Survival of the Fittest: How the Best Merchant Network + Effective Partnership Marketing = Not only Survival but a Way to Thrive.

Transcription

1 Survival of the Fittest: How the Best Merchant Network + Effective Partnership Marketing = Not only Survival but a Way to Thrive October 19, 2009

2 Panelists Kristin Davenport VP, Business Development Andrew Bonichi VP, Sales & Marketing Cruise and Vacation Group Stef Erik Anderson First Vice President, Loyalty & Rewards SunTrust Banks, Inc. Lars Holmquist Chief Marketing Officer Vesdia Corporation

3 Loyalty Landscape Reward Generation ( Earn ) Redemption ( Burn ) In-kind Earnings: Airlines, Hotels, Retail Miles, Nights, Discounts Payment Earnings: Cards and alternatives Base and bonus Enterprise Earnings: Cross-sell other products One time & ongoing bonuses Direct Partner Earnings: Co-brands, affiliates, barter One time & ongoing bonuses Merchant Network Earnings: In-store, online, local, partners Always on bonuses and periodic promotions Points Bank Points Miles Gallons Cash Value Fixed Rewards: Catalog or fixed inventory Travel Merchandise Gift Cards Charity, Cash, Savings Customer redemption or auto-redemption Variable Rewards: Points as a currency in circulation Use points or cash Split pay (points and cash) Online - Burn Mall or open inventory In-store

4 Merchant Networks: 3 Constituencies, 3 Winners 1. Consumers Increase rewards earning power by 25%+ Receive special retail offers and earn rewards 2. Financial Institutions Drive additional card usage Reduce reward program cost per point by up to 20% Partner with attractive consumer brands 3. Merchants Acquire new customers on a pay for performance basis Increase basket size Increase purchase frequency Gain additional market share Partnership marketing Direct access to program members Leverage multi-channel marketing

5 Industry Cross Channel Shopping Metrics Online sales growing 1 Will grow to 11% of total retail sales by 2012 Some categories have online penetration greater than 20% (computers, music, video, books, event tickets) Consumers still love to shop in stores 25% of all online product related searches result in a purchase of that product - 63% are converted offline 2 Even though consumers research online, they still buy offline (ROBO) 3 1 Source: Forrester, How Consumers Shop Across Channels, July 16, Source: comscore, Shop Local Annual Summit, July 16, Source: North American Technographics Finance, Retail, And Travel Benchmark Survey, Q3 2007

6 What is Survival of the Fittest? We are captivated by it just look at what we are watching on TV!

7 What is Survival of the Fittest? We are afraid of it just look at what is happening to our industry!

8 So What Do We Do? Determination Hard Work Persistent Steady Thoughtful Diligent We really did learn what to do in Kindergarten!

9 Merchant Network Survival Secrets A successful, sustainable merchant network requires Hard Work 1. Must meet merchant goals 2. Sustainable competitive differentiation takes time 3. Marketing claims must be achievable, not fantasy 4. Communications need to be steady 5. Don t be fooled by bells and whistles, value matters more 6. Respect consumer preferences and how they shop today 7. Online shopping portals are a conduit, not an endpoint 8. A diverse, large and growing in-store merchant network is critical 9. Network performance measurement and reporting is essential Some Stories of Survival

10 Cruise and Vacation Group Overview Business strategy focuses on closed loop reward and loyalty programs in the areas of cardholder accounts and employee benefits. Working with Vesdia since Sustainable Competitive Advantage Representing all of today s top cruise brands, two worldwide escorted tour companies and more than 500 resort properties with primary focus in the Caribbean, Hawaii, Mexico and Florida Proven Value The lowest available industry pricing A vacation reward (cash back or points) Exclusive offers, special cruise sales and sweepstakes A seamless process for cardholders as they link directly to a program-specific rewards site Reservations center, online quotes and online booking capability

11 Cruise and Vacation Group - Differentiation Advantage Versus Aggregators Rewards to cardholders (revenue sharing) up to 5x greater 95% of bookings through reservations center versus online Agency conversion rate in excess of 50% Participate in 11 Vesdia programs including Sun Trust Focus on Partner Goals: Focus on enrollment Focus on spend engagement (best value / best brands) Spend Trends In addition to the actual vacation purchase: Pre-vacation purchases Onboard or resort purchases (excursions, alcohol, gifts and incidentals, transportation, etc.) Impact of Current Economy: In a down economy, reward and loyalty programs move to the forefront We have seen an increase in revenue even with substantial cuts in the cost of vacation products. (30% increase in transactions and a 16% increase in revenue for the period 1/1 10/15 from 08 to 09) Approximately 25% of our business is repeat business (value and customer service) We are constantly adding new suppliers (resort properties, spa, golf and ski vacations)

12 Cruise and Vacation Group - Promotions Selective participation in merchant network loyalty programs Featured Offers Sweepstakes Win a Cruise Online, and Print Channels Measurable results delivered quickly Chose to participate with SunTrust to attract new customers in the Southeast

13 SunTrust Overview SunTrust Banks, Inc. (STI) is one of the nation s largest and strongest financial holding companies. Total Assets: $189.3 billion 1,692 branches and 2,582 ATMs across AL, AR, FL, GA, MD, MS, NC, SC, TN, VA, WV and DC Through its banking subsidiaries, STI provides deposit, credit, trust, and investment services to a broad range of retail, business, and institutional clients. Other subsidiaries provide mortgage banking, brokerage, investment management, equipment leasing, and capital market services. Consumer and Small Business Payment Products 4.8mm cards (over 85% debit) Nearly $6bn purchase volume in Q408 Data as of 12/31/08 unless noted

14 SunTrust Rewards BonusBuys Use your SunTrust card online or in-store at participating merchants and earn more SunPoints Launched in 2009 with bonus earning opportunities at over 500 merchants, including: Online merchants National brick & mortar merchants Local and regional merchants SunPoints awarded range 1-20 points per dollar in addition to base earnings Promoted with integrated, multi-channel marketing

15 Sample Program Marketing Statements and Newsletters s Website placement

16 Sample Promotional Placement Online Mall Travel Category Offer Placement

17 Partnership Marketing Survival Tactics Enhance offering through merchant partnerships Incrementality needs to be demonstrated everyday Historical customer purchase process is linear issuer influence is weak purchase < product < merchant < supplier < manufacturer Narrow the degrees of separation using a merchant network to move the process from linear to dynamic - with issuer influence stronger Supports Live Solid. Bank Solid positioning Merchant Buyer Supplier Bank

18 Merchant Case Studies

19 Vesdia Merchant Network Services Vesdia brings together merchants and loyalty programs to influence consumer shopping behavior Loyalty Programs: 30+ Programs 60+ million participants Support leading programs: Merchant Network: Online: 750+ National in-store & catalogs: 85+ Regional & local: 2,000+ Restaurants: 8,500+ Marketing strategy & support Reporting, data & analytics Reward processing & billing Performance & financial reporting Merchant & offer management Online mall creation & management Confidential, secure data storage

20 Case Study: Incremental Sales Merchant Profile: Specialty apparel/home decor with 350+ locations Situation: Generate incremental sales Solution: Participated in multiple partnership marketing programs Shopping incentive of 4x points/cash/miles to loyalty program participants Eligible channels included in-store, online and catalog Offer promoted through multi-channel marketing campaign Benefit: Total sales during the period increased 37% YOY New shopper annual sales increased 18% YOY

21 Case Study: New Customer Acquisition Merchant Profile: Sporting goods/specialty apparel retailer with 70+ locations Situation: New customer acquisition Solution: Participated in multiple partnership marketing programs Always on shopping incentive of 3x points/cash/miles to program participants Eligible channels included in-store, online and catalog Marketing campaign with over 39 million impressions featuring merchant Website placement on loyalty sites Direct mail promotional campaigns to opt-in participant base Benefit: Incremental sales from new shoppers = 890% ROI after funding rewards Performance Metric Results New shoppers as a percent of total shoppers 70% Percent of sales attributed to new shoppers 72% Percent of transactions attributed to new shoppers 68% AOV increase for new shoppers vs. existing shoppers 7%

22 Case Study: Market Share Shift Merchant Profile: Quick service restaurant with 8,500+ locations worldwide Situation: Market share growth and shift Solution: Participated in a partnership marketing program Points based program with an offer of 12X points per dollar spent Promoted brick & mortar locations within 13 states Marketing campaign included print, billboard, direct mail, online and statement inserts Targeted participants that shopped at merchant s competitors Benefit: Increased market share relative to 3 top competitors over 12% Month 1 Month 2 Month 3 Month 4 Market Share Shift Merchant Partner 42.6% 43.2% 45.5% 47.0% 4.3% Competitor A 57.3% 56.7% 54.4% 52.9% -4.3% Merchant Partner 71.9% 73.4% 75.3% 76.6% 4.6% Competitor B 28.0% 26.5% 24.6% 23.3% -4.6% Merchant Partner 76.7% 77.9% 79.2% 79.8% 3.1% Competitor C 23.2% 22.0% 20.7% 20.1% -3.1%

23 Q & A