Nov 21, 2006

When will Welcome begin developing direct relationships with merchants?

This question has always popped up, but for some reason or another it seems to be more frequent today. I find myself copying and pasting the answer each time the question comes up. Here it is.

First a little bit of history. At the start of Welcome in 1996, we began by selling direct to merchants and using XLS to create what we felt were more powerful private label loyalty cards. We discovered that XLS had much more potential and value in a multi-merchant environment, where the same card could be used to obtain multiple benefits across many merchants. So we started working on multi-merchant loyalty cards like a youth card (issued through universities in partnership with France’s ministry of youth and sports) and city cards (issued in partnership with municipal governments). We also discovered that the card needed to have a payment function to be truly useful. At the same time, we had begun working with financial institutions and found that it is those companies that valued XLS the most.

As we increasingly targeted financial institutions around the world, we at times did consider approaching merchants directly, even outside of France. But doing it globally is a whole other thing than doing it in France. We never felt that we had enough resources to do it properly.

Today, we are discovering that we are actually moving in that direction already, with our current resources. Many of our bank customers work with the same global retail organizations. UBL, Maybank and several others already work with Pizza Hut, for example, the first name that pops into my head. At some point, we will have lots of examples of best practices for Pizza Hut, and should be able to build a corporate relationship directly with their global marketing team. This would benefit Pizza Hut by helping them create corporate guidelines for using XLS which they could distribute to their franchisees around the world. It would benefit our bank licensees by providing them a pre-packaged offer which they could use to approach local Pizza Hut franchisees in their regions.

This is also an extension of the advertising and marketing work we have begun, and the results of which many of our licensees saw at our user summit last month in Athens. This work has so far resulted in branding guidelines and advertising storyboards which our licensees can provide to their marketing agencies to help get creative juices flowing. We would like to go further and develop more collateral which we could provide our banks to help them get to market faster. For example, details of ideal promotional marketing campaigns for specific merchants.

We would like to develop the concept of “XLS Certified Marketing Agencies”. This would consist of recruiting one or more promotional marketing agencies in each country, and training them on how to use XLS to create better promotions for their merchant clients. In other words, Welcome could focus on building content for our bank customers’ XLS powered credit and debit cards, getting more and more merchants to offer promotions linked to those cards, so banks can focus on getting more cards into customers' wallets.

In the past, our activities in this direction have been constrained by our resources, so we have had to think of indirect approaches like these to build relationships with merchants. We can go far with this approach and develop useful relationships with merchants over time. As our resources grow, we will certainly be able to develop direct relationships much faster.

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