Banks Need to Collect More Insights to Communicate Effectively

By Bob Williams, Director of Marketing Technologies at Harland Clarke and author of the blog, The Merchant Stand.

A friend and colleague Jim Marous shared an article from American Banker on Googe+ entitled Banks Underuse Mobile for Communication. The article discusses challenges that financial institutions have with communicating with their customers through mobile devices. While mobile device applications and mobile optimized sites are becoming more common, and expected by account holders, financial institutions are not using the mobile channel for proactive communication. Kael Kelly, senior director at Varolii is quoted in the article “Banks don’t have the data that they need. A lot of the phone number data doesn’t easily distinguish between a mobile number and a land-line.”

So the idea that banks don’t know what data they have made me think about some other data that Jim Marous shared about financial institutions and customer data. Like this tweet about banks not having email addresses for their account holders.

The challenge I see is missing or unintelligible customer profile data. That problem expands beyond the boundary of the financial services industry. It’s really a common need for any type of business. Another challenge is the misuse (or lack of use) of the data that an organization has. Another conversation with Jim last week revealed that he noticed his bank mention that online banking was 'down' using Twitter. While admirable that they used a more modern social media tool for this notification, there probably aren't many people following Twitter the way Jim does. Making matters worse, they didn't use either his email address (which is tied to his online banking account) or SMS (the bank has his cell phone) to make this notification. In other words, the bank had the tools, but didn't use what was at their disposal.

There’s no doubt that many organizations have a good process to manage customer profile data and communication. But for those that don’t, I believe there is a fairly simple solution.

A Simple Multi-Solution for Collecting Profile Data
The first step is to collect accurate information at the time of new account opening. That seems obvious, but for many businesses this may require updating the customer/client profile record to support addresses for current communication mediums. That means distinguishing between phone number types such as home, mobile, work etc. It means a place for an email address as well. If is it a business, you may also want to include a variable field for social media type contact information. At a minimum, require one phone number and one email address. If the customer insists they do not have an email address, then fill the field with an agreed upon standard such as (noemail@yourbusinessdomain.com)

I understand there are regulations governing anti-spam communications via email and SMS text. But I don’t think banks or other businesses need to over think/engineer a basic solution to keep accurate profile data.  The email and phone number should be required and make sure the customer knows when they establish the account that you may use this information to contact them with important notices about their account. You can optionally create a permission indicator (opt-in) that is designated for future marketing or non-marketing communications. While these changes may require IT, online banking and branch management support, the customer experience and cost benefits are significant.

A Simple Multi-Channel Solution for Keeping Profile Data Accurate
I suggest sending notifications through multiple channels annually for customers to check and update their profile contact information. Here are some possible touch points:

1. Pop up in the online account area after login.  Remember, customers are in your system by their own choice. So this is a fair message to display to them regularly. This is also an area where the customer can self-serve any updates they need to make.
2. Email reminder. Don’t ask the customer to login from the email message or reply to it. That’s a technique used by phishing attacks and creates mistrust. Rather, use the email to notify and request the customer update their profile information the next time they login to their online account or the next time they visit a branch/store location.
3. Post the reminder message on Facebook/Google+/Twitter and other social sites where customers may follow your brand for the purpose of receiving communication. These social medium platforms are broadcast platforms. You don’t need permission to place messages there and customers that see a message from your account page are there by their own choice.
4. Leverage the ATM. While some ATMs are equipped with interactive communication options, the ATM can at least be used as a reminder tool. Of maybe use a QR code on the ATM for customers to go to a log-in site for updating.
5. Put the reminder message in a recording for customers holding for live assistance. It’s a simple reminder that they should keep their profile information up-to-date to help with important account notifications.
6. Have any branch/store employees verify with customers on a designated week (quarterly or annually) that their information is up-to-date information. This only covers the customers that are serviced in-person for that week, but it’s a great touch point for interaction and shows that your brand is proactive to keep good records. Branch POS material can also emphasize the need for updated information.
7. Messaging on all statementing and promotional materials. Emphasizing the 'green' aspects of keeping all communication channels up to date makes this a priority all year long.

Since some customers may have fees associated with SMS texting, it’s not advisable to use that channel unless you have established that as part of their profile setup.

The email channel is different in this multi-channel approach because it is a message to an individual area. In fact, email addresses that are not accurate may return as undeliverable. Consider monitoring undeliverable emails and putting these customers on a list for follow-up through other means such as phone or postal mail.  Alternatively, remove email addresses from the profile record if they are not deliverable after three attempts.

What do you think? Should it be difficult to keep accurate profile data and request the customer update/verify it with recurring frequency? Do you have a process or program at your organization that has worked? I would love to know.

Banks Need to be Proactive to Stop Switching Trend

According to the 2012 U.S. Bank Customer Switching and Acquisition Study just released today by J.D. Power and Associates, continued frustration with fees and service has resulted in increased levels of switching at large, regional and mid-sized banks, with smaller banks and credit unions faring significantly better.

The study found that 9.6% of consumers switched their banks in the past year compared to 8.7% in 2011 and just 7.7% in 2010. But not all financial organizations were impacted equally. In fact, there was a extremely wide disparity between the switch rates at larger banks (avg. of 10% - 11.3%) and the .9% switch rate of switching at smaller banks and credit unions (a reduction from 8.8% in 2011).

Interestingly, roughly half of those leaving big banks went to another big bank. This could likely be attributed to the importance of being able to serve the customer as their life circumstances change and the importance of convenience as defined by the customer. According to Michael Beird, director of the banking services practice at J. D. Power and Associates, "Our study showed that consumers at smaller banks and credit unions were more likely to shop for an alternative provider if their financial needs  changed. In addition, bricks and mortar and the availability of advanced mobile technology is a value proposition that has yet to be overcome by smaller banks and credit unions." The disparity between large and small bank offerings of mobile services was reinforced by the recent Javelin Strategy & Research study, Mobile Banking, Smartphone and Tablet Forecast 2011 - 2016.

And while fees continued to a primary reason for consumers to begin to shop for a new bank or credit union (especially at mid-sized, regional and the largest banks), fees alone do not necessarily make a customer switch if the value of their overall experience is strong.  As was found in the 2011 U.S. Retail Banking Satisfaction Study, being charged a fee does not necessarily result in lower satisfaction or an eminent switch. This was also the case in the J. D. Power and Associates 2011 U.S. Small Business Banking Satisfaction Study where M&I Bank performed well in customer satisfaction despite having more significant fees.

In this year's study, Capital One received high rankings in both acquisition and retention even though the bank's fees were not the lowest. In addition, at Huntington Bank, where marketing focused on lower prices and increased convenience, performance was strong in both acquisition and retention categories.

SWITCHING BEGINS BEFORE ACCOUNT IS EVEN OPEN
Today's consumer makes a very informed decision before opening a new account. They research online, listen to friend's recommendations and do a personal 'litmus test' before walking into the door of your branch (or opening an account online). As a result, there is the opportunity to lose a new customer before you even complete a new account application. This is best illustrated using the J. D. Power New Buyer Purchase Funnel shown below.

JDPA New Buyer Purchase Funnel (2011)

According to Javelin Strategy & Research, only 53% of new online account openers were able to successfully open and fund their account (2011 Online Account Opening:Faulty Process Hobbles FIs in the Battle for Customer Acquisition, Profitability and Retention). It is important, therefore to monitor and manage your online and in-branch product purchase abandonment. I also discussed online abandonment in my May, 2011 blog post, Seven Steps to Reduce Offline and Online Bank Product Purchase Abandonment.

NEEDS ASSESSMENT AND MULTI-TOUCH ONBOARDING IMPROVE ODDS OF RETENTION
As has been seen in previous J. D. Power and Associate research done over the past three years, the importance of completing a needs assessment and having post new account opening follow-up significantly improves satisfaction (and reduces attrition). Previous research from J. D. Power and Associates also showed that satisfaction increased as the number of communication touches increased up to seven touches (see 10 Strategies for an Award-Winning Onboarding Process white paper). In each case, the level of cross-selling also increased.

Finally, the channel used for account opening also impacts satisfaction and retention potential. According to Beird, "Online channels for account initiation garners greater satisfaction among customers. Those who utilize the online channel rather than in-person for account opening report higher satisfaction levels with account initiation." It was found that, even without any additional follow up contact from the bank, online customers average 763, or 73 index points higher in satisfaction (on J.D. Power’s 1,000 point scale) than those who open an account in the branch. Beird added, "We found that if follow-up contact takes place after the online account initiation, the customer satisfaction level jumps an additional 100 index points to 864, versus 849 for in-person account opening accompanied by follow-up. 

Does your bank have an accurate measurement of the number of accounts and households that switch annually? Is it broken down by tenure and value of the account and/or relationship? Do you have a proactive strategy to lower your attrition rate both before the account is opened (shopping and consideration stage) as well as after the new account is opened?


I would love to hear from you on what you are doing at your bank or credit union and the success you are having. Please post your comments below.


Note: For more information regarding the J.D. Power and Associates 2012 U.S. Bank Customer Switching and Acquisition Study, please contact Holly Zagresky at Holly_Zagresky@jdpa.com 

Bank of America Should Become a Credit Union

I have decided that the best course of action for Bank of America may be to become a credit union. Despite the regulatory hurdles and government scrutiny that the bank would need to deal with, it may be an easier course of action than trying to catch a break with our industry's trade press, the general media and definitely those using social media to respond to every move the bank makes.

For instance, American Banker published a story last week from Ed Roberts entitled, Bank Transfer Day Spurs Big Membership Growth at CUs. The story cited that the credit union industry had near record growth in the second half of 2011 . . . 'after the ill-fated September announcement by Bank of America of monthly debit fees prompted Bank Transfer Day'. This growth of 850,000 members in the final six months of the year contributed to an annual growth for the credit union industry of almost 1.3 million new accounts, reported the NCUA.

According to my calculations, a growth of 850,000 new members for the second half of 2011 represents an average of fewer than one incremental new account per credit union (not per branch) a day. The statistics are roughly the same when you look at the annual growth rate as well. Assuming that the number of new members represented incremental growth, the 1.3 million new members reflect only a 1.4% growth over 2010 according to the 2010 Government Census. 

How does this become newsworthy? In almost all U.S. major newspapers, a version of this article ran including a reference to both Bank Transfer Day and Bank of America. The Los Angeles Times ran a headline, Banks' Fees Pay Off - For Credit Unions while Forbes ran an even more sensationalized headline, Credit Unions Membership Soars as Customers Spurn Big Banks. Does any other industry get as much press for close to flat line growth? Shouldn't this be more realistically considered business as usual? 

And how confused is the general consumer? Just a few short weeks before these reports, many of the same industry and national news organizations covered the Javelin Strategy and Research study that Bank Transfer Day had just a minor impact on money movement despite all of the media coverage. The Financial Brand covered the conflicting numbers being presented, and even the New York Times ran an article entitled, The Exaggerated Impact of Bank Transfer Day.

For news organizations (including the American Banker) to accept what amounts to unfiltered PR releases without determining if it is really 'news' is detrimental to both the banking and credit union industry, and feeds the 'banks are bad' sharks that continue to circle the consumerism waters. Maybe there should be an article this coming week announcing that each of the top 7 banks (and maybe the top 10) opened more than 1 million accounts in 2011 while being beat up in the media daily. To me, that is far more newsworthy than taking a PR feed from the credit union industry and not doing simple math to determine if generating 400,000 accounts in a quarter or 1.3 million last year even moved the needle.

On top of the aforementioned wide distribution of positive credit union PR by major news organizations mentioning Bank of America in a negative light, BofA received additional negative press last Thursday when the Wall Street Journal ran a front page article entitled, Big Bank Weighs Fee Revamp around the potential of the nation's second largest bank expanding a current checking pricing test that began last Fall. As has become commonplace, virtually all major news organizations ran their own version of the same 'old news'. And if that wasn't enough, a Massachusetts official slammed B of A for testing fees that would "burden" many of its customers. 

Unlike the American Banker article around credit union growth done by one of her associates, Maria Aspan did a very admirable job of covering the double edged sword facing Bank of America in her article entitled, B of A Draws New Fire For Old Checking Fee Test. Her reporting (and many of the comments associated with the article) underscored how Bank of America is in a no-win situation, where transparency is required but very painful.

So, instead of Bank of America trying to defend itself against an ongoing barrage of negative press and negative positioning as the reason for the 'growth' of the entire credit union industry, why doesn't BofA change their charter to become a credit union? Like a local credit union, BofA already does a massive level of community giving through their national and local philanthropy (over $200 million in 2010). They also offer loans and services on a local level, investing in the communities and small businesses they serve. The only thing they don't seem to get on the same level as credit unions is good press.

I don't have anything against the credit union industry or even the American Banker. I just wish that coverage of the industry (and of Bank of America) would be less sensationalized and biased and that the financial witch hunt would end. It definitely isn't good for Bank of America and I don't think it is very good for either the banking or credit union industries.

What do you think?

Marketing Funda : Determinants of Brand Extension Success

Professor Franziska Volckener and Professor Henrik Sattler of Institute of Marketing and Retailing, University of Hamburg, published a very insightful article  titled Drivers of Brand Extension Success in Journal of Marketing in 2006 which spoke about critical success factors that drive brand extension success. The authors through extensive empirical research distilled five factors that determine whether a brand extension will succeed in the market place. 

The study which was conducted in German FMCG industry gives valuable insights for marketing managers across the world.

The five factors that determine the success of brand extensions are as follows

1. Fit between parent brand and brand extension : Whether the extension is in line with the parent brand's positioning and consumer perception

2. Parent-brand conviction : The brand equity of parent brand , the trust of consumers on the parent brand's quality are critical factor that help extension success.

3. Parent-brand experience : The previous experience of the consumer towards the parent brand will affect the consumer's response to the extension

4. Retailer acceptance of brand extension : Retailers play an important role in the brand extension's success.

5. Marketing support : The investment in brand promotion also has a strong role to play in the success of the brand extension.

My Two Cents : The above cited research throws important light into the critical determinants of brand extension acceptance by consumers. Marketers should view these factors holistically because all these factors collectively contribute to the success of extensions. These factors like parent-brand experience and parent-brand conviction take time to develop. Hence haste in extending a brand without these factors can be risky.

 While I am personally critical of brand extensions, market pressures and opportunities make brand extensions a vital element in the marketing strategy . The research of Professors Volkener and Sattler is very relevant in this context.

Brand Update : Cadbury Eclairs Moves Up the Value Chain

2011 was an eventful year for Cadbury's Eclairs. The year saw the brand trying to move up the value chain by launching a new variant Cadbury Rich Brownie Eclairs. The move is significant because the brand has done an upward line stretch since the new variant is priced at Rs 2/-.

Cadbury's Rich Brownie variant is a significant move in the Rs 950 crore candy market where the most popular price point is Rs 1/- and  50 paise. The marketers were reeling under margin pressure because of a rise in the input costs at one hand and the price sensitive consumers at the other end. The problem was aggravated by the price competition from Nestle and local brands. Cadbury's still hold market leadership in value terms in this market while losing out the volume leadership to Nestle.

2011 also saw some changes in the positioning of Cadbury's Eclairs. The brand which earlier had the positioning of Doob le Zara ( which meant- immerse in taste) changed the tagline to "Get Lost".

Watch the ad here : Get Lost 
Cadbury's launched the Rich variant with the positioning of Chocolate Fountain. The brand adapted this from the earlier campaigns of Cadbury's Dairy Milk Eclairs' Chocolate Bomb ads. Instead of the heads exploding as bombs, in the Rich variant's ads, the heads explodes into fountains.

Watch the ad here : Cadbury's Rich Eclairs

Since the brand is priced high, the target market for this variant is older customers- the teens and youngsters.

While the new variant is banking on the chocolate fountain, the original Cadbury's Eclairs is experimenting with the " Lost in Taste " proposition. The creative brains finally came up with the tagline " Get Lost". For the first time , a brand is telling the customers to " Get Lost ".  May be the creative guys told the client  to " Get Lost " and client mistook it for the tagline and approved it !
The new tagline is far below the average creative standards for the reason that another brand from the same company i.e 5 Star is having the same positioning. It is common sense that it is not advisable for two brands from the same company to have same positioning. Positioning has to be unique and should not be shared unless it is a branded house. The entire campaign has a negative tone coupled with the tagline which itself is negative.
According to newsreports, the Rich Brownie variant wants to create a space for itself in the market which will convince the customer to pay higher price for the new variant.
Although nobody will have any doubts regarding the quality of these products, the campaigns for these two variants does not match the brand's real worth. Cadbury's have always known for its breakthrough campaigns. The recent ads for Silk, Shots , CDM all were of high quality creative executions. However, the ads for the eclairs does not match the standards of its siblings. What difference is there between the Chocolate Bomb and Chocolate Fountain  ? What difference is there between 5 Star and Get Lost campaigns ? Rather these come across as lazy cut-copy works.

Related Brand
Cadbury Eclairs

Big Data Provides Big Opportunity for Bank Loyalty

In a new regulatory environment, banks are faced with changing the foundation of rewards programs that were previously funded by interchange income from credit and debit cards. With debit interchange funding gone, FIs still need to continue to find ways to improve bank loyalty and drive the desired card behavior. In addition, banks need to leverage “big data” and mobile payments in the hope that they can replace some of the revenue lost as a result of Reg E and the Durbin Amendment.

Optimally, the future of rewards and loyalty will allow banks and credit unions to take advantage of the “Loyalty Trifecta” (my term for bringing together the benefits of 1) payment and transactional insight, 2) targeted offers and personalized communication as well as 3) mobile offers and payments).

To get an insider view of the challenges and opportunities available to banks today in the area of rewards and loyalty, I reached out to the leaders of four companies that provide unique solutions to the banking industry and who also will be co-panelists with me at the upcoming BAI Payments Connect 2012 Conference & Expo in a session entitled “Rewards in a Mobile Banking Environment.” 

Thanks to Tom Beecher, CEO, Cartera Commerce Inc.; Rob Heiser, President and CEO, Segmint; Schwark Satyavolu, CEO, Truaxis; and Rod Witmond, senior vice president, Product Management & Marketing, Cardlytics Inc who agreed to participate in the panel and contribute to this interview.

Note: An abridged version of this interview is also located as a BAI Banking Strategies article entitled, Big Data Drives 'Loyalty Trifecta' for Banks.

Q: What’s the current status of the banking rewards environment today and how can it be improved upon?

Witmond: Previously, U.S. banks brought offers to customers in a separate section of the bank website – often referred to as an “online mall.” Only a small percentage of their customers went there. It was not a loyalty solution. Various bank rewards solutions required the customer to enroll their card at a separate site and then hope they remembered to shop at a group of merchants providing lackluster discounts. Low engagement or difficult-to-use approaches won’t strengthen a retailer’s relationship with customers or move the needle on sales – for the merchant or the bank.

The banks’ business cases for the early generation, merchant-funded rewards programs promised significant earnings to the banks driven by large revenue shares. For the reasons stated above, retailers did not see these solutions as adding value to their current marketing mix and budgets did not shift. U.S. banks ended up with a big piece of a very small pie. New enhancements from loyalty vendors have refined the early approaches on several fronts.

Beecher: The scope and strategies for banking rewards have changed dramatically in the past two years. Durbin has forced banks to re-imagine how loyalty programs are designed and funded. Also, the development of card-linked offers – where consumers earn cashback or points when using their bank’s payment card at participating merchants – has opened up new incremental revenue opportunities for banks. Finally, the growth of Groupon and deals in general has made consumers (and banks) much more aware of the power and importance of local merchants and online offers.

Satyavolu: Most banking rewards in the past had four defining aspects: 1) they were mostly available on credit cards and less frequently on debit cards (due to being funded by interchange from merchants); 2) they were mostly one-size-fits-all (everybody gets the same extra points/cash-back on certain categories whether or not you shop there); 3) they were typically limited to cash-back or points back benefits; and 4) merchants were not involved in the creation of these benefits.

Heiser: The way FIs interact, engage and communicate is driven more and more by their customers’ technological lifestyles. While merchant-funded reward programs were one of the first to react to this shift, success today involves the application and technology adoption that is driven by transaction intellect − knowing and understanding the needs of customers.

Q: What are the benefits of your solution (from both a bank and consumer perspective) compared to rewards programs used by banks in the past?

Whitmond: While most rewards programs in the past used a points currency to reward based on the number and/or level of transactions, we now can leverage all of the banks electronic transaction data to isolate customers into finely defined segments. By leveraging purchase transaction data, we enable retailers to invest aggressively to grow their business. Bank customers receive 20% when they shop at new retailer, not 1%. And since the customer is receiving these rewards as part of their online banking experience (where the customer is viewing their relationship 9 times per month and 25% view their relationship daily), retailers realize that customers interact with their offers over a 100 times more than with other digital channels!

Beecher: Instead of the bank funding the rewards program as in the past, merchants pay for the card-linked offers and also pay a commission on the sale which turns into revenue for the bank. Therefore, the bank gains a new incremental revenue stream, and increases customer engagement and card spend. Because Cartera runs these programs as a fully managed, pay-for-performance service, banks can launch and innovate quickly and at low cost. In addition, instead of the customer needing to visit a rewards site to select their gift, redeeming card-linked offers is as simple as swiping their payment card at the participating merchant. The reward is automatically added to the customer's account in the currency set by the bank.

Satyavolu: Due to the advanced analysis of robust transaction data (within the bank's firewalls), the merchant is willing to provide much richer rewards to the customer than they could in a normal online coupon based environment. They already know the customer is 'qualified', therefore a greater incentive can be offered. In addition, while there are national merchants involved in the program, the bank can include local merchants as well which can build a strong bond with a bank's small business and commercial customers. Finally, unlike previous rewards programs that are simply based on transaction levels, today's rewards are much more personalized with the selection of offers being improved as the customer engages in the program. This drives a higher degree of online and mobile engagement with 35% higher login rates.

Heiser: As opposed to being a program based on rewards, Segmint leverages digital marketing technologies to help FIs acquire, cross sell and retain bank customers through dialogue marketing. Our program is driven through the micro-targeting of bank customers and assigning of Key Lifestyle Indicators (KLIs) - unique identifiers based on individual spending patterns and lifestyle trends. If customer engagement is the primary goal, then FIs ability to use KLIs to understand bank customer life events and deliver a comprehensive set of relevant FI products and services is ultimately a win-win for both sides. With today’s savvy consumer expecting to receive highly-targeted and engaging information, this meets their growing demand for personalized service and simplicity.

Q: How can a bank 'customize' your solution to differentiate itself in the marketplace?

Whitmond: Banks have numerous ways in the user interface to design a solution that is completely integrated to their specifications. This not only differentiates our solution from others in the market, but also from other banks that may have installed our solution. Second, because the Cardlytics solution is software loaded onto hardware that is in the bank’s environment, the bank has complete control over the targeting solution. This also means the bank has complete access to any - and all - relevant data fields. As such, the bank has complete control over designing and deploying solutions around the rewards program. This has resulted in customized email, SMS, mobile and social solutions.

Beecher: Cartera programs are private-labeled and customizable for each of our bank partners. Each bank can control the program construct and currency (e.g., cashback, points) , marketing strategy and messaging, merchants and offers to include, consumer experience, and marketing channels to use. Cartera supports the full range of options with technology and services and allows each bank to launch and run a distinct, differentiated program.

Satyavolu: StatementRewards provides each FI access to a web-based dashboard where they can control the nature and quantity of offers their customers will receive. Some of the unique features of our solution include merchant-level purchase insights, geo-aware services, cross-sell capabilities, social networking distribution (customers can share rewards on Facebook and Twitter and brag about their loyalty status level as they shop), gamification (reward discovery incentives), and bill analysis (allowing customers to receive personalized, recommendations to help save money on monthly recurring expenses like wireless, TV service and gas).

Heiser: Data-driven CMOs can utilize Segmint’s analytics engine, instantly-actionable campaign management tool, and ad delivery platform for the micro-targeting of bank customers and to initiate and manage customized experiences. Whether a mix of FI products/services or bank partner offers/discounts, Segmint's solution helps FIs initiate interaction and generate real-time offers when it is the right time for the bank customer. Segmint’s solution also provides unparalleled speed-to-market and comprehensive metrics – ultimately resulting in optimization of marketing spend. 

Q: How can your own solution be leveraged in a mobile environment as opposed to an online banking or bricks and mortar environment?

Witmond: The Cardlytics solution is already leveraged in a mobile environment. We have bank solutions for SMS, mobile, and email in the marketplace. Additionally, we have ATM and social media solutions close to deployment. Most banks start with online banking because it provides the greatest exposure to the rewards platform. However, they quickly recognize the value of extending into mobile applications where they have complete control over the data and data fields. As such, they can drive mobile solutions at their own speed. Where a bank cannot deploy a mobile solution quickly, we offer a white-label mobile solution that can be deployed alongside or within an existing FI application.

Beecher: Mobile is an increasingly important channel for communicating with consumers -- particularly with the growth of in-store (national and local) offers. Cartera powers mobile apps that show consumers where they can use their payment card to redeem card-linked offers from nearby merchants. As Cartera partners roll out support for mobile wallets, this capability will become even more powerful by enabling consumers to find and redeem offers entirely via their smartphone.

Satyavolu: Truaxis’s StatementRewards product easily integrates with a FI’s existing mobile banking app to provide additional benefits to banking customers. Through the existing mobile app, bank customers will be able to view all of their rewards, both purchased and available, via the user dashboard. From this user dashboard, customers can instantly view, purchase and redeem rewards directly while they’re on the go.

Heiser: Segmint is not a merchant-funded rewards provider and, as such, our philosophy is grounded on generating loyalty through digital engagement with customers. Segmint is device-agnostic and can deliver across virtually any electronic medium. There is no doubt that opportunities exist within the mobile environment, but as with all mediums/channels, success revolves around the actual content delivery.

Q: What innovation do you see on the horizon around loyalty and reward platforms, both in banking and non-banking industries, in terms of leveraging social media?

Witmond: We have banks that have already designed how our solution can extend into social media and are deploying the same. The challenge with social media is that it is a “social experience” all about engaging on a person-to-person basis. That being the case, the extension of the core platform into social is only the first stage and the true challenge is in making the rewards solution one that engages on a person-to-person basis.

Beecher: Innovations in payments, big-data-driven marketing, and loyalty are all merging together to form what will ultimately be a new playbook for companies in these spaces and a new set of winners, including the new card-linked offers space. Mobile payments are seeing new non-banking entrants, all realizing that the incorporation of offers into the wallet is central to consumer adoption.

One of the new frontiers of leveraging big data with marketing is anonymous payment data, where new technologies and entrants are helping banks use transaction data that preserves privacy and provides real benefits to consumers. An example would be my purchase at McDonald’s alerting Burger King to make an offer to me. The entire funding model for bank loyalty programs is being turned on its head with merchants paying consumers through banks to shop with them rather than banks focused on taking money from merchants (through interchange) and then funding rewards themselves.

Satyavolu: The biggest innovation for these platforms will be the continued use of data to drive personalization and cut-costs. Both banking and non-banking industries are sitting on piles of data that they both don’t have the resources to utilize and if they did, they wouldn’t know where to begin. By working with third-party vendors like Truaxis, these companies will finally be able to utilize this data through innovative new techniques.

Analyzing transaction data from FIs is only the tip of the iceberg. As these platforms become more integrated across multiple channels and industries, companies will be able to understand and connect with their customers to provide them with the most value and ensure that each customer has a completely personalized experience that provides them with exactly what they need and want.

The data buried in social networks adds an interesting new twist to the personalization capabilities that are made possible, when you add them to the transaction data streams that FIs already have today. The concept of loyalty marketing will undergo a quantum shift in how it operates and who is in the key enabler seat for merchants, where FIs have a huge opportunity and upside to facilitate these interactions.

Heiser: Social media is a huge game changer for FIs and will become the “biggest bank branch” they operate. With nearly a billion active monthly users on Facebook, FIs must become socially actionable and interact with customers in their channel of choice. Last year Segmint introduced SegmintSocial, our social media technology solution that gives FIs the power to precisely identify their customers on the bank’s Facebook page, customize their experience and engage them in real-time, personalized dialogue.

EMBARKING ON A NEW ERA FOR BANK LOYALTY

We are obviously entering a new era for bank loyalty and reward programs, where banks can leverage transactional and payment data to build a personalized engagement process. Whether the program includes merchant-funded offers or simply uses customer insight to drive greater share of wallet and retention, banks can significantly improve the value of the relationship from both the customer and bank's perspective.

Since we are treading on new territory regarding the use of customer insight, there may be consumer push-back at first as they see rewards/ads integrated on their online banking statement, ATM screen or even their phone. There will be tests of geo-locational marketing with many of these reward program in the near future, where customers may receive their offers via an email or SMS message as they near a participating merchant. 

The potential payoff for this new level of engagement is significant, however. According to recent Aite Group research entitled, The Case for Merchant Funded Incentives: New Opportunities for Card Issuers, merchant funded incentives could drive US$1.7 billion in annual revenue for card issuers by 2015. In addition, the number of U.S. cardholders (credit, debit, and prepaid) who subscribe to merchant- funded incentive programs could exceed 460 million by 2015.

“Merchant funded incentives programs are a good deal for card issuers, and offer a new revenue stream,” says Madeline K. Aufseeser, senior analyst with Aite Group and author of the report. “Because the cost to operate merchant-funded incentives is less than that of traditional reward programs and will generate a greater profit per account, card issuers will most likely consider swapping some existing traditional reward programs for merchant funded incentives programs, especially on debit portfolios.”

It is definitely a time of change for loyalty, and a time when marketers will be armed with significantly more customer insight to build marketing programs. Rewards and loyalty programs only scratch the surface of opportunity available to savvy bank marketers who can make use of 'big data'.

Is your organization considering or already implementing a new rewards and/loyalty program? How will you engage your customers to participate? Will you 'localize' your program, including local merchants? Will you leverage social media to enhance your customer profiles or help market your program. I would love to hear from you.

Opening Comments 5-9-2013 USDA report preview

Markets are called mixed/choppy this a.m. behind a two sided overnight session.

When the overnight session paused July corn was unchanged as was December corn, KC wheat was up a penny, MPLS wheat was off a penny, CBOT wheat was off 2, old crop soybeans were up 6 cents a bushel, and November soybeans were down a penny a bushel.  Outside markets are also fairly choppy with the US dollar up slightly with the cash index at 81.99, crude is off 50 cents, gold is off 10 bucks an ounce, and equity futures are pointing towards an unchanged start.

We had export sales out this a.m. and tomorrow we will have the May USDA Supply and Demand report.  Otherwise we seem to be in a weather market and one that seems to be controlled more by money flow then anything.   It hasn’t seem to matter if producers or buyers are interested in a given day for some time.

As for export sales kind of a non-event this a.m.  Corn sales were below expectations as well as the needed levels to hit the USDA present projections.  Will they be lowered on Friday?  Old crop wheat sales were also below the needed levels.  Soybeans sales were above needed level and positive for the first time in 3 weeks but nothing great.  Soybean meal sales continue to be positive; but also continue to slow down from the super strong pace we have had.

Last week we had super strong new crop sales for the big three grains; but that wasn’t the case this a.m.  New crop wheat sales came in at 8.3 million bushels; which is less then ½ of last week, corn sales for new crop came in only at 6.7 million bushels which was about ¼ of the previous week, and new crop soybeans sales came in at 14.4 million bushels also about 1/3 to ¼ of last week’s new crop sales.

The big thing that stands out for new crop sales is the fact that wheat is well ahead of where it was a year ago and corn and beans are well behind were they were at a year ago.  If you look at present balance sheet projections or thoughts.  (The actual first new crop USDA balance sheets will be out tomorrow Friday May 10^th)  One would think that we need to increase our corn and soybean exports versus this year or have massive carryout numbers simply based on the increased acres and fact that odds favor a little better yield versus last year’s drought impacted crops.  While our wheat ideas today are that the crop is smaller year over year and thus we will have less to export.  Bottom line is it could mean less wheat business as we go forward and hopefully it means more corn and soybean business as we go forward.

Weather still looks to be neutral for our markets; with the deferred slots still fairly open in the major parts of the corn belt.  Time however keeps going by and field work is slow in the corn belt; much got hit with a small amount of moisture yesterday; maybe not enough to push things back several days but probably enough to slow things down or halt things for a day or maybe two?  Next week’s crop progress report will be very important; but so will the deferred forecasts.

Tomorrow we have USDA report…….below is recap of trade estimates.  Typically I like taking a little risk off ahead of the USDA reports.  Not sure if that is the right move or not; really depends on how comfortable one is in the present marketing plan.  I would point out that there could be some huge risk; very un-likely and I still think we could and should see a weather rally at some point for the row crops. 

But here is the risk that I see and it is in regards to new crop corn primarily and remember corn seems to be king; so that risk could be transferred on to the other grains fairly easily.  The risk is that our new crop carryout number comes in much higher than the 2 billion bushels; maybe add to that a favorable forecast Sunday night along with planting progress better than expected and we could see extreme pressure and how knows how low the funds could drive us.  Now I think it is unlikely that the USDA does that and I think our old crop tightness is for real and that should keep some support for new crop but if we want to look just at the demand side you can make some big arguments that the USDA pencils our new crop corn carryout 200-500 million bushels above the 2 billion. 

For one we seem to have an ethanol blend wall; secondly as mentioned above we are well behind last year’s new crop corn exports; but more than that is we seem to have some talk of big crops in other places in the world.  Can we really just turn on a light switch and gain the exports back because now we need them?  How about feed demand how fast can that actually increase?  Then we have the production side of things; the USDA has had a history of overstating production; while will they not do that once again tomorrow?

If we look at the big picture we need to realize that a decent crop at all can leave us with a 2 billion bushel plus carryout while still needing to increase demand more year over year then we have EVER done in HISTORY.  That is scary and so is the fact that this is a USDA report as the logic they use should tell us as marketers that there is no guaranteed what they will print; right or wrong.  Bottom line is we could have plenty of risk and if you are not comfortable with it maybe do something about it?

What would one do?  That is a big struggle as I don’t really like making sales at present levels; nor do I like spending tons of money to buy the put options.  Perhaps the short dated new crop options are a move but who knows.

Please give us a call if there is anything we can do for you.

As mentioned here is the USDA estimates.

The below is coming from the Van Trump Report.

US Ending Stocks 2012/13  May # April USDA # Avg Guess Range of Guesses Corn ??? 0.757 0.749 0.684 - 0.800 Soybeans ??? 0.125 0.123 0.107 - 0.130 Wheat ??? 0.731 0.733 0.720 - 0.747 US Ending Stocks 2013/14 May # Feb Ag Outlook Avg Guess Range of Guesses Corn ??? 2.177  1.993 1.387 - 2.427 Soybeans ??? 0.250 0.236 0.147 - 0.325 Wheat ??? 0.639 0.658 0.486 - 0.800 Global Ending Stocks 2012/13 May # April USDA # Avg Guess Range of Guesses Corn ??? 125.290 125.646 123.500 - 132.100 Soybeans ??? 62.630 62.300 61.111 - 63.000 Wheat ??? 182.260 181.528 178.300 - 183.200 Global Ending Stocks 2013/14 May # Avg Guess Range of Guesses Corn ??? 151.695 130.000 - 168.300 Soybeans ??? 68.991 64.000 - 83.000 Wheat ??? 184.368 175.000 - 195.800 US Wheat Production May # 2012 Totals Avg Guess Range of Guesses All Wheat ??? 2.269 2.062 1.832 - 2.190 All Winter ??? 1.646 1.497 1.359 - 1.604 Hard Red Winter ??? 1.004 0.776 0.676 - 0.875 Soft Red Winter ??? 0.420 0.504 0.473 - 0.636 White Winter ??? 0.222 0.217 0.204 - 0.226 South American Production May # April USDA # Avg Guess Range of Guesses Brazil Corn ??? 74.000 74.708 73.000 - 77.500 Brazil Soy ??? 83.500 82.807 81.500 - 83.500 Argentine Corn ??? 26.500 25.583 24.000 - 26.500 Argentine Soy ??? 51.500 50.714 48.500 - 51.500

Jeremey Frost

Grain Merchandiser

Midwest Cooperatives

800-658-5535

800-658-3670