Branded Card = Powerful Information

Pat Morgan, Director of marketing

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Competition, high gas prices and a sluggish economy create an imperative for retailers: Find ways to differentiate yourselves from the guys across the street. There are lots of ways to do that, right? The hard part is finding the right formula that makes sense financially and drops money onto your bottom line. That’s issue No. 1. Issue No. 2 is the high cost of swipe fees.

My solution to these two issues: have your own merchant-branded debit card. It helps you build customer loyalty and reduce your cost of payments while providing a treasure trove of information about your customers that can be mined to achieve whatever goals you set.

Having a merchant-branded debit card means you offer customers a payment card that rewards them with a rollback at the pump, usually 5 to 10 cents per gallon. That will certainly bring in new customers, but how do you justify the reward?

Part of the justification comes from displacing high-cost bank-card transactions with a lower-cost transaction. Current swipe fees can cost you anywhere from 6 to 10 cents a gallon, unless you are a really big player who can negotiate lower fees. Having your own debit card will cost you about a penny and a half per gallon. Your customers still have the convenience of a debit card and you have savings with which to help fund their rewards.

Priceless Value

Fastrac Markets, a chain in upstate New York with 44 locations, has had its debitcard program in place since August 2008. “We have grown our customer usage of the card every year since we implemented the program,” says Randy Case, chief information officer of Fastrac. “The value of the program has been in providing our customers with the savings that we would normally pay Visa and MasterCard.”

But the value is so much more than a lower cost of swipe fees. When you have your own payment loyalty card program, you have powerful information about your customers: what they buy, where they shop, when they shop and how much they spend. You have their name, address, email and phone numbers, which gives you the ability to communicate directly with them and provide promotions and other incentives of choice. You learn who is financially trustworthy and who is not. You learn how to use the information to affect customer behavior.

This is information that the banks possess today; when it is yours, you have the opportunity to leverage it. Once you have the information, you have it forever— as long as you keep the customer. You keep the customer by giving them products and services they want at competitive prices. The power of the information is what you should be seeking. You start building a baseline of customer information when you launch your own debit-card payment program that starts with price rollback at the pump, but you gain the opportunity to continuously expand the information set and learning.

Reach Out, Effectively

You don’t have to be a large store operator to achieve tremendous success with your own debit-card program. One of our clients with one location has tied his customer base to Facebook and mobile phones. The company’s standard discount is 7 cents off per gallon, but on certain days it’s 10 cents a gallon. The retailer lets its customers know about the special discount by sending text messages and communicating on their Facebook pages. Sometimes it might be a car-wash special or an in-store promotion. It can do all of this not because of technology, but because the company has the information it needs about its customers and knows how to reach them. The store sold 10,000 gallons on one of the 10-cent-discount days.

Where is this store located? Rural Minnesota. The store has 425 customers who carry its debit card and more than 1,200 people it communicates with on a regular basis.

 A lot of dealers we speak with love their cash. They think it is free (which it is not, but that is a discussion for another time). But cash does not build loyalty or traffic, nor is it a strategic way to grow your business. You don’t have anything to track and build on when your customers pay with cash. Having your own debitcard program is one way to start building customer information that you can use for your own purposes.

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