Aug 24, 2006

Critical mistake #3: Offer merchants a “one size fits all” solution

(This post is part of the series on key success factors and common mistakes.)

Merchants are constantly approached by card issuers looking for special deals for their cardholders. Card issuers all deliver essentially the same sales pitch, something like this: “Hi, I’m with ABC Bank. We’d like you to offer a discount to our cardholders. In exchange, we’ll include your store in our membership guide book that goes out to all cardholders.” Another variant on this is to request that the merchant offer points or miles, redeemable for things in the card issuer's rewards catalog.

The pitch worked well in the early days, but now that all banks run around with the same story, it’s getting harder to get merchants excited. Banks now have to promise more than simply including the merchant in a program guide. They have to throw in more and more co-marketing stuff that can become very expensive.

When banks deploy chip card systems with built-in promotional marketing features, they have the opportunity to also upgrade their sales pitch to merchants. They can stand out from the boring "old way to pay" bankcard products and get much more attractive deals from merchants. Check out a prior post here which shows how two banks negotiated deals for their cardholders at the same restaurant, one bank using “new way to pay” features which let the merchant target his promotions, and the other bank offering the same low value one size fits all solution. The value to cardholders and merchants really stands out.

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