Are you unknowingly trying to resurrect failed concepts from the past?

Imagine this nightmare scenario.

You are excited about your brand new product or service that you are about to launch. As far as you know, it is something new and innovative that hasn’t ever been tried before. Then, right after launching it, you run into all kinds of horrible problems that eventually cause management to pull the plug. The old guy down the hall that has had it in for you for a long time starts doing his “I told you so” routine and begins circulating old press releases from other companies that tried to do the same thing a long time ago, and failed, mostly for the same reasons. You have unknowingly been trying to resurrect other people’s failed marketing concepts.

Fortunately, the web makes it much easier to avoid this kind of thing today. You can certainly attempt something that lots of other people have failed at; but at least you can be aware of what has been tried before and why those approaches failed and yours will not.

But what to make of this article on Pay By Touch’s plans to deploy loyalty coupon kiosks? I have seen the same thing tried before and it has often failed. Maybe there are no traces of those failed attempts? Out of curiosity (and as a test of my memory) I did a Google search on “coupon kiosk” and found lots of relatively old stuff on pilots that are no longer around. Coupon kiosks were a 1990’s thing that never really took off. A couple articles from back then give hints of the major flaws in these products, although the flaws weren’t clearly understood at the time. An article from 1991 starts with the following sentence, “Kmart is testing an automated electronic couponing kiosk in nine stores through which shoppers can receive coupons for as many as 24 different products.” Another article, from 1994, talks about a touch screen kiosk offering coupons on 32 products.

In May 2000, long after Kmart’s attempts, another company resurrected the concept and boldly announced that they “have designed the world’s first interactive multimedia coupon kiosk”, completely oblivious to the fact that identical products had been launched a decade earlier.

There are lots of problems with coupon kiosks. It’s easier to look through the Sunday paper and clip the coupons you want out of a selection that is far greater than anything a single company could reasonably negotiate for their kiosks. A kiosk would need to offer potentially hundreds of coupons, much more than the 24 or 32 offered on earlier generation products. That’s especially true if the coupons are targeted! Pay By Touch is going to have to fundamentally transform their organization if they expect to constantly update their kiosk with new offers on hundreds of products. Anther problem, this one even more fatal, is that nobody wants to wait in line at a kiosk before going into the store. The Google search also identified another issue to deal with: patents. I wish Pay By Touch luck navigating through those waters.

I don't know exactly why some of these concepts keep popping up again through the decades. My best guess is that it comes from a technologist's mindset, the old "solution looking for a problem" thing.

You can avoid all this by doing a simple Google search and being humble enough to ask why all those other people (many of them very smart) failed and how your project is so different that it will not.

Why merchants will eventually switch to credit card surcharges instead of cash discounts

Payments News links to a Los Angeles Times article describing how more and more gas stations in the US are offering discounts to customers that pay with cash instead of plastic. "To dodge the rising fees that credit card companies tack onto transactions, both no-name and big-brand stations are charging drivers less when they buy with cash." The article explains that customers apparently understand why gas stations are steering them away from plastic.

Cash discounts are not a clean solution to rising interchange fees, since by definition all plastic payments are penalized. Why should customers be penalized for using a low interchange product like a debit card? It would be much easier if merchants could surcharge on selective card products, like premium cards, rather than use the very blunt instrument of cash discounts.

Merchants complain that they can't negotiate interchange fees. They just have to accept the fees imposed on them. Much of the animosity and legal headaches are directly related to the sense of not being in control. Giving them the ability to selectively surcharge would address this issue. Merchants that don't like the fees on a particular product could then pass the cost on to their customers. You want to use a premium card and collect airmiles or cash back from your bank? Fine, just pay the extra cost of using that card. Allowing surcharges makes sense and would go a long way towards eliminating much of the legal risks hanging over card companies today.

Surcharges are contractually off limits to merchants, who could have their ability to accept credit cards revoked. But the legal support for prohibiting surcharges could be falling apart. The same article describes a gas station chain that put up two prices and used the word "Credit" to differentiate the higher price from the cash cost. Visa threatened to charge the company $5,000 a day and cut off the stations' ability to take Visa credit cards unless they changed the wording on their signs so as not to imply a surcharge on credit cards. State regulators took side against Visa, and Visa backed off. It's a very small step from there to clear and outright surcharges.

Selective surcharging would seriously disrupt current market dynamics though, wouldn't it? The ability for merchants to selectively surcharge would automatically force payment schemes to think seriously about the benefits they provide to merchants when they come up with a new card product with higher interchange fees attached. It would foster innovation that benefits merchants. Imagine new credit card products with new features that merchants get really excited about, and are ready to pay interchange fees for. Hey, isn't that a pretty good end result?

How firms use subliminal mind control on you

I found this video on The Thinking Blog. Enjoy.

Pressure from retail association kills plans to increase interchange on debit cards

How easy is it to get away with charging more for the same old debit card service without offering anything fundamentally new? No new features that benefit merchants, just new, higher interchange rates? It might have been possible to get away with this in the past, when debit card usage wasn’t so high. But now it’s getting much harder. And this is forcing the payment brands to search for new ways to compete against each other.

Pressure from the British Retail Consortium has lead to the withdrawal of plans for increased interchange fees to go with the launch of the new Debit MasterCard. The new debit card product was to be charged to merchants at a fixed fee of 3.5 pence plus 0.15 per cent of the purchase price, potentially much higher that the current method of simply charging a fixed fee for debit transactions in the UK. See MasterCard backs down over retailer fee.

MasterCard’s attempt was totally understandable and justifiable, given the increased competition between payment brands. MasterCard needs to launch new payment products with higher interchange that will get the brand onto banks’ cards. This is becoming more vital today than ever before, since MasterCard is a public company that must show strong growth. With Visa’s IPO coming in a few months, pressure will only increase. Very soon, we should begin to see a major change in how the payment brands compete with each other, with a much greater focus on providing more value to merchants in order to justify higher interchange fees. The payment brands have no choice but to focus major efforts on that battleground.

How focusing on acquisition features (rather than loyalty) can lead to better protection of interchange fees

Ron Shevlin attacks the fundamental concept underlying customer loyalty, the common belief that “it costs X times more to acquire a customer than to retain one”. After you read his blog post you come back to me and say, “OK, Aneace, so loyalty might be a bit overrated. What in the world does that have to do with interchange?”

The tendency to stress loyalty tactics over acquisition could cause the industry to sell itself short when designing payment information value added features which help to justify interchange fees. Acquisition tactics are often much more valuable to merchants, and, as a major side benefit, it turns out that they function best on general purpose credit or debit cards, rather than store cards, so merchants need banks more.

Here are a few simple examples using payment data hidden in the card to trigger receipt promotions. They are all based on attracting and exciting occasional customers, rather than rewarding loyal customers.

Recognizing a customer who has not been to a store in a long time and being able to print a special offer on the credit or debit card receipt is simple, cheap and irresistible for almost any merchant. All that’s needed is a simple bank payment terminal. No need for a CRM system, database tools or technical expertise. The feature is simply built into the standard payment transaction. It is a valuable feature that is uniquely available through general purpose credit or debit cards, not store loyalty cards or private label payment cards (remember, this customer is not a frequent customer, so he is not going to pull out his loyalty card).



You can’t call the special offer a reward because the merchant is not rewarding any type of desired behaviour. You can only refer to it as a promotional offer. Calling it a reward is bizarre.

Another example is sampling, a promotional marketing tactic which is almost as big as loyalty. Promo Magazine says that “product sampling is the most influential in-store marketing method when it comes to influencing consumer purchase decisions.” General purpose cards can help make sampling even more effective. Behaviour data stored in new generation credit or debit cards can help merchants avoid giving the same samples to everyone over and over again. Instead, merchants can give customers a different surprise sample at each visit, encouraging them to try many different products.


The receipt acts primarily as a trigger to alert the clerk to hand out a specific sample pack. The trigger could be on the receipt, as in this example, or it could be a flashing display that the clerk sees. The idea is to use the payment transaction to help enhance and improve the marketing activities already happening at the point of sale.

Let's throw in a twist. This payment feature could allow merchants to offer higher value samples, for example only at a customer’s 4th visit in a given period, which is much more effective than giving the sample to anyone that walks in the store. Yes I know, this little twist looks kind of like loyalty, but it’s not, because the merchant is not saying “shop 4 times and you get this big sample”. Calling it loyalty is confusing and diminishes the value of simply making product sampling more effective.

Games are another promotional marketing tactic almost as big as loyalty. Data in the payment card can be used to create simple game promotions that appear at the bottom of credit or debit card receipts, perhaps as part of an advertised promotion, or maybe just a surprise that pops up on the receipt.


Building these types of features into a single bank’s cards and POS terminals, in a closed loop system, helps to protect the bank’s merchant fees and brand value. This has been Welcome’s core capability for many years. Now, building the same features into a scheme payment product makes the product more attractive to merchants and therefore helps to justify the interchange rates attached to that product. This is Welcome’s new strategic direction.