Jan 8, 2007

Promotional marketing in China

I paid in a restaurant the other day and got these two coupons along with my receipt. One is for a 10 Yuan discount if I come back to the same restaurant for afternoon tea. The offer expires in a month. The other coupon is for the karaoke lounge upstairs.

These promotional marketing tactics would be much more effective if they were linked to a credit or debit card, so the offers can be targeted based on the customer's prior behaviour, rather than giving them out to everyone.

The restaurant discount is obviously intended to encourage customers to try the afternoon tea menu. What if I go to this restaurant all the time anyway? Isn't that offer wasted on someone like me? If it is not wasted and can be targeted only to first time or infrequent customers, would the restaurant have preferred to offer a much higher discount?

The KTV offer is an enticement for restaurant customers that have likely not discovered the karaoke lounge upstairs. Since management can't be sure that the coupon is not being given to an already frequent Frank Sinatra wannabe, they are afraid of wasting the discount on someone who would come anyway. So they keep the offer down to something manageable. Like 10 Yuan. What if they could give it only to people who had never been to the lounge? What if they could give it just once, rather than each time I eat at this restaurant? If they were confident on not wasting the offer, would they want to give something much more enticing?

Merchants can't do this today. They can't even do it with their own loyalty cards (because infrequent customers obviously don't have the merchant's loyalty card). The payment networks are ideally positioned to provide this added value to merchants, and general purpose credit or debit cards are the ideal tool for real-time promotional marketing at the POS. This would make credit and debit cards more valuable and attractive to merchants, so they accept cards more willingly without complaining about Visa and MasterCard's interchange fees, or American Express's merchant discount. The only other way to get merchants to willingly accept cards without complaining anymore is to bring the fees down.

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