Discover Horizon Newsletter Winter 2011


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Although this past year had its challenges with legislative issues and a slow economy, 2011 appears to have some exciting opportunities on the horizon. Using new advances in technology, Discover will continue providing you with the latest products and services. Be sure to read this issue’s articles on our latest innovations in mobile commerce, including Isis,™ Discover® Zip® and the Marketing Platform.

As we all know, loyalty is a key driver of your business. At Discover, we strive to help you attract and maintain loyal card members. Co-brand and private label programs are two areas that can increase brand awareness and customer loyalty. We have included some information about Discover product capabilities and asked Auriemma Consulting to give us their perspective on these growing markets.

In this issue:

* Mobile Marketing — Timely, Relevant and Empowering
* Suite of Products to Enhance Loyalty
* Joint Venture to Build National Mobile Commerce Network
* Discover Orange Bowl

Learn more about Discover's solutions for credit unions at

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Discover Horizon Newsletter Winter 2011

  1. 1. SM Brought to you by Discover ... your partner in payment services Issue # 3 • WINTeR 2011Welcome to Horizon SM Creating Maximum Value Card Programs As the new year Leveraging technology to build loyalty in credit card partnerships begins, I would By Bob Taglin, Director, and Eric Marks, Managing Director, Auriemma Consulting Group, like to take this Alliance Development Practice opportunity to Customer loyalty in the card cardholder segments. With thank you for your space, like in all industries, financials as tight as they continued interest can and does mean many are today, however, the in our publication. things. In co-brand or private ability to impact customer I hope you find label card partnership loyalty through the traditional it valuable and programs, creating, building levers has been constrained. insightful. and maintaining customer loyalty is all about There is a need for alternate approaches toAlthough this past year had its the ability of the partners — bank, brand attracting customer enthusiasm.challenges with legislative issues and and network — to work in lockstep to create One area of significant but still untappeda slow economy, 2011 appears to maximum value card programs for its mutual potential is the use of emerging technologieshave some exciting opportunities on customers. If done right, cardholder loyalty to positively impact the customer experiencethe horizon. Using new advances in will increase, and the partnership will reap and attractiveness of a program. Technologytechnology, Discover will continue many benefits, specifically increased brand can drive customer loyalty by improving theproviding you with the latest products product sales, higher credit card usage and convenience and functionality of the card. Itand services. Be sure to read this tenure, and a profitable card program. can also help generate buzz, attracting theissue’s articles on our latest innovations But what happens when the economy turns ever-growing market segment that enjoys ™in mobile commerce, including Isis, downward and government legislation affects the “cool” new features of the digital andDiscover Zip and the Marketing ® ® the way banks do business? The impact wireless age.Platform. has surely been felt in the economics of Most of the card industry is focused onAs we all know, loyalty is a key driver cardholder partnership programs: bank P&Ls mobile technology; some are taking action,of your business. At Discover, we strive are tighter, cardholders may be offered fewer others are taking a “wait and see” help you attract and maintain loyal rewards, and loyalty will suffer. Contactless cards are already in the marketcard members. Co-brand and private What to do? and RFID-enabled stickers (to be adhered tolabel programs are two areas that mobile phones or other personal devices) are Traditionally, loyalty levers that drive a cardcan increase brand awareness and currently being tested. Mobile applications partnership deal include:customer loyalty. We have included allow cardholders to manage their bank • Financial contribution from the bank tosome information about Discover accounts using their smartphones, though the brand (typically royalties, bounties,product capabilities and asked the penetration of these apps has been fairly marketing support)Auriemma Consulting to give us their limited to date. It remains to be seen whether • Credit card product (pricing, annual fee) these tools will generate significantly strongerperspective on these growing markets. • Value proposition (brand partnership and customer loyalty in the co-brand or privatePlease continue to provide us with your related rewards) (continued on page 2)comments and ideas. We look forward • Customer serviceto sharing more exciting informationwith you in the year to come. • Credit risk policy (FICO, approval rates, IN THIS ISSUE credit lines, etc.) Mobile Marketing — Timely, RelevantBest Regards, In the current environment, all levers will and Empowering.............................................. 2 need to be explored for opportunities. Bank Suite of Products to Enhance Loyalty.................... 3 and brand agreements will emphasize profit- Joint Venture to Build NationalKevin O’Donnell sharing arrangements where partners will Mobile Commerce Network .............................. 4Group Executive, Credit Issuance “live or die” together. Reward platforms Discover Orange Bowl ..................................... 4 will be even more customized for profitable Did You Know? ............................................... 4
  2. 2. Creating Maximum Value Card Programs (continued from page 1)label space. Other mobile initiatives offering potential for loyalty largely available for use by the parties involved.impact will require significantly more definition, development In the partnership marketplace, all key loyalty levers must beand investment. utilized, but mobile technology has “game changing” potential,ACG believes that mobile applications may present the best particularly in a tight economic environment in which customernear-term opportunities to drive cardholder loyalty, as well as loyalty is all the more important, but which requires creativitygenerate card and brand product spend. An example is location- to drive. nbased services, which would leverage a mobile phone’s GPS The views expressed in the preceding article are those of Auriemma Consultingcapability, enabling banks to identify (based on the location Group, and do not necessarily reflect the views of Discover.of the phone) the exact shopping location of their cardholders. About Auriemma Consulting GroupThis creates a potential new marketing channel with a simple Auriemma Consulting Group (ACG) is a full-service management consultingmessage: “Take advantage of a deal in the store you are in right firm serving the payments and lending industries since 1984. With offices innow.” Participating cardholders would receive text message New York and London, ACG’s Alliance Development practice helps companies create payment and lending partnerships that deliver long-lasting value. Weoffers of co-brand or private label bonus points, general work across the partnership lifecycle helping our clients to understand, plan,store discounts and/or free gifts from the store they are in or structure, select, negotiate, and manage successful partnership agreements.from nearby merchants. New card-offered features could be Bob Taglin, Director Bob is a director and a long-tenured memberdownloaded by cardholders. The potential capability to provide of ACG’s Alliance Development practice.relevant offers in real time is an exciting one to both cardholders Eric Marks, Managing Directorand co-brand or private label partners. Furthermore, the Eric leads ACG’s Alliance Development practice.barcodes and magnetic stripe technologies required are alreadyMobile Marketing — Timely, Relevant and EmpoweringBy Joyce Chen, Senior Loyalty Manager, Discover NetworkMobile phones, once considered a luxury, are now among gain new customers, increase customer loyalty and cross-sellthe most common personal items that an average American products. More efficient targeting typically leads to improvedcarries. Today, over 240 million Americans, ages 13 and older response rates and reduced costs. Because mobile offerhave mobile phones, and close to 20% have smartphones. campaigns are real-time digital campaigns, they can be quicklyAs the capability of mobile phones continues to improve, we adapted to changing market conditions.are witnessing their utility expand beyond the traditional role Improved, real-time analytical data allows companies to predictof voice and data into the realms of payment and commerce. and measure responses to a campaign more reliably. MobileMobile phones provide the opportunity for more targeted provides superior authentication and therefore can be usefulinteractions, using consumer preferences and behavior to reach in checking the rapid proliferation of discount offers, as inout to consumers in real time. the case of offers distributed on the Internet. Better responseAccording to a Firethorn Consumer Survey conducted in predictability ensures that the outcome and performance of aFebruary 2010, 85% of consumers said that they like to be digital campaign can be predicted with more confidence (loweron top of their finances daily, and three-quarters (76%) wish variability from forecast), leading to more confidence on thethere was an alternative to carrying around a wallet stuffed part of content providers in mobile as a channel for new offers.with cards, money, offers, coupons, etc. Strong evidence Discover Network used a customer-centric approach to developfrom a recent Mobile Money Study suggests that over 60% our loyalty product concept. In our view, the mobile solution isof consumers want mobile commerce capabilities and would not just about delivering an offer … it must be accompanieduse them frequently. Currently, the majority of mobile activities by the right type of offers, a set of tools and payment vehicles,circle around consumers seeking information (e.g., shopping and delivered with the right type of communication mechanisms,confirmation, order status, store hours), but more consumers are integrated and delivered on a real-time, relevant basis.beginning to use mobile phones to actually perform “commerce” Most experts agree that mobile commerce will be the futuresuch as comparison shopping or looking for deals. of payments and the key to delivering loyalty. At Discover,Card issuers are in a position to use mobile commerce on we believe that both mobile and contactless cards will continuea personal level to build deeper engagement and long-term to evolve into fully mobile tools as technologyloyalty. Mobile marketing can be used to increase revenue, continues to advance. nbuild stronger brand images and provide insight intocustomer preferences.The unique nature of mobile phones can also greatly enhancetarget-marketing efforts. Campaigns can be customized to 2
  3. 3. Suite of Products to Enhance LoyaltyThe race to drive customer loyalty and revenues today behavior/segmentation data, to determine what is the rightcenters around new ways to create value. As your business offer to send to them via the right channel. The Marketingpartner, we have created a variety of value-added products Platform will not change the offers, but it makes these offersthat center on the key to this strategy: using value-added much more targeted and delivers them in a way that makesservices to drive loyalty. sense to the consumer.Private label card products are branded with a Discover® Zip®, an innovative payment solution thatmerchant brand only and are only accepted at proprietary enables fast, secure transactions via contactless technologymerchant locations. Although the card has no utility beyond is back and now better than ever. Customers simply placethese specific merchant locations, it can provide many ways a Zip-enabled device near a Zip contactless reader toto introduce new card features, including make a payment and be on their way.innovative payment and rewards Merchants can increase volume andprograms. Discover’s Private Label Plus encourage customers to keep comingadds functionality to the standard private back by speeding them through theirlabel program by supporting instant checkout, merchant acceptance filtering, Recurring Payments with a creditpromotional financing, in-store payments, card or debit card helps consumersaccount look-up and maintenance. simplify their lives and better manageCash Over is an exclusive feature of their finances by automating paymentDiscover cards that allows cardholders of recurring or installment get cash back with their purchase Research showswithout a PIN and with no transaction that consumersfees. It is designed to increase customer reward theirconvenience and build credit andmerchant loyalty. Research debit Recurringshows that loyal shoppers Paymentsincreased their shopping trips billers withwith a participating merchant longer account17% year-over-year after retention andthey tried Cash Over. More lower customerthan 33,000 supermarket, service costs.warehouse club, dollar Co-brandedand other retail locations credit cardsnationwide offer Discover® feature the merchant brand on the card and areCash Over – with thousands accepted everywhere a general-purpose card isof new locations coming soon! accepted. For instance, the Walmart® Discover®Marketing Platform co-brand card is accepted not only at Walmart,delivers the key ingredients of but also everywhere Discover cards are accepted.a loyalty solution: timeliness, Co-branded cards can drive usage and buildrelevancy and empowerment. Our Marketing Platform is awareness. With our extensive resources andan intelligent decisioning engine designed to deliver a suite collaborative way of doing business, we can shapeof loyalty solutions to consumers. Its flexible architecture a co-branded card product around the specific needsallows you as an issuer to easily create customized, targeted and goals of any business.campaigns, and at the same time provides instant consumer Contact your Discover Networkinsights that can trigger communications. Relationship Manager for detailsMarketing Platform is about more than offers, coupons on these products and more. nor rewards. It is designed to take these loyalty pointsolutions, run them through an advanced analyticalengine, and on a real-time basis, interrogate consumer’s 3
  4. 4. Joint Venture to Build National Mobile Commerce NetworkAT&T Mobility, T-Mobile USA and Verizon Wireless are hard that ultimately eliminates the need for consumers to carry cash,at work building their joint venture ISIS,TM a national mobile credit and debit cards, reward cards, coupons, tickets andcommerce network that will fundamentally transform how people transit passes.” says, pay and save. Founding members AT&T Mobility, T-Mobile USA and VerizonIsis’s initial focus is building a mobile payment network that Wireless collectively provide wireless services to more than 200utilizes mobile phones to make point-of-sale purchases. By million consumers who will have access to the Isis service. Isisutilizing smartphone and near-field communication (NFC) is working with Discover Network, currently accepted at moretechnology to modernize the payments process, Isis will than seven million merchant locations nationwide, to develop andeliver new levels of competition and value to consumers and extensive mobile payment infrastructure for the joint venture.merchants. Isis expects to introduce its service in key geographic Barclaycard US, part of Barclays PLC, is expected to be the firstmarkets during the next 18 months. issuer on the network, offering multiple mobile payment productsMichael Abbott, Chief Executive Officer of Isis and a veteran to meet the needs of every services executive with extensive experience in “We believe the venture will have the scope and scalethe payment and technology industries, seems confident necessary to introduce mobile commerce on a broad basis.that the new mobile commerce network will successfully use In the beginning we intend to fully utilize Discover’s nationalexisting merchant relationships to provide an enhanced, payment infrastructure as well as Barclay’s expertise inmore convenient, more personalized shopping experience for contactless and mobile payments,” said Abbott. “Movingconsumers. “While mobile payments will be at the core of our forward, Isis will be available to all interested merchants,offering, it is only the start. We plan to create a mobile wallet banks and mobile carriers.” nDiscover Orange BowlIn the last issue of Horizon, we announced our four-year, five-gamedeal with ESPN and the Orange Bowl Committee which includesthe 2013 Discover BCS National Championship Game. The firstDiscover-sponsored Orange Bowl was held on January 3, 2011.It was one of the top five most watched college football games inESPN history with 10.7 million viewers. n Did You Know? 2011 Sweepstakes Discover is now offering the 2011 Discover Sweepstakes. Upcoming Industry Events Talk to your Discover relationship manager to find out how • WBA/FIPCO Bank Executives Conference, to participate. February 7–9, 2011, Pfister Hotel, Milwaukee, WI Discover Spending MonitorSM • NAFCU Strategic Growth Conference The Discover Spending Monitor now captures data (National Association of Federal Credit Unions), specific to consumers from the credit union March 15–17, 2011, Ft. Lauderdale, FL demographic. Check out the latest release at • 23rd Annual Card Forum & Expo, April 27–29, 2011, Miama Beach, FL NHL Sponsorship Increasing brand awareness with NHL sponsorship If you have any article topics that you In an effort to build consumer awareness, Discover is would like to see included in Horizon, expanding its sponsorships. Discover is now an Official Partner please contact Jodi McCullough, of the NHL® in the U.S. for 2011. This sponsorship includes Credit Issuance, at NHL All-Star Weekend, NHL Winter Classic, NHL Awards™ and the NHL Entry Draft. As part of the deal, Discover has also become the presenting sponsor of the NHL All-Star Game. © 2011 DFS Services LLC 4