At Discover Card, Cash is King
filed in Banking & Cards, Brand, Case Study on Apr.20, 2009
I’ve posted a new case study about Discover Card and it’s brand dominance in the cash-back credit card rewards field. It is available for download from the White Papers section of the Hanifin Loyalty LLC web site and I hope you will read, enjoy and send me feedback by entering comments to this post. Please download here.
To whet your appetite, here’s an excerpt:
“Every industry that has been around for 25 plus years has its share of fiefdoms, dogma, and biases. Loyalty Marketing is no different. As a young man, I remember my grandfather instructing me that “Cash is King”. With our current economic meltdown well underway, we are again hearing from financial pundits everywhere that “Cash is King”.
It seems that only in Loyalty Marketing do we disagree.
The most fundamental best practices call for value propositions that are motivating for the customer, but maybe just a little tough to dissect. Prying open the gap between perceived value and actual reward cost is good for all parties involved, sponsor, customer, and solutions provider. For that reason, punch cards that reward “the 10th one free” and cash back discounts are treated as solutions that are only chosen when the strategy team has a loyalty planning version of writer’s block.
In the face of the criticism and cash-back snobbery, I increasingly admire Discover Card. In case you don’t keep track, Discover is the sixth largest card issuer in the US with over $49 Billion in receivable and is the largest revenue producer within the Discover corporate umbrella. In the January 30, 2009 Discover Financial Services Financial Community Briefing, Harit Talwar – EVP, Card Programs & Chief Marketing Officer – reinforced the importance of their cash-back strategy, stating “Clearly, rewards leadership is the core of Discover”.
When you think of cash-back for using your credit card, you think Discover. The company has carved out its niche and stuck to its knitting. The question that begs for an answer is: how long can they remain one of the leading US card issuers with this one-trick-pony approach?
Bill Hanifin on 
May 5th, 2009 on 9:07 pm
Two items for respective comment:
First, the “tenth one free” approach, only works if it’s convenient, people don’t go out of their way for that (in other words, this is strictly for use as a frequent buyer program, or as a customer service reward, in order to pay if forward);
Secondly, speaking as one who, in the past, has only used credit as a source of deferred payment (30 days, & no more), just in order to be rewarded by the creditor’s generous benefit (I’ve always used the Mileage Plus program)… I’ve never used the Discover Card, while I’m sure the cash back sounds good in theory, I’d bet it doesn’t stand the test of time, since the only benefit I can see to a card company from an upstanding citizen, & credit-wise consumer such as myself, whom I’m assuming is your desired market, would be either the occasional lapse (which would negate all value for the consumer), or a downturn in the economy, which would be a double-edged sword, I would presume.
That said, I believe “Discover,” just the word, is a marketing standout; a tool which is easily adjusted to fit a better model, or offering of benefit, to a consumer draw or clout.
May 22nd, 2009 on 10:13 am
This is a great articles . Thanks for sharing.