Mercator Advisory Group Releases New Report: Loyalty Programs: Chip's Real Potential Unlocked

Until now, smart card industry in the U.S. hasn't found the magic application that will motivate merchants to replace POS terminals and expedite back office upgrades. Smart card-based loyalty programs can be the catalyst, and create a snowball effect in the solution of this "who moves first?" problem.

(PRWEB) December 17, 2003 --Until now, smart card industry in the U.S. hasn't found the magic application that will motivate merchants to replace POS terminals and expedite back office upgrades. Smart card-based loyalty programs can be the catalyst, and create a snowball effect in the solution of this "who moves first?" problem.

In a new research report "Loyalty Programs: Chip's Real Potential Unlocked", Mercator Advisory Group examines innovative loyalty programs and their strategic implications for the businesses in the payments industry.

Loyalty programs are used to increase acquisition, retention, usage, and average ticket and thus revenues. According to Evren Bayri, author of the report, "influencing consumer behavior through rewards can facilitate implementation of various business strategies. Business goals that are effected by and require a change in consumer preferences at the POS such as using a smart card instead of a magnetic stripe card or making offline debit transactions rather than online debit transactions can be accomplished through a carefully planned loyalty program."

KEY FINDINGS:

1.   The demand for loyalty programs is still present and it is growing significantly as can be seen by the number of vendors that offer loyalty solutions and the range of their offerings.

2.   Although increasing availability of programs is good from program implementation cost and standardization standpoints, it makes it significantly more challenging for companies to differentiate their programs and generate a positive return on their loyalty investments.

3.   Loyalty programs can be an effective marketing method to influence consumer behavior. Innovative approaches such as the Duetto Card have pushed the envelope in the US. This program combines a loyalty program with a traditional card through a combined magstripe approach that uses regular Visa transactions to drive a stored-value loyalty program for Starbucks.

4.   Loyalty programs may even be used for long-term strategic effect. When coupled with chip cards, it may be possible to create an environment whereby additional information may be necessary at the network level, making association-based authentication essential (and the corresponding fee structure) rather than regional EFT switching. Loyalty programs can enhance customer value, driving consumers to adopt technologies such as contactless devices which may also be used strategically to drive more volume through the association networks.

5.   Loyalty programs and smart cards can benefit each other: i.e. Loyalty programs can help to expedite the smart card penetration as smart card technology offers the ability for more data intensive programs that will add value for both cardholders, issuers and merchants alike

The report examines the synergies between loyalty programs and smart cards: i.e. Loyalty programs can help to expedite the smart card penetration as smart card technology offers the ability for more data intensive programs that will add value for both cardholders, issuers and merchants alike. As a matter of fact, Bonus Card, a MasterCard co-branded smart card with a coalition loyalty program developed by Incline Village, NV-based Quantum Loyalty Systems and Istanbul, Turkey-based Garanti Bank, reached 1.8 million members with a network of 650 program partners at 17,000 merchant locations after 2 years of its initial launch in 2000.

The demand for loyalty programs is still present and it is growing significantly as can be seen by the number of vendors that offer loyalty solutions and the range of their offerings. The report provides a high level overview of loyalty programs, examines sample loyalty programs highlighting successful strategies, and provides a compilation of loyalty solution vendors and their solutions.
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This report contains 27 pages and 9 exhibits.

Members of Mercator Advisory Group have access to these reports as well as the upcoming research for the year ahead, presentations, analyst access and other membership benefits. Please visit us online at www.mercatoradvisorygroup.com.

For more information call Mercator Advisory Group's main line: 508-845-5400 or send email to info@mercatoradvisorygroup.com.