The Prepaid Press - March 2009 - (Page 18)

GIFT CARDS & PROMOTIONS March 15 · 2009 - 18 Prepaid Consumer and Employee/Partner Incentives Delivering Value in a Market of Challenges and Opportunities By Brent Watters reward that would best motivate them. Mercator Advisory Group estimates that Corporate and Consumer Incentives collectively represent the second largest open-loop prepaid market segment at $6.7 billion. Prepaid cards compete with a long-established universe of tangible, experiential and symbolic rewards in this market. Some critics, primarily providers of traditional merchandise rewards, argue prepaid cards are no better than cash and deliver little or no memory or trophy value. These detractors offer a simplistic view of prepaid cards, declaring them merely as an effective replacement for cash and paper-based rewards (vouchers). What is omitted is the real value proposition prepaid cards offer and the features and functionalities that drive today’s prepaid offerings. For example, the use of restricted authorization, which enables clients to strategically direct cardholder purchasing to a selected merchant or group of merchants, is allowing for very tarA: “One could only wish,” simply answered Spencer Toomey, Vice President of The Corporate Marketplace, a high-end luxury incentive merchandise provider. Today’s weak economy is expected to negatively impact certain incentive programs, primarily employee and partner incentives, with few participants qualifying for rewards and the value of the awards being reduced as companies work to keep budgets in check. That said, it’s also anticipated that more money will flow in the direction of sales and consumer incentive programs with companies seeking to drive business growth. Regardless of the type of program, companies demanding highly targeted and cost effective incentive programs are turning to prepaid cards to meet their objectives because of the products cost effectiveness, ease of implementation and added benefits. According to a 2008 study by the Incentive Retail Federation (IRF), when asked how they planned to modify their merchandise, non-cash incentive and award mix in response to the current economy, planners of incentive programs ranked the increased usage of prepaid cards highest on their to-do-list. This indicates that companies are beginning to realize the value of the cards and their ability to drive centralized analytics and reporting, deliver solid one-to-one communications that strengthen relationships and improve upon loyalty and deliver other measurable results. “Prepaid Consumer and Employee/Partner Incentives: Delivering Value in a Market of Challenges and Opportunities,” by Principal Analyst Brent Watters, is the latest research report from Mercator Advisory Group. This report provides an overview of the Consumer & Employee/Partner Incentive market, identifies key stakeholders, explains the complex corporate market structures that must be considered when going to market, outlines the size of the prepaid incentive card segments and discusses the effectiveness and feature functionalities of today’s prepaid offerings that make them a powerful incentive product. Mercator Advisory Group intends to follow up this report in the future with a drilldown that provides a greater explanation of executable strategies and reviews opportunities within the space. For more information on this report, call Mercator Advisory Group at 781.419.1700 or email info@mercatoradvisorygroup.com. Brent Watters can be reached at bwatters@mercatoradvisorygroup.com. When prepaid cards were first introduced over ten years ago as mechanisms for delivering rewards and incentives to diverse groups of recipients, it was questionable whether the products would gain the needed market acceptance to evolve from a novelty item to a mainstay mechanism. While incentive cards of all types had been on a slow adoption curve with traditional buyers having experimented with the vehicle, the market has shifted to more rapid growth in recent years with many corporate users citing the cards as the most effective vehicle for providing rewards and incentives. The rate of growth and market acceptance of prepaid applications in the reward, recognition and incentive market is amazing by any measure. Key drivers behind the adoption have been the increased market familiarity with prepaid card applications and consumers’ growing preference for plastic over paper-based payments. Mercator Advisory Group has determined that 2007 load on all prepaid incentives, (open and closed, Consumer & Employee/Partner) amounted to $17.6 billion, a 22.7% increase from 2006 ($13.9 billion). The Incentive Federation Inc. (IFI) estimates that $46.08 billion was spent in 2007 on travel and merchandise rewards and incentive related products, programs and services in the U.S. It is likely that the actual market size is greater than the IFI’s figure because it underestimates additional spending by smaller companies and does not account for spot reward and other employee recognition purchases that are made independently, outside of a company’s purchasing process. The growth of closed-loop cards in the space is continuing at a modest pace, while open loop implementations are growing rapidly, especially as more companies move towards allowing end users to make choices in the actual gift itself. Network branded solutions offer greater flexibility over closed-loop implementations in enabling recipients to decide and choose the The rate of growth and market acceptance of prepaid applications in the reward, recognition and incentive market is amazing by any measure. geted, personal incentive plans with personalized reward choices. Also, there is the ability to effectively brand the products and capabilities that enable program managers to integrate strategic communications into every aspect of an incentive program. Prepaid cards by their very nature also provide an electronic footprint that generates rich cardholder data that can be leveraged to enhance programs, identify strategic partners and potentially offset costs associated with program sponsorship. Granted, some program sponsors have switched from offering merchandise to offering the cards, but this is not to say that the products will result in a decrease in the sale of merchandise as rewards. Because prepaid cards serve as the bridge to the actual reward, the usage of the cards simply shifts the purchase of those items back into the retail environment. This shift, however, does not bode well for providers selling merchandise direct to program sponsors. The presence of prepaid in the incentive marketplace is being felt by merchandise providers who continue to lose market share to prepaid products. This is made apparent by one merchandise provider’s response in ManageSmarter’s 2007 Incentive Industry Roundtable Q&A article. Q: “Gift cards (prepaid) have been booming for years. Are they starting to reach a saturation point?” http://www.dvrg.com http://www.dvrg.com

Table of Contents Feed for the Digital Edition of The Prepaid Press - March 2009

The Prepaid Press - March 2009 Contents The Retske Report: A Disconnect in Connecticut Regulatory Rundown 5 Minutes With Brooks Smith, CEO of InComm TracFone Launches SafeLink Wireless in NY iPayStation Enables International Top-Up Comverse Launches Next-Generation IMS Solution Prepaid Companies Agree to Pay $2.25 Million Prepaid Telecom in Brief Boost Mobile Reintroduces Itself Virgin Mobile Announces New Branding Campaign The State of Prepaid Technology: Becoming a Virtual Operator Prepaid Wireless Roundup New Prepaid Calling Plans from Verizon Wireless The Legal Line Jobless Benefit Debit Card Usage Debated InsurCard Provides Catastrophic Relief Solution Metavante, Monitise Americas Launch Text Banking TransCard Provides Personal Financial Management Walmart to Help Americans Manage Finances Payments and Processing in Brief Prepaid Consumer and Employee/Partner Incentives CashStar Launches Interactive Gift Card Platform VIPGift Continues Sales Expansion Pentagon Installs Unique Card Personalization Line Digital Promotions Grow in Popularity The Ultimate Gift Card Network Retail Sales Show Unexpected Rebound Smart Transaction Systems Selects Hypercom GiftCards.com Acquires Swapagift.com InComm Gaming Opportunities on the Rise VCT Adds Equipment to New Jersey Facility Gift Cards and Promotions in Brief Our Advertisers Contact Us

The Prepaid Press - March 2009

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