© Copyright January 2013, All Rights Reserved, BIA/Kelsey
Leading in Local
‘The New Marketplaces’:
Loyalty & Transaction Marketing
January 2013
Leading in Local | Loyalty & Transaction Marketing
Copyright © BIA/Kelsey 2013 i
Contents
Executive Summary ................................................................................................................................... 1
Introduction.............................................................................................................................................. 2
Defining Advertising, Loyalty and Transaction Marketing ............................................................................. 2
Roots of Transaction Marketing: Daily Deals and the Closed Loop ................................................................ 3
Are “Stand Alone” Deals Doomed to Limited Growth? .................................................................................. 5
Loyalty: The New Digital Frontier ............................................................................................................... 6
Transaction Marketing Builds on Loyalty ..................................................................................................... 8
More than Offers and Transactions .......................................................................................................... 10
Applying Transaction Marketing ............................................................................................................... 11
Transaction Marketing Targets: Merchants with Recurring Usage ............................................................... 12
Significant Investment in Loyalty and Transaction Marketing ..................................................................... 13
New Revenue Streams with Transaction Marketing ................................................................................... 14
The Importance of Big Data ..................................................................................................................... 15
The Power of Card Linking (or not) .......................................................................................................... 16
Looming Challenge for Industry: POS Integration ...................................................................................... 17
Possible Alternatives to Relying on POS .................................................................................................... 19
The Competitive Landscape for Transaction Marketing .............................................................................. 19
Existing Promotions Players ..................................................................................................................... 20
Independents ......................................................................................................................................... 20
Financial Institutions ............................................................................................................................... 20
Vertically Integrated Tech Players ............................................................................................................ 22
Media ..................................................................................................................................................... 23
A Piecemeal Approach to Transaction Marketing ....................................................................................... 24
Privacy and Pipeline Issues with Transaction Marketing ............................................................................. 25
Summary: Five Questions and Answers .................................................................................................... 26
Profiles of Select ‘Independent’ Transaction Marketing Companies ............................................................. 27
Belly .......................................................................................................................................................................27
Five Stars ..............................................................................................................................................................28
LocalBonus ..........................................................................................................................................................29
MOGL ...................................................................................................................................................................30
Perka .....................................................................................................................................................................31
Swipely .................................................................................................................................................................32
Leading in Local | Loyalty & Transaction Marketing
Copyright © BIA/Kelsey 2013 ii
Additional BIA/Kelsey Resources .............................................................................................................. 33
About the Author .................................................................................................................................... 35
Figures
Figure 1: From Advertising to Transaction Marketing ................................................................................... 2
Figure 2: SMBs and Deals .......................................................................................................................... 4
Figure 3: BIA/Kelsey's Deals Forecast ......................................................................................................... 5
Figure 4: Groupon Real Estate R.I.P. .......................................................................................................... 6
Figure 5: SMB Interest in Loyalty Programs ................................................................................................ 7
Figure 6: Customer Acquisition vs. Retention .............................................................................................. 8
Figure 7: Remember These? ...................................................................................................................... 9
Figure 8: The BIA/Kelsey Marketing Circles Model ..................................................................................... 10
Figure 9: Elements of Transaction Marketing ............................................................................................ 11
Figure 10: A MOGL Promotion .................................................................................................................. 12
Figure 11: Big Data –Integration of Third Party Cloud Databases for Dynamic Individualized Marketing ....... 16
Figure 12: A POS System Using FiveStars ................................................................................................. 18
Figure 13: Bank AmeriDeals ..................................................................................................................... 21
Figure 14: Gannett Digital's Key Ring ....................................................................................................... 24
Tables
Table 1: Key Targets for Transaction Marketing ........................................................................................ 13
Table 2: Key Investments in Transaction Marketing................................................................................... 14
Table 3: Transaction Marketing Revenue Streams ..................................................................................... 15
Table 4: Loyalty Tech Acquisitions............................................................................................................ 22
Leading in Local | Loyalty & Transaction Marketing
Copyright © BIA/Kelsey 2013 1
Executive Summary
The market acceptance of daily deals and the emergence of new programs to track
and act on consumer loyalty have triggered a rapid evolution of the promotions space.
Consumers are increasingly engaged by promotions based on their individual
spending, behavior and location. BIA/Kelsey calls this “transaction marketing.” It
represents a step up from traditional loyalty marketing efforts.
Loyalty and transaction marketing represent new marketing opportunities for local
merchants. These work alongside traditional advertising; presence management/social
media; and mobile (geo-location).
Interest in loyalty and transaction marketing solutions is demonstrably high. We
expect there to be increasingly apparent, direct competition between deals and loyalty
vendors in certain categories, such as restaurants and salons.
Investors have poured more than $222 million into the loyalty and transaction
marketing space since 2008, with expectations for significant revenue growth from
merchant services, loyalty incentives, commissions, transaction processing and other
areas.
In this environment, transaction marketing and related “non-advertising” promotional
solutions, including deals, coupons, gift cards and gift certificates, are likely to achieve
parity with paid media advertising, such as display ads and contextual search ads.
We answer five key questions in this report:
1. Will non-advertising solutions be a major factor in merchant marketing
planning and spending?
2. Will non-advertising solutions be money saving substitutes for traditional
advertising, or will they complement it?
3. What channels are best positioned to anchor these new solutions?
4. What will be the impact of technology changes on the rate of acceptance?
5. Are non-advertising programs effective for local merchants and how will they
assess return on investment?
Leading in Local | Loyalty & Transaction Marketing
Copyright © BIA/Kelsey 2013 2
Introduction
The parameters of local marketing are changing rapidly. While the end goal remains a
constant – to engage customers and sell more – the evolution of technology and data
analysis has increasingly moved marketing beyond advertising.
Some of the key change factors include:
Cloud-based databases that can be integrated on a “big data” basis with
sales and marketing analytics and dashboards for campaign planning, execution and evaluation.
Mobile web and applications with geo-location technology.
Performance-based search and related solutions (e.g., click through rates;
cost per action).
Social media, recommendations and referrals (e.g., “earned media”)
This marketing activity isn’t all “advertising.” Nor it is always “media.” Instead, we are
beginning a partial reallocation of spending from advertising-based marketing to a
new paradigm that we refer to as “loyalty and transaction marketing.”
Defining Advertising, Loyalty and Transaction Marketing
Loyalty and transaction marketing is applied widely to customer acquisition, customer
loyalty, email marketing and the promotion of specific brands/products. What we have
is a sequential ladder of three core marketing concepts for acquiring and engaging
consumers. These include advertising; loyalty marketing; and transaction marketing.
Figure 1: From Advertising to Transaction Marketing
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(BIA/Kelsey, 2012)
“Advertising” is defined as paid placement of sales or branding messages in media,
listings or search. It can be placed directly with publishers or via advertising networks.
Advertising is generally thought of as being media driven, where success is measured
in reach and engagement. Promotions such as coupons and deals are in a subset
known as “directional media,” where success is measured in incremental leads.
Advertising
Display
Classifieds
Search
Coupons
Loyalty Marketing
Frequent User Clubs
Newsletters
Social Media "likes"
Rewards
Transaction Marketing
Deals
Geo-based Mobile Offers
Big Data
Card Linked Offers
Leading in Local | Loyalty & Transaction Marketing
Copyright © BIA/Kelsey 2013 3
“Loyalty marketing” is defined as specific efforts to acquire, engage and retain
customers. It can target specific customer groups based on their search interests and
purchase patterns. Loyalty marketing utilizes techniques that include frequent shopper
clubs and memberships, email and print newsletters, social media programs, special
events, discounts and coupons, custom content, gift cards, and gift certificates.
“Transaction marketing” is defined as the dynamic linking and analysis of credit- and
debit-card purchases with other consumer and marketing databases. Transaction
marketing was developed on the principles of “big data.” Marketers can profile and
target consumers for specific offers based on such measures as open rates, page
views, frequency of visits, shopping carts, and the size and makeup of orders.
Transaction marketing generally incorporates loyalty marketing, and is sometimes
referred to as “card-linked offers” (although card-linked offers are really a sub-
segment of transaction marketing).
Roots of Transaction Marketing: Daily Deals and the Closed Loop
The transaction marketing era arguably began in 2008 with the emergence of daily
deal companies, led by Groupon and Living Social. Prior to deals, promotions were
mostly limited to random advertising messages, contextual search ads, and
promotional media such as coupons and sweepstakes.
Coinciding with technology developments, deals ushered in a new era, showcasing
promotions that lead directly to transactions. They proved to be true pay for
performance vehicles. The deals providers closed the loop from awareness to
purchase by tying promotional spending to credit- and debit-card transactions.
At this point, almost five years into it, deals have carved out an important role in the
promotions mix. Awareness of deals as a shopping option, and use among consumers
and merchants continues to climb.
Groupon and Living Social – the industry’s leaders -- have 35 million U.S. consumers
combined, including some consumers using both services. Moreover, half of U.S. small
and medium-sized businesses (SMBs) surveyed in BIA/Kelsey’s 2012 Local Commerce
Monitor study indicate they are likely to run a deal during the next six months. This
trend is likely to be reinforced by the growing efforts of new players, such as Google
and Amazon, in the deals space.