Cycling commentators like to quip that the individual time trial is a “race of truth”. In other words there’s no place to hide as the man and machine face off against the clock.

The winner of the most recent edition of the Tour de France was decided on the final day in such a race, as Cadel Evans scorched his rivals and took the overall Yellow Jersey with the second best time of the day. Australia’s first overall Tour de France victor was undeniably better on this day – the truth was told.

Building a brand is much like a “race of truth”. Consumers are either for you or against you. And, there are only so many brands that stand out in today’s market evoking emotional response and nearly blind loyalty from their customers.

Starbucks, Apple, Coca-Cola, Facebook are brands that generate passion. Visa, MasterCard and Google register tremendous awareness but don’t necessarily conjure up “passionate” responses. I worked for Visa in the past and can attest to the fact that many consumers don’t understand the brand. I still get questions from friends asking if I can help fix their credit card problems! That of course is a matter between the issuing bank and the cardholder, not the domain of Visa/MasterCard.

Some brands are strong regionally but invisible outside their core market. Grocers Wegmans and Publix come to mind as do coffee chains Dunkin Donuts and Tim Horton’s. Dunkin is apparently embarking on national expansion, so the name may become more familiar across the U.S. soon.

Borders had a brand that was high profile, but became fuzzy. Some say that the lack of focus led to eroding customer loyalty and ultimately, the chain’s demise. You can read one assessment of Border’s failure here. IMHO, I’m not sure Barnes & Noble is doing a much better job in creating a brand that consumers care about – they just happen to be the last chain standing in the book-selling category.

Luxury brands drive customer loyalty through aspirational messaging, exclusivity, and, if backed up with customer experience that reinforces the brand, are sustainable. Nieman Marcus, Coach, Cartier, Tiffany are all brands that speak for themselves.

Some brands equate ubiquity with success. I wore Nike shoes in my early cross country days but my love of the swoosh waned as I saw the logo plastered on everything from golf balls to swim suits. Under Armour adopted the same approach from the starting gate as their logos seems to show up everywhere.

Does brand saturation create confidence or invite a suspicion of quality?

The brands that trigger emotion and sustain it over time seem to be highly focused. NorthFace and Patagonia have created aspirational brands among the outdoor and adventure travel set. I’m just waiting to see which one introduces the Bear Grylls line first!

Ironman has built a brand that oozes passion, commitment, aspiration, desire. Please write me if you know of another organization that sells out nearly every event it operates one year in advance, registering 2,000 people at the exorbitant price of $625, all for the privilege of torturing themselves through a 140.6 mile race.

With the ever expanding presence of the Ironman brand, it runs the same risk as Nike and Under Armour. The ubiquity of brand impressions in the market dilutes the core message to “best” customers and opens the door for competitors. As Ironman attempts to consolidate its hold on the endurance sport market, new race series have sprung up, most notably the HITS series using 6 time winner Dave Scott as spokesperson.

The importance of brand understanding for Loyalty Marketers is that we have to maintain perspective on the power of our brands to engage customers before any incentives are introduced. Every market is competitive and we need to study the range of customer choice in the market and understand the limits of impact for our loyalty strategies.

Organizations should adopt a holistic approach towards building loyalty strategy. Brand understanding is critical to crafting the value proposition that will complement core branding messages and further solidify relationships with our customers.

When it comes to brand recognition, the usual names that dominate the conversation are Apple, Starbucks, Coca-Cola, McDonalds, Visa and …. Chick-fil-A?

Ok, Chick-fil-A may not be a household name of the same caliber as Starbucks, but I guaranty that the “second largest chicken restaurant chain in the US” has the most passionate fan base in the quick-serve sector.

I was a first-hand witness to a Chick-fil-A grand opening in Pompano, Florida this week and I was amazed by what I saw. It was the tent city that caught my eye and made me pull over on the road. But it was the “renegade” fans that made me hang around and be late for dinner.

About 5 years ago, Chick-fil-A started its “First 100″ promotion in conjunction with new store openings. Beginning at 6am the day before official opening, folks can line up and enter a lottery to win one “Chicken Sandwich, Chick-fil-A Waffle Potato Fries and drink per week for a year”, a total of 52 meals.

In the midst of the crowd, I not only met the guy who was “No. 1″ in line, but also a rare pair of gents, one named John Veggieoilman, who told me they had participated in 34 openings over the past 4 years.

Chick-fil-A was founded by Truett Cathy in the early 1960’s and his faith based business philosophies have served him well. Mr. Cathy is credited with inventing the boneless breast of chicken sandwich and the chain has grown to more than 1,430 stores across 38 states – all without being open on Sundays.

More people might know Chick-fil-A for their renegade cows which urge people to “Eat Mor Chikin”. These iconic figures are on par with the Geico Gekko and the Aflac Duck, but it is truly the renegade fans who line up for 18 hours to be part of the First 100 that tell the story of a successful brand.

For all the viral and word-of-mouth marketing taking place online, here is an excellent example of how an offline brand can create a passionate following of customers all through an “underground” promotion like First 100.  The story has been often repeated around the country and  judging from the people I talked with at the Pompano store, the frenzy will continue.

Chick-fil-A surely benefits from the nearly-free media impressions from local coverage and I’ll bet those winners don’t eat alone during their year in the freebie line. First 100 is a winner all around just as is Chick-fil-A.

Mr. Cathy and his family have lots to proud of, and the rest of us can learn a bit about brand building from this humble southern gentleman.

Editor’s Note: I’ll be having lunch at Chick-fil-A tomorrow as part of my follow-up story!

When it comes to brand recognition, the usual names that dominate the conversation are Apple, Starbucks, Coca-Cola, McDonalds, Visa and …. Chick-fil-A?

Ok, Chick-fil-A may not be a household name of the same caliber as Starbucks, but I guaranty that the “second largest chicken restaurant chain in the US” has the most passionate fan base in the quick-serve sector.

I was a first-hand witness to a Chick-fil-A grand opening in Pompano, Florida this week and I was amazed by what I saw. It was the tent city that caught my eye and made me pull over on the road. But it was the “renegade” fans that made me hang around and be late for dinner.

About 5 years ago, Chick-fil-A started its “First 100″ promotion in conjunction with new store openings. Beginning at 6am the day before official opening, folks can line up and enter a lottery to win one “Chicken Sandwich, Chick-fil-A Waffle Potato Fries and drink per week for a year”, a total of 52 meals.

In the midst of the crowd, I not only met the guy who was “No. 1″ in line, but also a rare pair of gents, one named John Veggieoilman, who told me they had participated in 34 openings over the past 4 years.

Chick-fil-A was founded by Truett Cathy in the early 1960’s and his faith based business philosophies have served him well. Mr. Cathy is credited with inventing the boneless breast of chicken sandwich and the chain has grown to more than 1,430 stores across 38 states – all without being open on Sundays.

More people might know Chick-fil-A for their renegade cows which urge people to “Eat Mor Chikin”. These iconic figures are on par with the Geico Gekko and the Aflac Duck, but it is truly the renegade fans who line up for 18 hours to be part of the First 100 that tell the story of a successful brand.

For all the viral and word-of-mouth marketing taking place online, here is an excellent example of how an offline brand can create a passionate following of customers all through an “underground” promotion like First 100.  The story has been often repeated around the country and  judging from the people I talked with at the Pompano store, the frenzy will continue.

Chick-fil-A surely benefits from the nearly-free media impressions from local coverage and I’ll bet those winners don’t eat alone during their year in the freebie line. First 100 is a winner all around just as is Chick-fil-A.

Mr. Cathy and his family have lots to proud of, and the rest of us can learn a bit about brand building from this humble southern gentleman.

Editor’s Note: I’ll be having lunch at Chick-fil-A tomorrow as part of my follow-up story!

I recently shared a story in the Toronto Globe & Mail about how Canadian parents would rather talk with their children about sex, drugs or alcohol than money.

Sometimes when I talk with stakeholders responsible for loyalty program operations, I get the feeling that the question draining their complexion is not far from that mark. “Who pays for Loyalty?” is a simple question that can cause discomfort and spark lengthy discussion.

My first boss (just a few rungs up) was Hugh McColl, the ex-marine who built North Carolina National Bank (NCNB)into a regional powerhouse and set it on a course to become what is now Bank of America.  Mr. McColl taught me a lot and had a famous way to simplify the evaluation of a company’s commercial credit risk. In the middle of heated debates about which ratios should be included in a financial analysis to see if some Fortune 100 customer was able to handle a loan under consideration, Mr. McColl would remind us that “all loans have to be paid back from cash, somehow, sometime.”

This pure logic should be remembered by retailers as they push harder to lower interchange rates for card transactions. As the rush to meet implementation deadlines for the Credit Card Act of 2009 dwindles, attention is turning once again to interchange. A good take on the current debate can be found in this article.

The question before many loyalty sponsors today is actually closer to “How can I pay less for Loyalty points?” The behavior of card issuing banks responsible for loyalty programs during this recession speak loudly that reducing cost is high priority. The changes to program rules to hasten forfeiture of points or miles, added fees for redemption, and additional points needed to redeem rewards have all been applied in well known rewards programs over the past several months.

Funding the cost of loyalty can be borne by one party or shared by partners.  How the breakage of those points is shared influences how each party manages program rules and drives more (or less) breakage. In some pay-for-performance models where participating merchants fund rewards to debit card holders from their banking partner, breakage is not a critical issue for either party.

• The bank, typically paying out rewards as a cash back account credit, is not too concerned about the nearly “100% redemption rate” occurring since the retailer is footing the bill.

• Fortunately, the retailer is able to offset its expense with incremental sales earned, all of which is accomplished by a lower than average give-away (10% cash back equivalent versus 40% markdown).

Some people have tried to paint this “merchant funded” model as banks taking advantage of retailers, but I disagree. Intelligent targeting that drives incremental sales and reduces the retailer’s reliance on discounting, while delivering increased card spend at lower cost to the bank is a win-win for all parties.  With retailers papering the walls with “40% off everything in store” signs just to get consumer attention, funding the equivalent of a 10% cash back in points is an attractive alternative.

In my opinion, the renewed emphasis on legislating interchange rates is the red-herring of the year. Yes, MasterCard, Visa, and American Express have a lock on the acceptance network at the retailer. But any perceived threat of monopoly can be balanced with understanding that merchant sales increase when cards are accepted. The cost is high, but at this point, the opportunity cost  is unacceptable.

It is entirely reasonable that business wants to reduce cost, and here’s the lowest hanging fruit – train front-line personnel to stop asking customers if they want “debit or credit” and encourage them to enter their PIN for debit transactions. Consumers really don’t care how they use their card as long as the purchase is completed and there are significant cost reductions to be enjoyed by a continuing shift to PIN based purchases.

If the focus remains instead on reducing credit card interchange rates, card issuers will see a key driver of the rewards business case in jeopardy and could shut down the rewards nozzle even tighter. If cash is not available from the banks, if rewards cards were to go away all together (they won’t), retailers would be left to subsidize their own loyalty marketing efforts without the prospect of shared funding from another source. Private label cards are probably not a holistic answer as consumers have spoken that they want more utility from their payment devices and are only willing to carry the cards with highest utility in their wallets.

In a world without card based loyalty, retailers would be left one tool short of a solid toolbox. Breaking the cycle of discounts and endless sales will be increasingly difficult and consumers will be further trained to wait for the greatest discounts before “footfall” occurs in store.

Here’s the best part: consumers don’t care who pays for loyalty. They want the utility of their payment card, want to earn rewards, and want the best price with good quality from the items purchased in store. I would not want to be retail executive who puts a huge dent in interchange and, while celebrating a temporary victory, watches revenues shrink as the alternatives to ever growing rounds of discounts and pure price competition are diminished.

The visual image I leave you with is Leon Lett getting the ball knocked out of his hands just before he crosses the goal line and is denied his touchdown by Don Beebe on a play that should have led to a massive celebration.

PS: That play might be the only highlight for the Buffalo Bills in Super Bowl XXVII

The 21st Annual Card Forum took place last week in Marco Island, Florida. The conference synopsis which follows was originally published at www.TheWiseMarketer.com as filed by Bill Hanifin, North American Contributing Editor.

Register here for a free subscription to the Wise Marketer

The 21st Annual Card Forum and Expo has recently been held in Florida and, while the banking and card markets in the US might be reeling, the quality of presentations and attendees was superb.

Bill Hanifin, Managing Director of Hanifin Loyalty, reports that according to Bruce Kerr of Loyalty One USA and Laurence Booth of Amex Bank of Canada, the loyalty market in Canada is “holistically engaged”, with some nine in ten Canadian households actively engaged in a loyalty programme (the US figure is one in three). In order to break through the clutter, Amex has worked with Air Miles Canada to revamp and relaunch its Platinum Credit Card in 2008, breaking through the traditional co-brand model, with gratifying results.

According to Jim McCarthy, Head of North American Financial Institution Sales, Visa, payment cards are making inroads into cash and cheque payments which, in the US, have seen their share of annual Personal Consumption Expenditure fall from 61% to 47% over a few years. Consumers increasingly shop on value, are in control of their commercial relationships, and are tending toward more judicious use of credit cards.

According to McCarthy, the debit card will be the key product going forward for most issuers. He reaffirmed that rewards and loyalty programmes are here to stay and that providing value and control while encouraging responsible choices will contribute to overall card loyalty. McCarthy quoted a Wells Fargo study among university students which revealed that, as the result of a financial literacy campaign, late fees in the test group dropped 42%, overdraft charges were down 40%, and past due accounts declined 55%, while card volume spend increased by 22%. The results clearly indicate that banks offering solid financial guidance can separate themselves from the competition.

A panel of ‘Retail Loyalty Leaders’ including Best Buy, Macy’s and Saks Fifth Avenue, moderated by Colloquy’s Rick Ferguson, focused on the importance of loyal customers in a downturn, Aubyn Thomas of Macy’s said that loyal customers continued to shop during the downturn and fellow panelists agreed that it was their most loyal clients who saved the day when the economy worsened. As a result, none of the retailers were willing to reduce investment in their frequent shopping programmes. Instead, they recommended that better use of transactional and customer data would drive efficiency in communications and reduce programme operating costs. Saks has encouraged associates to work harder at building relationships with clients and to use the CRM tools already deployed.

At the best of times, there are challenges in predicting customer behaviour in any market, but the stakes are raised to do so accurately in a down market. According to Lightspeed Research’s Joel Stanton, to successfully understand and predict customer behaviour, a robust, holistic view of the customer is required and that simply focusing on one relationship or one product is not enough.

This article is copyright 2009 TheWiseMarketer.com

The 21st Annual Card Forum took place last week in Marco Island, Florida. The conference synopsis which follows was originally published at www.TheWiseMarketer.com as filed by Bill Hanifin, North American Contributing Editor.

Register here for a free subscription to the Wise Marketer

The 21st Annual Card Forum and Expo has recently been held in Florida and, while the banking and card markets in the US might be reeling, the quality of presentations and attendees was superb.

Bill Hanifin, Managing Director of Hanifin Loyalty, reports that according to Bruce Kerr of Loyalty One USA and Laurence Booth of Amex Bank of Canada, the loyalty market in Canada is “holistically engaged”, with some nine in ten Canadian households actively engaged in a loyalty programme (the US figure is one in three). In order to break through the clutter, Amex has worked with Air Miles Canada to revamp and relaunch its Platinum Credit Card in 2008, breaking through the traditional co-brand model, with gratifying results.

According to Jim McCarthy, Head of North American Financial Institution Sales, Visa, payment cards are making inroads into cash and cheque payments which, in the US, have seen their share of annual Personal Consumption Expenditure fall from 61% to 47% over a few years. Consumers increasingly shop on value, are in control of their commercial relationships, and are tending toward more judicious use of credit cards.

According to McCarthy, the debit card will be the key product going forward for most issuers. He reaffirmed that rewards and loyalty programmes are here to stay and that providing value and control while encouraging responsible choices will contribute to overall card loyalty. McCarthy quoted a Wells Fargo study among university students which revealed that, as the result of a financial literacy campaign, late fees in the test group dropped 42%, overdraft charges were down 40%, and past due accounts declined 55%, while card volume spend increased by 22%. The results clearly indicate that banks offering solid financial guidance can separate themselves from the competition.

A panel of ‘Retail Loyalty Leaders’ including Best Buy, Macy’s and Saks Fifth Avenue, moderated by Colloquy’s Rick Ferguson, focused on the importance of loyal customers in a downturn, Aubyn Thomas of Macy’s said that loyal customers continued to shop during the downturn and fellow panelists agreed that it was their most loyal clients who saved the day when the economy worsened. As a result, none of the retailers were willing to reduce investment in their frequent shopping programmes. Instead, they recommended that better use of transactional and customer data would drive efficiency in communications and reduce programme operating costs. Saks has encouraged associates to work harder at building relationships with clients and to use the CRM tools already deployed.

At the best of times, there are challenges in predicting customer behaviour in any market, but the stakes are raised to do so accurately in a down market. According to Lightspeed Research’s Joel Stanton, to successfully understand and predict customer behaviour, a robust, holistic view of the customer is required and that simply focusing on one relationship or one product is not enough.

This article is copyright 2009 TheWiseMarketer.com

BP Visa Rewards Card

Seeing the low-fuel light illuminate on the dashboard signals different reactions to the driver based on how well you know your vehicle. Having driven my previous one for over 8 years, I could shrug my shoulders knowing that at least 3 gallons remained. My new ride was a different story and, on a day when gasoline prices hit record highs in the US, I made the first right hand turn when I noticed the indicator doing its job.

The BP (Amoco) station I entered was known to carry the highest prices in the area but the pain of donating a few more bucks to Big Oil was moderated by my fear of having to push the car into the cheaper station down the road. You could fairly say that I entered this consumer transaction with a negative brand bias.

Passing time as the tank filled, I noticed the display on top of the pumps touting the “New BP Visa Rewards Card”. The message shouted that I could earn up to $80 in cash with rebates up to 10% on BP fuel purchases. I was interested until I spied the dreaded asterisk. The offer was introductory in nature and good for the first 60 days only. The ownership cycle of a credit card is long enough that, to me, introductory offers are like women’s perfume, tempting and engaging, but possibly leading to a poor decision.

Fortunately for BP, Visa, and JP Morgan Chase (the issuer), I noticed a second asterisk. The card had been selected by Kiplinger’s Personal Finance as the “best gasoline credit card” in both November 2006 and 2007. This card was apparently worth a second look.

My loyalty calculator in full gear, I realized that according to the spending examples in the promotional banner, the blended funding rate (percentage rebate on purchases made with the card) was 4% during the introductory period and 2% thereafter. I also calculated that, even if I pumped all of my gas at the cheaper station, saving $.05 per gallon, I would have to use over 500 gallons of gas during the introductory period to equal the 10% rebate offered through the card, way beyond my level of demand.

Several questions popped into my head:

• With Big Oil increasingly viewed as the Darth Vader of commerce, would consumers consciously affiliate themselves with a cobrand gasoline card?
• Could using this payment device and consolidating fuel purchases make the “expensive” gas effectively the better alternative?
• How did Kiplinger’s justify their rating of the card as best in class for two years running?

From the bottom up, the Kiplinger’s web site didn’t provide much detail, though more could possibly be found in their print edition. My own evaluation is that the 2% rebate level is above most cards in the market, there are no limitations on the amount of rebates that can be earned, and the interest rate on the card is reasonable with a range of 12.24 – 20.24% depending on creditworthiness. Rewards options include $25 BP gift cards, checks made payable to the cardholder, or a donation The Conservation Fund, an environmental charity.

In all, the card represents a strong offer. Kiplinger’s top rated cash rebate card was Amex Blue Cash, and it topped the BP offer for cardholders who spend more than $6,500 per year. At that level, the base rate of 1% cash back jumps to 5%. The rebate on fuel and other purchases does reduce the effective rate paid per gallon and with prices soaring near $4.00, the rebates are going to be $.18 – .20 per gallon even after the introductory period ends. The advantage is lost if fuel purchases are not consolidated to BP, and I question whether people have the discipline to capitalize on the opportunity.

Brand is another matter. This case reminded me that one person focus groups are deadly. Just because I am a frequent flyer and might not want to pay for a business dinner with a fuel cobrand card, does not mean that a huge market for the card doesn’t exist. Many people not only want rewards, but want them with more immediacy. Cash back, the preferred reward in most focus groups I have observed, is attractive to many consumers.

I was only at the fuel station for a few minutes, but I was reminded of these lessons:

1. Card acquisition is a numbers game and rich introductory offers are a highly effective tool
2. Lower cost of acquisition can justify stronger consumer value propositions and BP has adopted a model that is highly efficient
3. Analytical segmentation of customer data will not go out of style anytime soon as there is a “card for everyone” and the challenge is linking the offer to the right audience
4. Even when the economy is tough and an industry is out of favor, well planned Customer Strategy can shift the advantage between competitors

Bill Hanifin

There are some things that people just can’t live without these days. The mobile phone tops the list and, depending on your age and demographic, is closely followed by the Blackberry, iPod, Instant Messaging service, or Xbox 360.

Fortunately for bankers, the 7.16 square inches of plastic known as a credit or debit card is high on the list as well. Each of the associations has contributed to reinforce the importance of payment plastic in our lives. American Express implanted the enduring message “don’t leave home without it”. MasterCard successfully reminds us that their card is “Priceless”, while Visa punctuates the importance of cards by shouting “Life takes Visa”.

Once universal acceptance was established and association brands gained global recognition, it was the rewards business that propelled cards to their next phase of development. Though there is a card for everyone, reward cards continue to capture the highest levels of consumer attention and drive profitability for issuers.

Don’t believe me? Then hear what Visa, Tower Group and McKinsey have to say:

• A 2005 Visa study reported that 50% of all general purpose cards offered rewards in the US market and accounted for 77% of all purchases.

• The Tower Group reported that ““Reward programs may be a lifesaver for an industry experiencing a 0.3% response rate to card-acquisition letters and long-term threats from new technology such as cell-phone payments”

• McKinsey provided more evidence with this comment: “Loyal customers typically generate 30 – 70% more value than run-of-the-mill clients do”

This body of evidence for card rewards has a dark side. It exists in the strong sense of entitlement for rewards by most cardholders and the lack of differentiation in card reward program structure in the market today. The question is, where do we go from here?

To establish leadership in the issuing business, 4 key questions must be answered:

• How can the rewards game be played at lower cost?

• How can program liability be better managed?

• Can rewards currency be used to achieve multiple goals beyond retention?

• Is there life after “points”, and how will the next wave of innovation take form?

Answers to these questions are complex. To merely focus on cost control may jeopardize cardholder perception of the value proposition. The industry is in desperate need of true innovation and fortunately some answers are in sight. Current attention getting trends include Relationship Banking and Merchant Funded rewards programs. Successful examples of each concept are in evidence though relationship banking has yet to promulgate through the industry and merchant funded rewards programs need further evolution.

Not yet on the radar is a rewards structure that will solidly engage the 80 million Americans known as Generation Y (the Millennials). Social networking and viral concepts including the patent pending “Xcelerator” might hold answers for the industry to break the code with younger consumers, but market trial is needed for validation.

One key to creating true innovation might be to set aside the traditional “product launch” mindset and approach the business from a consumer/cardholder viewpoint. Granted that many card marketers might discard this comment as dated, but if that’s so, why don’t we see the tree bearing fruit?

As example, I was on the ground in 2002 when the first Relationship Banking program was launched in North America. Despite the success of that program, I have not seen independent research indicating that offering rewards across multiple products will significantly change consumer opinion of their financial institution. In other words, are we creating products that enamor industry practitioners while we miss the mark with our customers? Are we even sure that consumers desire a relationship with their bank or will service, trust, and advocacy define brand loyalty in banking?

The card rewards race will continue to intensify and the issuers which emerge to capture market share will be those committed to pursuit of true innovation and have their ears tuned to the customer drumbeat.

Bill Hanifin