Social media card overview

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Social media card overview

  1. 1. By Jay Deragon, Dan Robles & Sherman Mohr Social Media Directions, Inc Executive Summary October 25 2010 A New Economic Paradigm The Social Media Card The Value Game
  2. 2. The Social Media Card Executive Summary Page 2 of 10 The information contained in this document is intended only for Social Media Directions, Inc., and is considered confidential client communication and is protected from disclosure. Please be aware that any dissemination or copying of this communication is strictly prohibited. Introduction: Social Media Card Coupons, rebates, and rewards are often called contingency incentives because their value is contingent on the purchase of a product. While the idea is not new, the medium has changed. With the advent of mobile computing and Internet technology, the ability to carry and access an electronic account wherever you go is the most promising medium for the deployment of incentives and rewards. A second major trend is in the area of data collection. Supermarkets have learned that it is valuable for them to “pay” the customer in exchange for data that makes stocking and distribution more efficient. When combined, coupon + data are a tremendously valuable marketing and logistics tool. The next development of coupon + data model is the notion that if a person likes a product, so too will their friends. This is the coupon + data + association model. Not surprisingly, the marketing value of the combination of these linked data increases almost exponentially with the advent of social media. Unfortunately, money, data, and people’s relationships are all sensitive subjects, but when combined they create a witches brew of perils for anyone who seeks to extract value from the activity of others. Everyone fears a viral backlash in social media should there be a perception that someone is getting something from you for nothing. People do not trust banks, insurance companies or government, and hackers will try to exploit any money system that appears to be successful. As a consequence, the frictions of safeguards and regulation as well as social frictions of distrust and hesitation slow the velocity of money down to a crawl. However, the payoff for any business method that can scale the benefits while avoiding these perils is an opportunity too large to ignore, if not a flat-out game changer. The business model described herein proposes a method for achieving scalability by integrating products and services, introducing a vetting mechanism, and empowering an “entrepreneur class” of people to identify, facilitate, and monetize their own social value creation and sharing opportunities.
  3. 3. The Social Media Card Executive Summary Page 3 of 10 The information contained in this document is intended only for Social Media Directions, Inc., and is considered confidential client communication and is protected from disclosure. Please be aware that any dissemination or copying of this communication is strictly prohibited. Understanding Credit to Debit Shifts Debit cards  In 2008, 72 percent of consumers indicated they used a debit card in the past year. In 2007, that number was 65 percent. (Source: Javelin, "Credit Card Spending Declines" study, March 2009)  Debit card usage grew from 2007 to 2008, with 66 percent of consumers indicating they used a debit card in the month preceding the September 2008 survey, compared to 57 percent of consumers in 2007. (Source: Javelin, "Credit Card Spending Declines" study, March 2009)  Only 47 percent of Americans over 65 said they had used a debit card in the month before the September 2008 survey, 19 points lower than any other age group. (Source: Javelin, "Credit Card Spending Declines" study, March 2009)  76 percent of Americans aged 25 to 34 indicated they had used a debit card in the month preceding the September 2008 survey. 63 percent of that age group said that had used a credit card in the same period. (Source: Javelin, "Credit Card Spending Declines" study, March 2009)  71 percent of Americans aged 18 to 24 said that they had used a debit card in the month preceding the September 2008 survey. Just 51 percent of that same age group indicated they had used a credit card in the same period. (Source: Javelin, "Credit Card Spending Declines" study, March 2009)  Top 10 U.S. general purpose debit card issuers (Note: 2007 ranking in parentheses) 1. Bank of America - $224.59 (1); 2. Wells Fargo - $167.30 (2); 3. Chase V/MC - $135.96 (5); 4. U.S. Bank - $34.78 (6); 5. PNC - $30.11 (18); 6. Regions Bank - $22.60 (7); 7. USAA (1) - $21.55 (11); 8. SunTrust - $21.12 (8); 9. TD Bank - $20.59 (29); 10. Citi - $20.22 (9) (Source: Nilson Report, April 2009)  As of September 30, 2008, there were 314 million Visa debit cards in circulation in the United States. (Source: Visa.com)  As of December 31, 2008, there were 126 million MasterCard debit cards in circulation in the United States. (Source: MasterCard.com)  74 percent of monthly college spending is with cash and debit cards. Only 7 percent is with credit cards. (Source: Student Monitor annual financial services study, 2008) Rewards  Visa says rewards cards now make up more than half of all credit cards and about 80 percent of money spent on a credit card. (Source: Aite Group, January 2008)  Consumers say rewards are the second-most important reason for choosing to apply for a specific card, behind no annual fees and ahead of low interest rates. (Source: Aite Group survey, January 2008)  More than one third of consumers choose which card to use in order to maximize card rewards. (Source: ComScore, September 2008)  Two-thirds of survey respondents said they would consider switching their primary credit card if a better feature were offered. (Source: ComScore, September 2008)
  4. 4. The Social Media Card Executive Summary Page 4 of 10 The information contained in this document is intended only for Social Media Directions, Inc., and is considered confidential client communication and is protected from disclosure. Please be aware that any dissemination or copying of this communication is strictly prohibited.  Among customers who said they would consider switching cards based on better rewards, more than two thirds (68 percent) said that cash back would be most influential in getting them to switch. (Source: ComScore, September 2008)  48 percent of credit cardholders use credit cards that accumulate points for merchandise, airline tickets or both. This is up from 25 percent in 2003. (Source: Vertis Customer Focus financial study, May 2007)  Use of general-purpose credit cards containing no benefits has decreased from 38 percent in 2003 to 31 percent in 2007. (Source: Vertis Customer Focus financial study, May 2007)  Credit cards issuing "cash back" incentives were used in 2007 by 30 percent of all credit cardholders, compared to 18 percent in 2003. (Source: Vertis Customer Focus financial study, May 2007)  Today, credit cards are responsible for more than $2.5 trillion in transactions a year and are accepted at more than 24 million locations in more than 200 countries and territories. (Source: American Bankers Association, March 2009)  It is estimated that there are 10,000 payment card transactions made every second around the world. (Source: American Bankers Association, March 2009)  Between 1989 and 2006, the nation's total credit card charges increased from about $69 billion a year to more than $1.8 trillion. (Source: Demos.org, April 2008) Online use  Seventy three percent of survey respondents said they have logged into their credit card and debit card account via the Internet. (Source: ComScore, September 2008)  More than eight out of 10 respondents said that checking their statement online is important to them, which is consistent with results from the 2007 survey. (Source: ComScore, September 2008)  Of adults whom use debit cards for on line and off line purchases females used it more frequently (74%) vs. males (51%) Debit card statistics continue to experience staggering growth with 157.9 MM accounts and 199.0 MM cards in existence. Almost 7 out of 10 (69%) consumer households report that they possess a debit card. More than one-half (53%) of all consumer households use their debit cards to make a retail purchase (online and/or offline) on a monthly basis. And in fact, the average debit cardholder will use their debit card 11.9 times each month and that is without use of rewards.
  5. 5. The Social Media Card Executive Summary Page 5 of 10 The information contained in this document is intended only for Social Media Directions, Inc., and is considered confidential client communication and is protected from disclosure. Please be aware that any dissemination or copying of this communication is strictly prohibited. Consumer Behavior and Coupons The brands that have enjoyed the most success using social media to drive consumers toward purchases follow one of two paths: Either they offer coupons or discounts, or they position themselves in front of consumers during sales or other special events, according to eMarketer. One-quarter of respondents to a survey conducted by Chadwick Martin Bailey said that coupons and discounts were the primary reason they became fans of a brand on Facebook. An additional 21 percent said it was because they were already customers. Another survey, by Morpace, found that 37 percent of Facebook users joined fan pages because they wanted to get coupons and discounts. "Coupons remain a leading driver of brand interactions in social networks," said eMarketer senior analyst Debra Aho Williamson. "At the same time, they can be one of the trickiest social media tactics to pull off. The discount offer must print or download easily and must work as promised. And the retail store or distribution channel must be prepared for demand."Imagine a world without all this madness. If brands would recognize how foolish and wasteful their marketing and advertising schemes are then just maybe they could design a system that favors the consumer who, after all, pays for all this madness with their time, talents, and social treasure. The rise in coupon distribution and redemption on the Internet has increased 92% and consumer redemption of these coupons is up over 360%. As cash-crunched consumers hunt for bargains, companies hope coupons will build loyalty after the recession is over. After nearly two decades in decline, the coupon is back. Thanks to the recession, in 2009 consumers used coupons at a faster clip rate than they did the year before – the first increase in coupon redemption in 17 years, says a new study by Inmar Inc.
  6. 6. The Social Media Card Executive Summary Page 6 of 10 The information contained in this document is intended only for Social Media Directions, Inc., and is considered confidential client communication and is protected from disclosure. Please be aware that any dissemination or copying of this communication is strictly prohibited. Businesses issued 367 billion coupons last year and consumers redeemed 3.3 billion, a 27 percent increase from 2008's 2.6 billion, and the highest usage since Inmar began tracking trends in 1988. Online coupon access increased 92 percent (Google searches for "printable coupons" and "online printable coupons" more than doubled) and redemption of those Internet deals leaped up 360 percent, although the Internet still accounts for only 1.5 percent of all coupons redeemed. The Inmar's study suggests 1 in 5 people who receive an Internet coupon will redeem it. Coupon face values averaged $1.44 for redeemed coupons on-line and off-line. In today’s marketplace numerous business models for on-line marketing are being tested and applied with different levels of success. Marketing models are fundamentally designed to create a “call to action” using different channels and attraction techniques to reach buyers. Whether it be a click through to a brands site or an incentivized offer to “get something” everyone wants the buyer’s attention to engage with their proposition online and off. The Social Media Card business model and related business rules are aimed at creating innovation that creates a market differential (arbitrage opportunities) over existing models and rules currently being applied. …But integration of engagement, coupons and transactions is critical The existing market of advertisers and marketers are quickly realizing the value of using the web as a low cost scalable source for reaching buyers by creating attention and attraction to specific value propositions. With this realization we are seeing emerging business models specifically to the use of coupons, rewards, incentives and loyalty programs which enhance branding and transactions. Brands and merchants are largely relying on their marketing agencies for use of emerging tools and to craft the right message and design of proposed incentives as an extension of “advertising schemes.
  7. 7. The Social Media Card Executive Summary Page 7 of 10 The information contained in this document is intended only for Social Media Directions, Inc., and is considered confidential client communication and is protected from disclosure. Please be aware that any dissemination or copying of this communication is strictly prohibited. Given the “newness” of the medium, the technology and the related channels much of today’s business models are following Google Adsense models coupled with traditional “coupon redemption” models or a variation of both. The best way to describe the current market behavior relative to these models is experimentation followed by innovation brought to market by those observing the experimentation closely. The internet, and all things social, shows three clear trends that provide significant opportunity to those who have technology and relations necessary to capture them. These trends include: 1. Affinity to people, brands and organizations are now focused on local, the last mile of social media. 2. Monetization of all social activity is moving to saving, sharing and local community support. 3. Social commerce is creating new currencies, which are fueled and controlled by buyers rather than sellers. 4. Integration of engagement, rewards and transactions Marketing Strategy The marketing strategy for any vertical or affinity group is the same for each. Each vertical or group represents a value exchange that provides consumer solutions for engagement with groups, fan pages and communities on-line and off line.. Co-branding of The Social Media Debit Card would be an approach that each group would have to consider based on cost, revenue sharing and inclination for brand recognition. Co-Branded opportunities would ensure accelerated marketing and subsequent adoption of The Social Media Card.
  8. 8. The Social Media Card Executive Summary Page 8 of 10 The information contained in this document is intended only for Social Media Directions, Inc., and is considered confidential client communication and is protected from disclosure. Please be aware that any dissemination or copying of this communication is strictly prohibited. Financial Analysis of the Social Media Card The Social Media Card makes money from use of the game by the participants. The economic driver of the game is the debit card platform. Revenue comes from multiple transactional points driven by buyers and sellers. A full analysis of chosen host should be done relative what drives the economics of the debit card platform by adoption rates and audience size. . The economics of The Social Media Card are driven by multiple variables. The variables that determine the final net gains to the host include: 1. Size of audience 2. # of merchant offers 3. Relevant knowledge about using social technology effectively 4. Marketing aimed at audience awareness of the value proposition 5. # of times each audience member plays the game. i.e. takes and uses relevant offers and gains points for usage 6. Use of the game on mobile devices 7. Word of mouth spread by the audience
  9. 9. The Social Media Card Executive Summary Page 9 of 10 The information contained in this document is intended only for Social Media Directions, Inc., and is considered confidential client communication and is protected from disclosure. Please be aware that any dissemination or copying of this communication is strictly prohibited. 8. Integration into relevant Fan pages and on-line communities 9. Relevancy of the offers to the audience 10. The effectiveness of related online and off line campaigns These are just a few of the relevant variables that drive the economics for the host of the value game using the debit card platform. There are other variables based on the design of value offered by the host through the debit card platform. The bottom line is that there is very little if any down side to initiating the value game for any large affinity group wishing to get ahead of the social media game by leveraging innovation that drives economic gains. The Economics The following summarizes the basic economics of the Social Media Card: 1. Cost of card to consumer: $0 2. Cost of coupon to consumer: $0…..vs. average value received between $5 - $100 per month 3. Cost to merchants for each downloaded coupon by consumer: $0.75 4. Agency fee per downloaded coupon .15% paid out of #3 5. Revenue share to card host or affiliate: Negotiable based on previous variables described Example scenario per 100,000 Card users who download only 5 coupons per month, industry average is 11. Revenue Share to card host or affiliate: $50,000 - $100,000 per month Agency revenue: $45,000 - $55,000 per month The Social Media Card provides on-line user, merchant and affinity host and interface with real time reporting of adoption and usage. The host and brands also have the ability to build custom messaging campaigns direct to consumers, via email, mobile and social media outlets, relative to offers and rewards to consumers. Consumers can point and click offers that get automatically added in real time to their card with relevant notifications. The Social Media Card is a VISA Debit Card and thus recognized nationally at all retail outlets, ATM machines, on-line stores and banks. .
  10. 10. The Social Media Card Executive Summary Page 10 of 10 The information contained in this document is intended only for Social Media Directions, Inc., and is considered confidential client communication and is protected from disclosure. Please be aware that any dissemination or copying of this communication is strictly prohibited.

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