Innovative online digital services and devices increasingly affect everyday life. We communicate with friends and business partners through social network services such as Facebook, LinkedIn, Twitter and Flickr. Macs, iPhones and iPods are brought on the subway, to the gym and to school. Computer and video games have become a social phenomenon with games such as Singstar, Guitar Hero and Buzz, and online gaming is becoming mainstream entertainment. In fact, according to the Entertainment Software Association (ESA), the average US gamer is 35 years old and 40% are women.
Banks and card issuers in the US have adapted to these habits and launched credit cards that both subsidize monthly subscription fees for online games through card use, and that give bonus points redeemable as iTunes music downloads. Nordic card companies, however, have yet to realize the full potential of digital content and the gaming industry.
World of Warcraft Visa
To illustrate, in May 2007, Blizzard and First National Bank released the World of Warcraft Visa card. World of Warcraft is the world’s leading MMO (Massively Multiplayer Online game). The MMO market, measured in terms of estimates for active player accounts, doubled in size from January 2005 – January 2008. Estimated active player accounts for World of Warcraft as of January 2008 surpassed 10 million worldwide, with 2.5 million in the US, according to statistics provided by mmogchart.com. This is an enormous customer base with the majority being potential cardholders. Furthermore, the main revenue driver for World of Warcraft is automatically renewed subscriptions paid for on a monthly, quarterly or biannual basis. This provides a minimum card spend of USD 13-15 per month – or USD 156-180 per year, depending on the payment plan, for an active player who charges his game account to the card.
The World of Warcraft Visa card provides a 1% cash back bonus redeemable in playing time, and the first purchase made with the card rewards the cardholder with one month of gaming (value USD 15). There is no annual card fee, a 6-month 0% APR introductory offer, and the player currently can choose among 13 game-related images for the card’s visual design.
Entropia Universe
The Swedish software company MindArk has designed the virtual universe Entropia, an MMO marketed as “The first virtual universe with a real cash economy”. The games uses a currency called PED (Project Entropia Dollars), which is exchangeable for USD at a rate of 10 PED = 1 USD. Players can purchase items and services in the game using PED acquired through playing the game or by purchasing the virtual currency using real world money. Similarly, the player can sell items and services in the game for PED – and exchange the virtual money for real world money, which can be transferred to an international bank account.
For a time money could be paid out in cash at ATMs through Entropia Universe Cash Cards issued by CardOne Plus, available for purchase inside the game, but the product was suspended in January 2007 due to problems on CardOne Plus’ end. Rumors have since persisted of a new MasterCard-branded card in development, possibly a prepaid card.
UPDATE: 18 March 2009: The Swedish Financial Supervisory Authority has granted a license to conduct banking activities to Mind Bank AB, a wholly owned subsidiary of MindArk PE AB. Mind Bank will be the first bank that fully incorporates real money transactions with activities in a virtual world. According to the press release, Mind Bank will function as a central bank for all virtual worlds in the Entropia Universe, but also offer services to customers on the conventional market.
Opportunity: Funcom
The Norwegian game developer Funcom has created several MMOs. The most recent release with the highest number of players is Age of Conan, which was launched in May 2008. At one point, Age of Conan had 700,000 accounts, but attrition has been higher than expected, and an estimate at the beginning of 2009 is 100,000 active accounts. It remains to be seen whether Funcom can reverse the trend for Age of Conan, but the company has a new MMO under development, The Secret World.
Both of these MMOs could represent opportunities for card companies in the form of a co-branded card program inspired by the World of Warcraft Visa card. Card companies could also investigate the prepaid subscription products sold through retail outlets for MMOs, which are targeted at young players without access to credit and debit cards required for online payments options.
This article is an excerpt from the report Nordic Card Trends and Opportunities 2009-2010.
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Monday, March 16, 2009
Tuesday, February 24, 2009
New marketing law
Norway’s revised marketing law comes into effect on 1 June 2009. After attending a seminar organized by the Consumer Ombudsman in Norway, we conclude that telemarketers will face new hurdles, while three interesting opportunities arise: contests, coupons and bargain gifts.
The marketing law governs marketing, business practices and documentation requirements, and applies primarily to activities directed towards consumers, but also contains a chapter on protecting the interests of businesses. The revised marketing law replaces the current marketing law of 1972, and incorporates elements from EU directives – including a “black list” of marketing activities that are banned.
The black list contains activities related to unfair business practices, with emphasis on “misleading” and “aggressive” practices. For example, it is misleading to employ certificates or quality or environmental brands without fulfilling requirements and attaining necessary permissions to use them. Aggressive practices can, for instance, be creating false impressions that a consumer has won something, when there is no prize involved – or the reward requires costs for the consumer.
Telemarketers face increasing regulation. The weekend is declared a telemarketing free zone, which confines telemarketing activities to 09:00-21:00 Monday through Friday. Computer assisted calls will no longer be permitted, to prevent “no voice on the other end” cases, which have been a cause for distress among some consumers. There will also be stronger information requirements for telemarketers, and most importantly, consumers will have to provide written consent to telemarketing sales. The format of the consent could be e-mail, SMS, fax or some other form of communication, as long as the format supports the necessary information requirements.
The most visible changes to consumers will likely be three elements that are strongly regulated in the current law, but which have been omitted or moderated in the revised marketing law. These are contests, coupons and bargain gifts (Norwegian “tilgift”).
Contests with random winners are not allowed in the current marketing law, only skill-related contests. This helps explain why we have quiz questions in commercials and TV shows with questions such as “How much is 2+2?” or “What is the prime minister’s name?” When the new law comes into effect in June 2009, this requirement is forfeited – and we will be spared the ridiculously easy questions designed to circumvent the current law.
Coupons are an interesting area, as they can assume many formats – not just the old “cut the piece from the newspaper” variant some associate the word with. To which extent will coupons be virtual, and how will they be distributed? SMS is a viable channel, and mobile ticket solutions already exist in the Norwegian market, provided by the mobile marketing company InCent.
Bargain gifts may well represent the most interesting change. A bargain gift is essentially a bundled additional product provided along with the main product you purchase. In the current law, there is a requirement that a bargain gift needs to be associated with the main product, for instance a bargain gift t-shirt along with a pair of jeans is accepted, while a CD is not. This requirement becomes obsolete with the new law. In theory, we could see cars being bundled with apartments, credit cards bundled with iPhones, household appliances with a new mortgage (there’s an incentive to switch banks!), or movie tickets to go with flowers for your date.
The new marketing law comes into effect 1 June 2009. Marketers, get ready, set… go!
The marketing law governs marketing, business practices and documentation requirements, and applies primarily to activities directed towards consumers, but also contains a chapter on protecting the interests of businesses. The revised marketing law replaces the current marketing law of 1972, and incorporates elements from EU directives – including a “black list” of marketing activities that are banned.
The black list contains activities related to unfair business practices, with emphasis on “misleading” and “aggressive” practices. For example, it is misleading to employ certificates or quality or environmental brands without fulfilling requirements and attaining necessary permissions to use them. Aggressive practices can, for instance, be creating false impressions that a consumer has won something, when there is no prize involved – or the reward requires costs for the consumer.
Telemarketers face increasing regulation. The weekend is declared a telemarketing free zone, which confines telemarketing activities to 09:00-21:00 Monday through Friday. Computer assisted calls will no longer be permitted, to prevent “no voice on the other end” cases, which have been a cause for distress among some consumers. There will also be stronger information requirements for telemarketers, and most importantly, consumers will have to provide written consent to telemarketing sales. The format of the consent could be e-mail, SMS, fax or some other form of communication, as long as the format supports the necessary information requirements.
The most visible changes to consumers will likely be three elements that are strongly regulated in the current law, but which have been omitted or moderated in the revised marketing law. These are contests, coupons and bargain gifts (Norwegian “tilgift”).
Contests with random winners are not allowed in the current marketing law, only skill-related contests. This helps explain why we have quiz questions in commercials and TV shows with questions such as “How much is 2+2?” or “What is the prime minister’s name?” When the new law comes into effect in June 2009, this requirement is forfeited – and we will be spared the ridiculously easy questions designed to circumvent the current law.
Coupons are an interesting area, as they can assume many formats – not just the old “cut the piece from the newspaper” variant some associate the word with. To which extent will coupons be virtual, and how will they be distributed? SMS is a viable channel, and mobile ticket solutions already exist in the Norwegian market, provided by the mobile marketing company InCent.
Bargain gifts may well represent the most interesting change. A bargain gift is essentially a bundled additional product provided along with the main product you purchase. In the current law, there is a requirement that a bargain gift needs to be associated with the main product, for instance a bargain gift t-shirt along with a pair of jeans is accepted, while a CD is not. This requirement becomes obsolete with the new law. In theory, we could see cars being bundled with apartments, credit cards bundled with iPhones, household appliances with a new mortgage (there’s an incentive to switch banks!), or movie tickets to go with flowers for your date.
The new marketing law comes into effect 1 June 2009. Marketers, get ready, set… go!
Sunday, February 15, 2009
Profiling your customers
Profiling and keeping track of competitors is a common activity for companies that want to stay on top of market developments. But few companies monitor their customers using the same methods despite clear advantages to doing so.
While a CRM system typically allows tracking of contact data, customer communication, order history and marketing campaigns, there are elements they tend to overlook. Customer corporate goals and strategies are seldom described in CRM systems, nor is information about business performance, new product releases, major contracts and agreements, organizational restructuring, or statements from key personnel - all of which can give the sales force an edge in following up customers, or evaluating a potential new customer.
If your sales force had company profiles containing the above information (and more) on your top 5 or 10 key accounts, none would dispute that their ability to identify opportunities and threats to the customer relationship would increase. Not only does your sales force improve its knowledge, but your customers will be duly impressed by your knowledge about them. The same holds true both for following up existing customers, and when preparing for the crucial first meeting with potential new customers.
The great Chinese general Sun Tzu once said: “Know the enemy, know yourself, and victory is never in doubt - not in a hundred battles. He who knows self, but not the enemy, will suffer one defeat for every victory. He who knows neither self nor enemy, will fail in every battle.” Had Sun Tzu not been a warrior, but a merchant, he might have included the customer in his saying. “Know the enemy, know yourself, and know your customer – then victory is never in doubt.”
MACAW research can provide company profiles for you to keep tabs on both competitors and customers. But don't just take our word on it when you can judge for yourself. We want you to see with your own eyes what we can do.
So contact us and we will send you a free sample company profile. No strings attached.
While a CRM system typically allows tracking of contact data, customer communication, order history and marketing campaigns, there are elements they tend to overlook. Customer corporate goals and strategies are seldom described in CRM systems, nor is information about business performance, new product releases, major contracts and agreements, organizational restructuring, or statements from key personnel - all of which can give the sales force an edge in following up customers, or evaluating a potential new customer.
If your sales force had company profiles containing the above information (and more) on your top 5 or 10 key accounts, none would dispute that their ability to identify opportunities and threats to the customer relationship would increase. Not only does your sales force improve its knowledge, but your customers will be duly impressed by your knowledge about them. The same holds true both for following up existing customers, and when preparing for the crucial first meeting with potential new customers.
The great Chinese general Sun Tzu once said: “Know the enemy, know yourself, and victory is never in doubt - not in a hundred battles. He who knows self, but not the enemy, will suffer one defeat for every victory. He who knows neither self nor enemy, will fail in every battle.” Had Sun Tzu not been a warrior, but a merchant, he might have included the customer in his saying. “Know the enemy, know yourself, and know your customer – then victory is never in doubt.”
MACAW research can provide company profiles for you to keep tabs on both competitors and customers. But don't just take our word on it when you can judge for yourself. We want you to see with your own eyes what we can do.
So contact us and we will send you a free sample company profile. No strings attached.
Monday, February 2, 2009
Optimizing loyalty programs
Loyalty program managers face a paradox during the global economic downturn. Recent research from airmiles.co.uk suggests that consumers value reward programs more during a recession. But at the same time loyalty program managers are faced with demands to cut costs. Can the short term benefits of cutting costs be aligned with long term customer retention?
The answer is yes. Cutting costs does not only have a short term effect on a company’s result, but also a long term positive effect, assuming that the value of the cost cuts is not surpassed by revenue losses. The latter is what program managers fear; that cutting costs will lead to customer attrition and cause long term net loss. The key to avoid this scenario is to know which loyalty elements to cut and which not to. We will briefly walk you through our process to successfully trim a loyalty program.
One approach to resolving this dilemma is to study the elements of the loyalty program as follows. First, by measuring which elements customers value, and optionally their impact on overall satisfaction, program managers will gain insights into which elements are the key loyalty generators and which are less important. The next step is comparing perceived value to the costs of maintaining individual elements.
By creating a matrix with two dimensions, perceived value and cost, we can map program elements into four groups. Of particular interest are those with high perceived value and low costs. These are the elements you usually want to keep. Elements with low value to customers and high costs for the company should probably be removed from the program. What to do with benefits in low value-low cost and high value-high cost combinations is bound to be debated. By adding a third dimension to the study, customer awareness, one can measure to which extent individual program elements are known to customers. This in turn gives program managers more information to go on.
High cost elements with high value and high awareness are likely to weaken loyalty if they are removed. Similar elements with low awareness could either be removed, as few customers will miss them, or optionally they can be emphasized in future marketing efforts to both existing and potential clients to increase the perceived overall value of the program. For low cost and low value elements, we argue that the consequences of removal should be small regardless of awareness, though it should be noted that any elements with high awareness are more likely to be noticed as missing. Again, the consequences should be small, as long as the elements indeed have low value to customers. That’s really all there is to it.
To summarize, companies should do the following to optimize their loyalty rewards programs.
1. Measure perceived customer value, costs and awareness of individual reward program elements.
2. Keep high value- low cost elements. These elements give the best return on investment.
3. Cut low value- high cost and low value-low cost elements. The former will have greater impact on the bottom line.
4. Consider keeping high cost-high value elements with high awareness. Consider cutting or increase marketing of similar elements with low awareness.
The answer is yes. Cutting costs does not only have a short term effect on a company’s result, but also a long term positive effect, assuming that the value of the cost cuts is not surpassed by revenue losses. The latter is what program managers fear; that cutting costs will lead to customer attrition and cause long term net loss. The key to avoid this scenario is to know which loyalty elements to cut and which not to. We will briefly walk you through our process to successfully trim a loyalty program.
One approach to resolving this dilemma is to study the elements of the loyalty program as follows. First, by measuring which elements customers value, and optionally their impact on overall satisfaction, program managers will gain insights into which elements are the key loyalty generators and which are less important. The next step is comparing perceived value to the costs of maintaining individual elements.
By creating a matrix with two dimensions, perceived value and cost, we can map program elements into four groups. Of particular interest are those with high perceived value and low costs. These are the elements you usually want to keep. Elements with low value to customers and high costs for the company should probably be removed from the program. What to do with benefits in low value-low cost and high value-high cost combinations is bound to be debated. By adding a third dimension to the study, customer awareness, one can measure to which extent individual program elements are known to customers. This in turn gives program managers more information to go on.
High cost elements with high value and high awareness are likely to weaken loyalty if they are removed. Similar elements with low awareness could either be removed, as few customers will miss them, or optionally they can be emphasized in future marketing efforts to both existing and potential clients to increase the perceived overall value of the program. For low cost and low value elements, we argue that the consequences of removal should be small regardless of awareness, though it should be noted that any elements with high awareness are more likely to be noticed as missing. Again, the consequences should be small, as long as the elements indeed have low value to customers. That’s really all there is to it.
To summarize, companies should do the following to optimize their loyalty rewards programs.
1. Measure perceived customer value, costs and awareness of individual reward program elements.
2. Keep high value- low cost elements. These elements give the best return on investment.
3. Cut low value- high cost and low value-low cost elements. The former will have greater impact on the bottom line.
4. Consider keeping high cost-high value elements with high awareness. Consider cutting or increase marketing of similar elements with low awareness.
Saturday, January 31, 2009
Core values - too close to the core
When we hear the term business strategy, certain words come to mind. Corporate visions, missions, business objectives, core values, goals and so forth. These terms permeate modern business culture and are a central part of corporate communication. Let’s focus on one term - core values. Both small businesses and major corporations convey their core values to us through websites, presentations, media coverage, and so on. Now stop and think. What do core values actually communicate?
Core values are basic principles that form a foundation in corporate culture. They are communicated to us as customers, employees, investors, or other stakeholder roles. Essentially, core values are a segmentation variable, just as you can segment groups by age, occupation, income, roles or color preferences. The underlying assumption would be that there are some fundamental preferences that guide our behavior, in the roles we assume when interacting with a company. Thus a company projecting the” right values” to us would intuitively seem more appealing than one that doesn’t match our fundamental preferences.
Few people would argue against calling core values a convention. When something is a convention, it means very many are using it. Thus differentiating a company based on core values becomes increasingly difficult. Think of your bank, internet service provider or a travel agent. What are their core values? Don’t feel bad if you don’t remember, as we have a hypothesis that most people don’t pay more than a few seconds of attention to core values that don’t stand out. We assume this is because the communicated values are “too close to the core” of our preferences, as we will explain below.
Let’s take a look at some of the core values we have gathered from a handful of websites for major corporations. “Professionalism”, “Competence.”, “Integrity” and “Quality”. While all these are fundamental characteristics a company should comply with, they don’t help set the company apart from its competitors. Is there anyone who would actually deal with a company that is unprofessional and incompetent, or one with low integrity and shoddy quality? We hope not. In fact, we expect that those we deal with adhere to such elementary principles. But they are not core values we notice. They are too basic and too many companies flag them as their core values for us to react to them.
The values highlighted above are all “too close to the core” of running a business. Companies that wish to differentiate themselves based on their core values need to look outward from this inner set of traditional core values. Beyond terms such as “Professionalism” and “Competence” there are values such as “Interaction”, “Simplicity”, “Experiences”, and “Ownership”. Companies need insight into what values they should focus on to appeal to us, whether we are customers, employees or other stakeholders.
Six questions summarize the knowledge companies need to choose core values that make them stand out.
1. What is your company good at?
2. What are your competitors’ core values?
3. What is important to your stakeholders?
4. Are there unclaimed core values with high importance to stakeholders?
5. How large is the gap between what you are good at and the preferences of your stakeholders?
6. What will it take to close the gap?
Core values are basic principles that form a foundation in corporate culture. They are communicated to us as customers, employees, investors, or other stakeholder roles. Essentially, core values are a segmentation variable, just as you can segment groups by age, occupation, income, roles or color preferences. The underlying assumption would be that there are some fundamental preferences that guide our behavior, in the roles we assume when interacting with a company. Thus a company projecting the” right values” to us would intuitively seem more appealing than one that doesn’t match our fundamental preferences.
Few people would argue against calling core values a convention. When something is a convention, it means very many are using it. Thus differentiating a company based on core values becomes increasingly difficult. Think of your bank, internet service provider or a travel agent. What are their core values? Don’t feel bad if you don’t remember, as we have a hypothesis that most people don’t pay more than a few seconds of attention to core values that don’t stand out. We assume this is because the communicated values are “too close to the core” of our preferences, as we will explain below.
Let’s take a look at some of the core values we have gathered from a handful of websites for major corporations. “Professionalism”, “Competence.”, “Integrity” and “Quality”. While all these are fundamental characteristics a company should comply with, they don’t help set the company apart from its competitors. Is there anyone who would actually deal with a company that is unprofessional and incompetent, or one with low integrity and shoddy quality? We hope not. In fact, we expect that those we deal with adhere to such elementary principles. But they are not core values we notice. They are too basic and too many companies flag them as their core values for us to react to them.
The values highlighted above are all “too close to the core” of running a business. Companies that wish to differentiate themselves based on their core values need to look outward from this inner set of traditional core values. Beyond terms such as “Professionalism” and “Competence” there are values such as “Interaction”, “Simplicity”, “Experiences”, and “Ownership”. Companies need insight into what values they should focus on to appeal to us, whether we are customers, employees or other stakeholders.
Six questions summarize the knowledge companies need to choose core values that make them stand out.
1. What is your company good at?
2. What are your competitors’ core values?
3. What is important to your stakeholders?
4. Are there unclaimed core values with high importance to stakeholders?
5. How large is the gap between what you are good at and the preferences of your stakeholders?
6. What will it take to close the gap?
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