) rewards programs.
Q: Can you touch on firm offers of credit vs ITA?
A: The bulk of rewards offers continue to be pre-screened. ITA’s are used most frequently seen with cobranded rewards cards.
Q: ¬What is the biggest frustration with rewards that you have picked up in your research¬?
A: The missing piece is instant redemption. We discussed a couple of examples of issuers who have recently added instant redemption to their programs including Target and the Marriot Rewards program. Citi just announced that it is testing what it refers to as 2G cards developed by Dynamics, Inc. (see Lisa Hronek’s Blog “Cutting edge credit: push a button to pay with rewards”)
Q: ¬How do these trends apply to non-financial services loyalty cards?¬
A: The most popular rewards programs are those offered via a grocery or drug store chain. The challenge for the card industry is to figure out how to partner with these programs that are already entrenched in the wallet (consumers have 14 loyalty programs according to Colloquy). Non-financial loyalty programs are often more technologically advanced – Starbucks,for example, has a mobile loyalty program in operation – and credit card companies can learn from their experience.
Q: ¬What do you think the top 3 success metrics are for an effective loyalty program?¬
A: An interesting question given that rewards cards are, arguably, the “plain vanilla” cards of the new era. I say that because most people own a rewards card and many are receiving multiple offers for rewards cards in the mail. In other words, you have to have a rewards program if you want to compete for prime consumers. I would therefore say a measure of acquisition, such as new accounts, is measuring the rewards program; share of wallet – because that’s what it’s all about – and some type of redemption measure that factors in ROI.
Q: Given some of the downward trend you showed earlier, is there a market/consumer for a richer rewards card with a fee?
A: Yes, there is a market but it is very competitive and any new rewards program will need a clear advantage in order to stand-out. For example, Citi just launched a suite of new ThankYou Rewards cards which offer a 15% discount on travel booked through a partner and no foreign transaction fees. These additional features are necessary to differentiate this card from the competition.
Q: Are you seeing similar trends in the rewards small business space?
A: There are fewer players in the small business space, particularly when it comes to direct mail, so the dynamic is different. However, some trends stand-out such as the promotion of cash-back products from Chase and American Express. The result is a head-to-head between the two issuers that is playing out in this space. You’ll recall, one example from the webinar was a business card from American Express that demonstrated the use of aggressive marketing tactics.
Q: What data is available about the percent of rewards card owners who actually redeem their points?
A: Redeemers tend to be more satisfied and use their cards more often. This means that making it easy to redeem/removing barriers to redemption will have a positive impact.
While I follow the insurance direct marketing industry, I can’t help but feel a little envious of what I’m seeing on television. At least in the Chicago area, where I sit between the two largest auto insurers Allstate and State Farm, I seem to be seeing more auto insurance commercials.
Earlier this year, Advertising Age reported that in 2009, GEICO out-spent the next highest auto insurance advertiser, Progressive, by more than 60 percent. Both State Farm and Allstate, who spend on parity with each other, spent less than half that of GEICO.
Progressive’s concept of an insurance company as a consumer package goods superstore is continuing with Pickles, the dog, teaming up with Flo to provide a comparative quote. You can’t go wrong featuring a cute animal. Flo is now playing second banana and providing a voiceover as the commercials end with a shot of Pickles in charge.
The Gecko has a long history with GEICO and his new commercials take advantage of his steady development as a spokesperson. No longer is he casually talking about pie and chips to a real gecko, as he did in one of his first commercials. Now he is talking in front of conference audiences with all the giveaways branded in his likeness. Like Progressive’s Flo, GEICO is capitalizing on a developed brand image.
Still working to develop an image, Esurance seems to have placed secret agent Erin into deep cover as they now use a small group of dedicated employees who talk about their interactions with Esurance customers. Whether it’s The Saver or the Coverage Counselor, this cast of spokespersons grabs attention by playing out short stories on the experiences of being an Esurance customer.
Both of today’s leading auto insurers stick with the real life spokesperson format. Together, State Farm and Allstate challenge Progressive and GEICO’s messages of saving money and fast quotes.
State Farm has developed its spokesman into the customer’s friend who reminds them to check whether their friends and family are one of 40 million State Farm customers. Then he one-ups the competition by telling the audience that State Farm is larger than Progressive and GEICO combined.
Similarly, Allstate continues to rely on Denis Haysbert as the spokesperson for most of their commercials. In a new campaign he supports Dean Winters, portraying Mayhem, in a series depicting causes of accidents. Allstate, like State Farm, challenges GEICO’s message by asking if a fifteen minute call could provide the service you get from your personal agent.
It’s clear that these five companies are spending a lot on the development of new brand images. Apparently the money is coming from their print advertising since Adweek recently reported that the auto insurance industry reduced its print spending by 26 percent in 2009. Some of that decrease may include direct mail, which Comperemedia reports as having decreased five percent last year from 2008.
These five companies can be split into two groups when it comes to direct mail strategy. Both Progressive and Esurance have nearly stopped mailing. Of the others, GEICO is still the largest mailer, not segmenting who receives a solicitation, while Allstate and State Farm maintain strong mail levels and utilize their agents to guide the segments on address labels.
When I look at auto insurance direct mail, I’m surprised how different the pieces are from the companies’ commercials. There’s a dysfunctional integrated marketing strategy, a direct marketing channel disconnect. The images these companies are investing in and creating on television are not being leveraged in their direct mail solicitations.
I would think it would be an advantage to incorporate the TV brand images into mail campaigns as a reminder of the company’s brand values. After all, the advantage of advertising is it builds the brand through repetition of a message.
On Tuesday, the Federal Reserve confirmed what we have all been thinking for the last couple months – the US economic recovery is weakening. The health of our small businesses is acknowledged as being key to the recovery and many economists agree that the inability of small firms to obtain financing has stifled economic growth. Small businesses need loans to invest in capital and hire employees so that they can begin new projects. We need to have faith in these companies in order to break the negative cycle that is holding back the country.
I was therefore shocked to read in the Mintel Comperemedia Q2 2010 Small Business Lines and Loans Review that just 3% of business panelists had received a business loan offer via direct mail during the quarter; this is down from nearly 40% two years ago.
This fact is particularly alarming when you consider some of the bold statements made recently by banks as they compete to outdo each other with various lending statistics. I take my hat off to those banks that are not just talking-up their lending activities, but are also integrating those efforts with direct marketing campaigns. In other words, reaching out to small businesses, directly, in their time of need.
PNC, BBVA Compass and Chase are doing just that:
– PNC has been promoting its Cash Flow Options program in direct mail. Cash Flow Options encompasses a suite of loan products and the bank is offering a half-point reduction off its daily quoted interest rate plus a 50% reduction off the loan origination fee.
– BBVA Compass has been sending offers to small business owners promoting unsecured lines of credit and business loans. Lines range from $10,000 to $250,000 with interest rates as low as 6.00%. For 5-year term loans of $100,000 or more, small business owners can get a rate as low as 5.18%.
– Chase’s Loan for Hire campaign is the most noteworthy campaign of the national banks. Small businesses can get a half-point rate discount on each employee they hire up to three. Also, if you have a business checking account with Chase, you get another half-point discount on top of that for a total of 2% off the published daily interest rate. We haven’t seen a direct mail campaign promoting Loan for Hire yet, but Chase has blanketed the country with print and radio advertisements and has been promoting the product in its branches.
The PNC, BBVA and Chase examples are encouraging, but clearly it is not enough to keep economic recovery strong. Another positive sign is that small business credit card marketing is up significantly. This will be invaluable for many small firms as they struggle to stay afloat.
It’s time for business lending to follow suit and pull this country clear of the great recession once and for all. Yes, a rallying cry for small business marketers; nothing less than our economic future is at stake.
I’m concerned about the recent delay in setting rules for the medical loss ratio (MLR) provision of health reform. With the implementation set for January 1, 2011 there is not much time for health insurers to develop their plans for next year.
Under the health reform rules, insurers are required to spend 85 percent on medical care for every premium dollar received from group plans, and 80 percent for premiums received from small group and individual plans. HHS (US Department of Health and Human Services) is charged with managing the development of the rules and guidelines. It has asked NAIC (National Association of Insurance Commissioners) for their recommendations on how to calculate and implement the MLR requirement. They have missed their target of June 30, 2010 to have rules in place. In their defense, it is complicated.
Because of the delay, a political fight is developing over the issue. Senator Al Franken is calling for vigilance to make sure the insurance industry doesn’t define medical expense as everything that is not profit. He has cited the recent announcement by Wellpoint to reclassify $500 million in administrative expenses such as health and wellness, nurse hotline, smoking cessation and weight loss programs as medical.
I’ve noticed in Comperemedia a recent letter to Assurant producers notifying them that, because of the uncertainty of the MLR rules, Assurant will reserve the right to change commissions for next year and is placing a temporary limit on first year commissions. With this uncertainty stretching well into next year’s planning cycle, I’m wondering if it is more than simply constraining planning or if it is having a material affect? More importantly, has the concern about MLR’s impact on commissions caused policy sales to slow?