Status and Review of Card-Linked Offers, 2015

Transcription

1 Status and Review of Card-Linked Offers, 2015 A Report Based on the BIA/Kelsey-CardLinx Association Member Survey February 2015 Insight Paper 2015 BIA/Kelsey. All Rights Reserved.

2 Contents Executive Summary... 1 Key Findings... 2 Finding #1: Card-Linked Offers is a Growing Category with Momentum... 3 Finding #2: Buy and Conversion Rates are High... 4 Finding #3: No Single Category Dominates the CLO Space... 4 Finding #4: Cash Back is the Preferred Reward Type... 5 Finding #5: Virtual Currencies are a Potential Alternative to Cash Back for Some Players... 5 Finding #6: Coalition Points are Preferred Over Merchant-Specific Points... 6 Finding #7: There is No Consensus on How Many Offers to Feature... 6 Finding #8: The CLO Experience for Merchants Needs Improvement... 6 Finding #9: Structural Sales Issues Have Cut Into Progress... 7 Finding #10: CLO Tech Companies Have to Lead; Everyone Must Coordinate... 8 Conclusions: The Five Things That Need to Happen for CLO Success... 8 About BIA/Kelsey...10 About the Author...10 Appendix: Survey Methodology...11 Copyright BIA/Kelsey 2015 i

3 Executive Summary Card-linked offers (CLOs) are marketing offers that are intelligently targeted to consumers based on the transactions they completed using their credit card/debit card or loyalty card. Sometimes linked to electronic wallets or epayments, they represent an alternative to advertising and media budgets, and are potentially revolutionary. Unlike most advertising, CLOs provide perfect attribution of spending dollars. As such, they represent the congruence of big data, transactions and marketing. First introduced in 2008, CLOs became widely available in when they were rolled out by Bank of America, American Express and other financial institutions (FIs) with ambitious, multimillion dollar marketing programs. For such FIs, CLOs represent an opportunity to earn commissions and marketing contracts from merchants; and take their place as marketing partners in a way that might supplement or replace the traditional use of media channels such as TV, radio, coupons, Yellow Pages and search. The emergence of CLOs also represent a new role for commerce and social media oriented companies that now live uneasily off of advertising revenue. Leaders such as Foursquare, Microsoft, First Data and Groupon have already experimented with CLOs. Others such as Google, Facebook, Apple, Amazon and ebay might join them in using CLOs as a new way to enhance and monetize their merchant relationships. Traditional media companies, meanwhile, could add CLOs to their portfolio of marketing tools. Since their introduction, however, some of the original scenarios for CLOs have changed. Business models for CLOs have also shifted. So here are two core questions: Are CLOs catching on, circa 2015, and worth investing in? Or are they just another example of technology for technology s sake for which there is little genuine demand? To find out, BIA/Kelsey set out to conduct a Survey of the CLO ecosystem, which eventually included key publishers, card-linked technology providers, payment processors, payment networks and merchants/advertisers. Key Findings BIA/Kelsey surveyed 14 leaders of the emerging card-linked offer (CLO) ecosystem during October and November We posed 12 basic questions to each respondent. The resulting discussions were based on these questions, and also extended beyond them. 1. Do more merchants use card-linked offers than 12 months ago? 2. What kind of change has there been in merchant marketing budgets for CLO? 3. What percentage of business comes from top merchant categories? 4. Which merchant categories benefit the most from card-linked offers? 5. Has the consumer response rate changed from six months ago? 6. What is the average number of conversions/sales on a per-consumer basis? Copyright BIA/Kelsey

4 7. Will cash back remain the leading rewards vehicle? 8. Are rewards better presented as a coalition currency that can be redeemed among many members of a network, or are they better presented for individual merchant redemption? 9. How many offers should be presented at one time? 10. Will card-linked offers in 2015 be led by financial institutions, publishers or tech companies? 11. Which merchant department do you typically work with? 12. What are your best practices? There are 10 key findings: 1. Card-linked offers is a growing category, with momentum. 2. CLO buy and conversion rates are high. 3. No single category dominates the CLO space. 4. Cash back is the preferred CLO reward type. 5. Virtual currencies are a potential alternative to cash back. 6. Coalition points are preferred to merchant-specific points. 7. There is no consensus on how many offers to feature. 8. The CLO Experience For merchants needs improvement. 9. Structural sales issues have cut into progress. 10. CLO tech companies have to lead; everyone must coordinate. Appendix: Survey Methodology We conducted 14 fully anonymized, phone-based Surveys during October and November 2014 with industry leaders including 11 key members of The CardLinx Association, the leading standards and awareness organization for the CLO ecosystem; as well as executives from 3 nonmembers: Vantiv, Heartland Payments and Edo Interactive. CardLinx helped provide access to its membership, and audited many of our discussions. Members of the association include leading publishers, technology providers, payment processors, payment networks and merchants/advertisers. The observations and conclusions drawn, however, are entirely those of BIA/Kelsey. To Purchase Report To purchase this report, please call (800) or us at sales@biakelsey.com. Upon purchase, we will send you a PDF file via . The price is $495. Copyright BIA/Kelsey

5 About BIA/Kelsey BIA/Kelsey is a market research and analyst firm that tracks all things local, with a special focus on the transition of local marketing and commerce spending. Since its inception in the 1980s, BIA/Kelsey has provided the inside track on critical data, analysis, and recommendations that local-oriented firms need in order to grow and transform in this rapidly evolving segment. The company s set of products include industry- leading conferences, research reports, articles and client consulting. About the Author Peter Krasilovsky VP and Chief Analyst, BIA/Kelsey Vice President Peter Krasilovsky is well-known for his insights into the shifts of media and commerce, and has been deeply involved in extending major media and commerce brands into new digital revenue streams and digital services. With more than 26 years of experience, Krasilovsky has been highly visible in his work, which has ranged from new cable TV and telephone services to ecommerce and promotions. As a strategist, Krasilovsky has consulted with such companies and organizations as AT&T, AOL, The National Football League, NBC, Discovery Communications, Hearst and Meredith Publishing. Krasilovsky is widely quoted on digital media and commerce trends, and has been writing the Local Onliner blog since Previously, he was a columnist and editor of several telecommunications and digital media newsletters. In 1986, Krasilovsky began his career as Director of Research at The Cable Television Information Center. From 1990 to 1998, Krasilovsky was Vice President for Arlen Communications. In 1998, Krasilovsky joined The Kelsey Group, a predecessor of BIA/Kelsey, to launch the Local Online Commerce program. Krasilovsky has an M.A. in communications management from The Annenberg School of Communications at the University of Southern California. His B.A. is in liberal arts from Sarah Lawrence College in Bronxville, New York. Copyright BIA/Kelsey

6 Upcoming Research on Card Linked, Loyalty and Payments BIA/Kelsey is actively researching key topics involving transaction marketing, promotions and small business marketing activities. Our research is available through papers and business advisory services Two insights papers we'll publish this year include: Merchants and The New Era of Promotions: Review and Analysis of Merchant Programs using card linked offers, loyalty programs and geo location. June 2015 The Use of Promotions and Analytics Oriented Data by Local Business: Survey Data from BIA/Kelsey s Local Commerce Monitor and Custom Interviews. November 2015 We also offer business development support. We can be commissioned for custom research and on-site and online strategy sessions. We can assist with prospect identification, activity profiling and business introductions for the following types of companies: SMB focused Companies Marketplace Companies ecommerce Companies Transaction Based Companies Advertising Agencies For details on our papers or services, contact info@biakelsey.com. Stay tuned to our coverage by subscribing to our blog. Copyright BIA/Kelsey