The Prepaid Press - July 15, 2008 - (Page 4) PREPAID BUSINESS July 15 · 2008 - 4 THE RETSKE REPORT By Gene Retske Bad Times, Good Opportunity? There is a lot of discussion about the slowing US economy. Economists and (gasp!) politicians are arguing about whether this is really a recession. The talking faces battle it out nightly on the news programs, selling doom and gloom, or skepticism about the state of the US economy. What we have probably can’t be called a recession if the technical recession is two straight quarters of negative growth. So far, we have not even had one quarter of negative growth, so whatever it is that is going on, is not recession by the definition. Although we are not technically in a recession, there are signs of slow growth, and no one can deny there are ominous signs. Since the state of the economy is more perception than reality, the dialog that continues 24/7 in the media has clearly had an impact on some consumer groups. Consumer confidence is highly sensitive to such “chatter” about the economy. So, what is the likely impact of a slowing economy on the prepaid industry? The answer is good news and bad news, depending on what products and what markets you are serving. Slowdowns are never good for retail sales, but, a tightening economy has provided opportunities in the past, sometimes significant opportunities, for those providing prepaid services. THE BAR JUST GOT RAISED TURNKEY ELECTRONIC POS We are excited to announce the opening of our state of the art customer support center; over 50 dedicated professionals to be your back office with an unparalleled level of service. • Customer Support • Customer Set up/Training • Proactive Customer Retention • Back Office Accounting • Product Management • Terminal Management • Electronic Airtime • Integrated Long Distance • Bill Payment • Stored Value • Cross Border • Global Roaming Recipient of "2008 TSP of the Year Award" from Boost Mobile AGENTS WANTED 212.219.2220 sales@prepaypoint.com Built EXCLUSIVELY on distributor alliances Come Visit Us in Booth 1101 at The Prepaid Press Expo. August 19-21, Caesars Palace, Las Vegas Let’s look at a couple scenarios. It probably goes without saying that a weakening economy means that some consumers will max out their credit cards. There has been a lot of discussion lately about the credit crunch, and it is true that the amount of money available for funding credit card accounts has been reduced. Some consumers have had their credit lines reduced, or are at the maximum. There are many things that have to be paid with credit cards, so ATM cards and prepaid debit cards may see additional sales as consumers who have lost access to credit cards may look for alternatives. This could represent a new business opportunity for some debit card issuers, if you tune and adjust your marketing message and target audience accordingly. For example, summer vacation season is in full swing, and while it is possible to travel without a credit card, it is very inconvenient. Prepaid debit cards with some vacation incentives could be a good fit. The key will be to create a product that will attract summer vacationers, and offer benefits to make their travel more convenient and affordable. There are other examples as well. We all know that most taxpayers will be getting tax rebates in July. Many retailers have recognized that $168 billion worth of tax rebates is a target worthy of a concerted effort. So, some enterprising retailers have tried to assure themselves a good chunk of the business by offering consumers incentives for spending the money in their establishments. One very effective promotion used by retailers, supermarkets and home centers was to give the consumer 110% of the value of the rebate check on a debit card or gift card tied to that retailer. This is very attractive to the consumer because it gives them a bonus on the tax rebates. Those who have been in the prepaid calling card business know that there is no hard and fast rule regarding how they fare during a slow economy. On one hand, tighter money depresses retail across the board, so some people may curtail calling to help control expenditures. On the other hand, budget conscious consumers may look for alternatives to long distance calling. The prepaid alternative, if properly promoted to the right target audiences, might find new markets. Many landline telephone customers are unaware that there are lower cost alternatives to Direct Distance Dialing that will not require a deposit. As a bonus, if they make any level of international calls, they can probably cut that cost considerably. Again, the key is to identify and attack the markets that might be looking for ways to reduce expenditures. The same applies to wireless callers. They may find themselves unable to continue the contract, or without a credit rating to get a contractual service. They will turn to prepaid to keep their service going. Traditionally, high gas prices have increased calling of all kinds, as users turn to the telephone to save gas. Both calling cards and wireless can benefit from this. A slight change in marketing in these times might find new users who spend their money on calling instead of gasoline. The bottom line to this is that hard times, if that is what we are really into, do not have to be bad for prepaid businesses. There are opportunities galore out there, regardless of the economic environment. The key is to look for what your product offers, and how it may help beleaguered consumers to stretch their dollars.
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