The Prepaid Press - October 15, 2008 - (Page 22)

RETAIL FOCUS October 15 · 2008 - 22 Promotions Evolve into Must-Have Marketing Strategy for Prepaid Sector By Ingrid Ricks Consumers who purchased a Bass Pro gift card for Father’s Day this year were lured by more than just the promise of a great, personalized present for the sports-oriented man in their life. They were baited with a free miniature tackle box that was packaged with the gift card. The result for Bass Pro? A 27 percent boost in year-over-year gift card sales, averaged across the 2,000 retail locations where the card was sold. “The goal was to make Bass Pro stand out during a very important time for their products and cards, in a gift card mall where there is a sea of 200 cards or in a c-store filled with racks of beer,” explains Mike Skinner, General Manager for Coinstar E-Payment Services, Inc., which markets prepaid cards in retail locations across the country. “More and more, we are challenging gift card providers to find ways of highlighting their card uniquely enough that we can drive consumers to it over others.” But there are also other factors driving the promotions trend. Skinner says in the case of gift cards, it comes down – at least in part – to a maturing market. “If you go back five years ago, the idea of a gift card mall was new and we all experienced growth because there was brand new distribution. But as a category matures, it becomes more challenging to find growth and you have to work harder to get the same mindshare from consumers,” says Skinner. “Many gift card malls – particularly in the grocery chains and large mass merchandisers – will have 200 plus cards on a rack, and that’s a lot of choices for consumers. How does Borders stand out from iTunes? There is certainly more recognition on the part of card providers that it is time for the category to promote it.” Mark Nyer of William Exline, Inc., a promotions company that markets its patented CardBook cardholders to the gift card sector, believes retailers’ growing understanding of the enormous added revenue opportunity gift cards represent is also driving the promotions trend. “I think in the beginning, retailers looked at the breakage on gift cards and saw it as a great way to increase their income,” notes Nyer. “But then stores started figuring out that when people come in to use gift cards, they usually spend a lot more than the actual value of the card. As a result, retailers are now looking at special discount offers and other promotions that will get the gift card holder into the store. “ The Push for Promotions From free gifts and discount coupon offers, to chance-to-win sweepstakes and rewards programs, incentives designed to motivate consumers to buy are emerging as a must-have marketing strategy across the prepaid product sector. Retailers and prepaid product providers alike are struggling with how to move products from shelves and even drive foot traffic at a time when gas and food prices are at an all-time high, and discretionary spending is at an all-time low. For them, promotions are playing an increasingly integral role in enticing consumers to buy. A Variety of Approaches While the goal of driving foot traffic and generating sales is the same across the category, prepaid providers and merchants are taking different approaches when it comes to promotions. For Prepaid Promotions, a phone card provider based in Alabama, the key to selling phone time and generating foot traffic for retailers lies in the line of sweepstakes phone cards the company launched early this year. The five and ten minute sweepstakes phone cards are sold to c-store retailers in rolls of 1,500 and 3,000 cards, and are kept at the register much the same as lottery cards. Each roll has a guaranteed number of winners, which are paid out by the c-store that sells the card. To find out if they are a winner, phone card buyers simply peel the card apart to unveil the instant win message – along with the phone time PIN and instructions. “Many consumers buy phone cards to make a call that lasts five or 10 minutes long, and especially in an economic downturn, if they have an opportunity to win money on a product that they are already going to buy, they will buy that card instead,” says Prepaid Promotions COO Brent Buchanan, noting that his company is already selling more than a million of the cards each month. “Every c-store is looking to drive traffic and get more people into their store, and our product gives that to them,” he adds. “What’s more, the profit margins for the retailer is 30 to 40 percent, including the prize payouts – and that doesn’t figure in that people are spending their winnings at the location. If they win $50 from buying phone cards, they turn around and buy beer, cigarettes and candy, so most of that moneys stays with the retailer.” Nyer says the secret for the retailers he works with is to combine their gift card with his CardBook cardholders, which feature a slot for the prepaid card and can include as many pages of special offers as desired to keep consumers coming back to the store. It’s a strategy that has paid off big for Tichnor’s, a better men’s clothing chain in Ohio. “The book has a different promotion for each month, with the goal of driving people back into the store two, three, or four times a year,” notes President Kevin Chernikoff, who has been using the CardBooks for four years. “Our average sale runs around $427, so when someone comes in with a $25 or $50 gift certificate, they end up spending a lot more.” Prepaid debit card issuers are also getting into the promotions game. Skinner says his company has teamed with Green Dot to offer $10 mail-in rebate promotions that essentially make the card free. But an even bigger trend for prepaid debit cards are merchant rewards and discounts funded by Merchant Discount Networks, according to David Fish, a senior analyst for Mercator Advisory Group. Fish, who recently authored a report on the subject, says that because rewards have become such a necessary part of the value proposition on the credit side, consumers now expect the same on the prepaid side. And he says card issuers are turning to merchant discount networks to fund it. As an example, Fish points to a recent deal by rapid! PayCard and BSP Rewards, in which payroll card holders receive discounts when they shop at merchants featured in BSP’s online mall. “It’s definitely a trend and I think we are going to see more and more because it is the most viable way for prepaid debit card issuers to offer rewards,” notes Fish. Retailers Still Hold Key to Success While promotions now play a vital role in driving prepaid product sales, Skinner stresses that the most valuable component for success still comes down to the retailers themselves. “We (prepaid category) are so unique compared to other products in that retailers don’t have to carry any cost until the product is sold, making it pure margin to their bottom line. But they still have to work hard at getting the consumer mindshare. They have to promote and merchandise and make sure that the racks are stocked and ready to go.” “The bottom line message is that they have to be intimately involved,” he adds. “I tell every retailer I call on that this has to be in their top five corporate initiatives. That means it is important to the clerk, to operations, and to the headquarters group that is establishing this program. That’s what will make it successful.” http://www.prepaidmarkets.com http://www.prepaidmarkets.com

Table of Contents Feed for the Digital Edition of The Prepaid Press - October 15, 2008

The Prepaid Press - October 15, 2008 Oblio Wins Judgment Mobile Remittance Providers Look to Latin America Contents The Retske Report: The Game Changer Regulatory Rundown: New Rules and Requirements Likely for 2009 5 Minutes With Saul Bienenfeld, President of Pop2Call Prepaid Wireless Roundup MetroPCS Sues Virgin Mobile Wireless in Brief Leap’s Cricket Service Introduces Cricket PAYGo Virgin Mobile USA to Launch the Shuttle New Study Shows Mobile Phones Merging Roles TracFone Launches SafeLink Wireless in FL IVI and Titan Sign Agreement with YA Global Boost Mobile Launches New Phone The State of Prepaid Technology: Will the Coming Market Bring You Problems or Opportunities? Calling Cards in Brief The Legal Line Tata Awarded Cisco Powered Status IDT Fails to Meet NYSE Listing Standards BillSoft Offers New Taxation Service Dialogic to Acquire NMS Platforms Business STi Acquires Sprint’s Calling Card Business TelcoBridges Introduces ToolPack System Manager Hypercom Increases Multilane Team Mobile Banking: CGAP Spurs Market Prepaid Resources Introduces PORTABLES Bancorp and Obopay Introduce Payment Card Verities, Inc. Partners with BBB and i2c Inc. The Bancorp Bank Partners with LeagueSafe Donor Dialogue Partners with Springbok Services Mercator Offers New Merchant Report Travelex Launches Budget Calculator MPOWER Companies Join Clinton Global Initiative Payments in Brief Promotions Evolve into Must-Have Marketing Strategy for Prepaid Sector Access Launches Cash-Back Rewards VendTek Partners with United Bank Card Flash Foods, Tedeschi Partner with Pinnacle Prepaid 101: Basics of PINs Gasoline Cards to Benefit Armed Forces, Veterans i2c Inc. Signs Agreement with Diestel iPayStation Partners with Pronto Envios Sodexo Releases Prepaid Incentive Card Heartland Leverages VeriFone Managed Services Retail Focus in Brief Our Advertisers Contact Us

The Prepaid Press - October 15, 2008

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