Look out Groupon and Living Social. Bank of America is putting its own spin on transaction-based marketing programs–one that includes hyper-targeted offers with a payoff for both merchant partners and consumers.
The nation’s largest consumer bank, with more than 5,600 retail branches and 16,000 ATMS, completed a nationwide rollout this month of BankAmeriDeals, a transaction-based marketing program that presents cash-back offers to account holders on their account statements. The offers are based on customers’ past purchase behavior and presented to customers on their online or mobile statements. Customers simply click on offers that interest them. When they consummate the deal by making the required merchant purchase, the promised cash is automatically deposited into their accounts.
Bank of America uses tools from Cardlytics to support the BankAmeriDeals program. Cardlytics controls the targeting information requested by merchant advertisers, but the system runs on the bank’s hardware. No customer information or transaction-level data leaves the bank’s control. Actual consumer targeting is handled by Bank of America based on models provided by Cardlytics for each merchant customer. “We can forecast where people are likely to spend and on what based on where they spent in the past,” says Rod Witmond, VP of marketing for Cardlytics.
The profit potential this type of predictive analytics and hyper-targeting represents makes the approach an attractive one. In fact, market research firm Aite Group predicts that by 2015 transaction-based marketing programs employed by banks and credit card issuers will drive $1.7 billion in revenue for financial institutions based on merchant transactions of $115 billion.
Aite Group Analyst Madeline Aufseeser says transaction-based marketing programs presents the payments industry with a unique opportunity to capitalize on changing retailer advertising and customer acquisition trends. “Rich purchasing data and rising adoption of online and mobile banking puts card issuers at a strategic advantage,” she says. “The merchant-funded incentive programs will increase customer loyalty and transaction volume. New revenue streams can be created with little effort and financial risk.”
The merchants who fund the programs also shoulder little risk. Cardlytics takes a processing fee based on redemption activity and Bank of America charges no start-up fees for joining BankAmeriDeals. The advertising that merchants receive on people’s bank statements and on listings on the bank’s mobile app is free.
Matthew Vincent, director of marketing at Hawthorne’s New York Pizza, a five-store chain in Charlotte, NC, says he’ll never sign on with daily deals services again after participating in the BankAmeriDeals pilot program early this year. “The numbers we look at are activations and redemptions and they have been super,” he says. “Ten percent of the people who activated have never dined with us before and, of those, 10% are coming in to redeem the offers. That’s a really high rate.”
Vincent is able to use a Cardlytics formula to price incentives for three target groups: first time diners, infrequent diners who’ve visited Hawthorne’s fewer than six times, and frequent customers. “Infrequent customers are the most desirable target for us and the numbers there have been incomparable. In September so far, 25% of them activated the offer and 72% of those came in to dine.”
The new business comes in on a slow and steady basis, not all in one day like many daily deals redemptions. That’s a plus, because the bump in one day’s business Hawthorne’s got from Groupon had a negative effect on customer service due to long waits for tables. “This is a daily deal killer,” Vincent says. “We’re just not going back to it.”
