Fuel Rewards® Program Coalition Loyalty-Based Card-Linked Offers: A New Digital Era for Loyalty Marketing

Coalition Loyalty-Based Card-Linked Offers:A New Digital Era for Loyalty Marketing

Strengthening the Appeal of Card-Linked Offers with Frequent, Reward-Earning Opportunities in a Growing & Broad Coalition Loyalty Network

by Brandon LogsdonPresident & Chief Executive Officer, Fuel Rewards® program

fuelrewards.comCopyright 2015 Excentus Corporation. Fuel Rewards® is a registered trademark of Excentus Corporation. GROUPON is a registered trademark of Groupon, Inc. Facebook is a registered trademark of Facebook, Inc.

Fuel Rewards® Program Coalition Loyalty-Based Card-Linked Offers: A New Digital Era for Loyalty Marketing

Card-linked offers (CLOs) have paved the way for the convergence of payment transactions with coupon/discount delivery, are bringing more customers through the doors of participating merchants and are keeping interest high in credit/debit cards that provide rewards, points, daily deals, cash-back savings or discounts.

But CLOs are ready for a new wave of participating merchants who not only want to deliver coupons and discounts, but also want more frequent and steady customers, more data-driven insights into their customers’ transactions, higher sales and greater ownership of the loyalty they often share with the financial institutions that issue the cards.

CLOs are also facing a new generation of mobile-minded consumers who want their CLO credit and debit cards to earn valuable rewards from a larger, multi-merchant network of stores and brands. The coalition loyalty-based CLO will give merchants a larger stake in the loyalty process, support proactive merchant-specific marketing opportunities, embrace the behaviors and desires of mobile-empowered customers for multiple earning opportunities, and deliver universal value in rewards that can be redeemed in a nationwide coalition loyalty program as savings on fuel at the pump.

The Fuel Rewards® program outlines how this new CLO platform will play out to the benefit of merchants and consumers across the nation.

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Fuel Rewards® Program Coalition Loyalty-Based Card-Linked Offers: A New Digital Era for Loyalty Marketing 3

Card-Linked Offers (CLOs) have long promised to take advantage of the power of digital marketing and the growing volume of data about consumers’ preferences and transactions. CLOs have been heavily promoted as the Next Big Thing for driving more traffic to specific merchants’ brick-and-mortar locations, boosting sales and deepening customer loyalty in the same way that affiliate marketing programs boosted sales for online merchants over the last 15 years.

But CLOs haven’t quite delivered on their promises.

The driving force behind CLOs has always been a straightforward proposition: credit/debit cards that feature merchant-funded discounts, cash back, points and rewards delivered with each swipe of a consumer’s credit or debit card for each completed offer. Traditional CLOs have a lot in common with Groupon and other daily-deal platforms in which consumers select or pre-pay for specific offers from merchants. In both CLO and daily deal programs, customers have to proactively search for the right offers, and each discount or reward is limited to a single transaction at a specific merchant.

To date, merchant-funded CLOs have proven their ability to deliver short-term sales and new customers. But like the daily deal, CLOs have not built the kind of long-term, tangible and sustainable loyalty that generates sales — increased and ongoing — from customers who visit frequently and have developed a true connection with the merchant. Momentum behind CLO models began to increase in 2010, when Facebook became the most popular social media destination in the world and online retail sales began to equal

Card-Linked Offers: The Evolution of a Loyalty Product

brick-and-mortar sales. CLOs began to take advantage of new data available from an increasingly digital, social and mobile retail marketplace. These newer CLOs allowed consumers to earn discounts from a wider variety of shopping experiences, and tactics like email marketing created more personalized offers and communications. As CLOs have evolved to these digitally-powered products, however, they have nonetheless left participating merchants wanting more.

A lot more, including:

More repeat business and frequency from the new customers they acquire

More re-engagement and spending from lapsed or infrequent customers

More real-time opportunities to interact with their own customers

More reasonable commission fees, and more proof that CLOs attract more customers and generate more sales

More ownership of the brand loyalty they must share with the issuing debit and credit card firms

More business and deeper brand loyalty from existing customers

More access to rich transactional data from shoppers’ activities

Consumers, the second half of the CLO equation, want their spending to result in discounts and/or rewards that have everyday value and can be redeemed frequently and regularly. Additionally, they want opportunities to earn from a network of participating merchants rather than compartmentalizing their earnings with a single merchant.

Fuel Rewards® Program Coalition Loyalty-Based Card-Linked Offers: A New Digital Era for Loyalty Marketing 4

The Limitation of CLOs Today As currently and commonly used, CLOs have certain advantages and drawbacks. The upside of CLOs is that each card-linked transaction is transparent to the merchant, who is not responsible for IT or other technology implementations. A financial institution (typically the issuer of the credit/debit card) facilitates the CLO, with the capability to capture detailed transactional data.

The disadvantage for merchants is that the financial institution controls both the customer relationship and the data. As a result, the merchant does not have access to detailed customer infor-mation or transactional data, and usually cannot communicate savings opportunities or benefits directly to customers before or at the point-of-sale. Financial institutions usually wait to notify customers about reward balances until their next credit card statement — anywhere from 45 to 60 days after the customer has actually earned (and probably forgotten about) the purchase and ensuing rewards. This delayed-offer system stands in stark contrast to today’s mobile-reliant customers, who increasingly expect an instant response or redemption notification on their smartphone or mobile device.

Passive and Ineffective MarketingIn addition, customers participating in today’s most common CLO programs must proactively “opt in” to receive select offers and discounts, or they must intentionally search for relevant offers. Because offers aren’t targeted or pushed to them based on preference, this current form of CLO marketing becomes passive and ineffective, creating a potential breakdown in participa- tion for customers who may not receive optimal communications, may not understand the program, or do not take the time to actively read and choose offers.

Although CLOs do show results, the fact they are primarily “digital coupons” offering a discount on a single transaction hinders the ability to promote long-term loyalty to merchants, making it even more challenging to determine whether the earned customer loyalty is directed more heavily to the financial institution or to the merchants.

Moreover, the growth of brand-discounting daily specials has exacerbated a retail industry problem, eroding margins while enhancing loyalty to third-party dealmakers rather than deepening loyalty to the participating merchants themselves. The opportunity exists, however, to shift these CLOs in a new direction: one that is broader, more versatile and influential, and maintains ease of adoption and use. This new loyalty and coalition-based CLO delivers long-term sustainable loyalty to merchants, and everyday-value, frequently earned rewards to their customers.

Benefits

Customer participation

Merchant-directed reward levels

Reward currency

Earn structure

Reward immediacy

Customer data stream

Offline promotion

Curated Customer Offers/Content

Push Marketing

Traditional CLO

Opt-in

Unavailable or passive

Multiple currencies; partner-specific

Individual earn buckets

7-60 days

Partial access

Print only

Partially available (pull)

Limited, sometimes untargeted

Coalition Loyalty CLO

Always available

Available and targeted

Universal currency/fuel savings

Aggregate earn

<5 days

Insightful aggregate data

Print, brick and mortar

Always on

Frequent, geo- and transaction-targeted

Fuel Rewards® Program Coalition Loyalty-Based Card-Linked Offers: A New Digital Era for Loyalty Marketing 5

What today’s consumers want is a reinvented CLO-based program that allows them to earn frequent, value-laden rewards from everyday purchases — without having to put another loyalty card on a key chain. In addition, consumers want to earn rewards from a broad network of merchants, as well as the ability to redeem their rewards regularly and quickly. Merchants, too, are demanding increased frequency, sales, and effectiveness of their loyalty marketing programs, which include CLO-driven offers.

Combined, consumers’ and merchants’ expectations set the stage for the roll-out and adoption of these next-phase CLOs, characterized by an updated, multi-faced, more utilitarian loyalty-driven format. These coalition loyalty-based CLOs break the one-card/one-merchant mold by allowing loyalty program members to connect their credit and debit cards to a broader merchant network. Instead of earning discounts and rewards with a single merchant, consumers can earn rewards cumulatively and from a broad network of merchants within a coalition loyalty program.

Various credit/debit card purchases made throughout any given day, week or month — on apparel, dining, electronics, home improvement items, sporting goods, personal care items and more – all have the potential to earn rewards, and the rewards accumulate quickly and frequently within this new coalition loyalty-based CLO.

The benefits for merchants are clear. They gain an affiliation with a broad merchant network and its equally broad customer base. They gain the ability to offer universally appealing, easily

earned and easily redeemed rewards that touch every major consumer demographic. In this new coalition loyalty-based CLO environment, anonymized aggregate customer data is captured, analyzed and shared with merchants in near real-time, a competitive advantage for participating merchants that are eager to track and optimize their offers, fine-tune marketing strategies, enhance mobile marketing initiatives and boost customer loyalty.

Moreover, participating merchants can deliver a common reward that is fundamentally, regularly and universally valuable to consumers in the form of everyday savings on fuel – a value they can enjoy by watching the price roll back each time they fill up at the pump.

A New, Results-Driven Format: Coalition Loyalty-Based CLOs

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Collective Earning Capabilities, A Common Reward Operated within the context of a coalition-based loyalty program, these CLOs go deeper than the commonly used model. Today’s merchants can experience true loyalty by combining ease of use, variety of participation options and a coveted rewards currency to create a winning value proposition for consumers. They also can support more personalized and direct communications with customers, and they have access to quicker, richer, more insightful data based on consumers’ credit and debit card transactions. The new capabilities, opportunities and applications of the CLO platform powered by coalition rewards shift industry thinking about loyalty and loyalty marketing — away from standalone and silo-framed loyalty programs and toward a broader program with network benefits and nationwide reach for earning and redemption.

Benefits for merchants and marketers Coalition loyalty-based CLOs give marketers access to and ownership of new data points and messaging opportunities that differentiate their rewards program from other rewards programs.

Benefits for consumers and cardholders Coalition loyalty-based CLOs give consumers what they want: more frequent earn-burn cycles and cumulative rewards that are valuable every day of the week.

Built for the mobile marketplace This flexible new CLO platform keeps pace with today’s fast-changing marketplace, where transactions can be physical, digital or mobile, and where smartphones and other mobile devices can serve as the tools and avenues that make credit and debit cards easy to link to any program, easy to track/redeem rewards and easy to build loyalty that’s personalized and frequent.

Coalition Loyalty-Based CLOs Expand Merchant, Member OpportunitiesFrom beginning to end of the transactional process, several key factors differentiate new coalition loyalty-based capabilities from their predecessor CLOs. First, customers who choose to enroll their credit or debit card in a coalition loyalty-based CLO have ongoing access to available offers, a change of pace from existing CLOs that place the onus on consumers to search for and find offers that interest them (“click it to get it”). Coalition loyalty-based CLO customers are free to participate in all existing offers, which are also baked into and supported by the digital-mobile channel. CLO program administrators can use the mobile channel and push notifications, for example, to keep consumers updated about promotions and offers. Mobile messaging capabilities also provide

real-time data to better measure how specific messages and campaigns influence consumer behaviors or shopper-to-buyer conversion. Participating merchants become proactive players in the CLO marketing experience rather than passive affiliates.

In addition, coalition loyalty-based CLO discounts and rewards can be communicated to the customer quickly by text message or email. The rich data set grows with each transaction, enabling merchants to create and deploy increasingly personalized communications and offers.

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Coalition loyalty-based CLOs are also card-agnostic in that they are not affiliated with one specific bank or financial institution. The data benefit to the merchant is immediate, and customers can earn a highly-desired currency by using the card of their choice with a wide variety of merchants.

For example, a typical customer may visit a store and pay with a debit card for one purchase, and then buy online from the same merchant using a different credit card. In the traditional CLO environment, those discreet transactions appear to originate from two distinct customers. But because coalition loyalty-based CLO transactions are matched with personally identifiable information (PII), the platform can trace both of those transactions to a single customer rather than mistakenly record them as unique purchasers.

A coalition loyalty-based CLO platform can track data across cards and banks, incorporating and linking historical information to individual customers to provide a holistic view and support more meaningful, relevant marketing initiatives.

The enhanced data stream helps identify and diffuse common CLO issues like cannibalization. Merchants who are unable to link customer visits directly to an offer have no idea if these customers were attracted by the offer, or simply planned to visit anyway. Coalition loyalty-based CLO data is able to profile cardholder behaviors to determine why a customer engaged. Did she respond to a particular offer by returning to the store after not shopping recently? Did she purchase more as a result of his return to the store? Did she visit more frequently as the result of a particular offer?

Coalition loyalty-based CLO data is able to profile cardholder behaviors to determine why a customer engaged . . . Did she visit more frequently as the result of a particular offer?

Fuel Rewards® Program Coalition Loyalty-Based Card-Linked Offers: A New Digital Era for Loyalty Marketing 8

A Superior Brand Loyalty EngineThe Fuel Rewards program’s coalition loyalty-based CLO platform is linked to a universal currency with a proven track record of changing consumer behavior. Fuel Rewards savings, combined with aggregate earning power on daily purchases, create stronger customer loyalty than standalone programs. Powering a coalition loyalty program, this seamless, elegant platform rewards both customers and merchants.

This new platform’s approach to frequent earn-redeem capabilities sets it apart from other CLOs. Although U.S. households are enrolled in 29 loyalty programs on average, they are active in only 12 because of mediocre value propositions, according to the 2015 COLLOQUY Loyalty Census.

Colloquy highlights several marketing factors that limit member participation in loyalty programs:

Focusing on customer acquisition at the expense of customer engagement

Basing strategies on loyal behaviors but not asking customers what they need/want

Assuming that a one-size-fits-all program is sufficient while ignoring the value of personalization

Treating all members as equally valuable rather than relying on analytics to identify and leverage members’ significant and unique differences, revenue contributions and roles

Providing diluted benefits and generic experiences

The Fuel Rewards program’s coalition loyalty-based CLO platform, however addresses those factors and reduces long earn-and-burn cycles by allowing customers to aggregate the rewards they earn from multiple merchants into a common earn bucket. Every dollar spent with merchants involved in the Fuel Rewards program contributes collectively toward fuel savings — a benefit that is instantly communicated with each transaction at the mall,

Repeat customers spend

67% MOREthan new customers

shopping center, grocery, restaurant and online store, and then reinforced at the pump when the customer receives an immediate, tangible discount while fueling up. That immediate feedback loop encourages repeat customers, and according to a 2014 study from research firm BIA/Kelsey, repeat customers spend 67% more than new customers.

Fuel Rewards savings — applied toward an everyday commodity — have a high perceived value among consumers, much higher than the actual cents-off amount. If that value were simply cash-back at individual merchants, customers would not only have a lower perceived value of the reward, but they would have to spend far more in order to earn enough points to redeem. Frustrated customers frequently “give up” on earning rewards on daily purchases because it takes too much time and too many purchases to earn a truly substantial or valuable reward in standalone loyalty programs.

Instead, what we’ve seen within the Fuel Rewards program is increased customer participation in the coalition loyalty-based CLO environment in order to earn the coveted savings on fuel. Instant notice of earned rewards and frequent redemption opportunities have the power to create substantial and long- lasting changes in consumer behaviors, including more frequent visits, more spending per transaction, higher customer participation in loyalty programs and increased loyalty to the brand. Members get real-time satisfaction from frequent tracking, redemption and awareness of the amounts of rewards they’re constantly earning, constantly saving and frequently redeeming. Data shows, in fact, that upwards of 75% of consumers redeem fuel savings within 20 days of earning rewards, compared to 35% redemption rates (Forrester Research) over the life of the reward in general loyalty programs across the United States.

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For participating merchants and partners, the data stream and IT capabilities of our coalition loyalty-based CLO platform deliver the strength of coalition in a plug-and-play format. This turnkey platform manages all customer relationship management activities (CRM), consumer sign-up and membership, technology and customer touch points. Moreover, the very nature of the coalition offers piggybacked brand awareness and extensive cross-marketing opportunities with other merchant members. (Learn more about coalition loyalty in our white paper Coalition Loyalty: A Roadmap for Success in the U.S..)

With the added capability of an updated mobile app, enhanced data collection and more personalized and immediate customer communication, coalition loyalty-based CLOs deliver on the long- time promise of existing CLOs, and they even promise a futuristic vision. With all of the right technologies and transactional solutions in place, this upgraded futuristic iteration of CLOs has the potential to streamline the entire payment/earn/redeem process into a single-swipe, omni-channel product. Future

Coalition Loyalty-Based CLOs: A Platform for the Future, Powering Long-Term Loyalty

customers and merchants would finally achieve seamless bundling of disparate loyalty, digital, wallet, card and mobile platforms.

That solution is still in the not-too-distant but still misty future, but today, it’s time for CLOs to offer more. The upgraded, updated, modernized coalition loyalty-based CLOs deliver what merchants have been asking for: loyalty programs that engage more customers, increase overall sales, collect more data and transactional insights, and deepen the brand’s ownership of the loyalty relationship.

Where existing CLOs are valuable for some merchants, coalition loyalty-based CLOs represent the evolutionary solution that can take advantage of technology, mobile capabilities and long-understood consumer demands for a 21st-century loyalty program that truly meets their needs. This gives merchants the platform they have long sought to host and manage loyalty programs that truly do deliver more customers, more sales and deeper brand loyalty.

About the Author With over 13 years of experience at Excentus, Brandon has been the driving force behind developing a first-of-a-kind nationwide coalition loyalty program and engaging in strategic relationships with our cornerstone partners, Shell and MasterCard. In his role as CEO, Brandon is also a member of the Excentus Board of Directors and oversees three strategic Excentus business units — the Fuel Rewards coalition loyalty program; our subsidiary Centego, which provides enabling technology and services for private-label fuel-based loyalty programs, and our IP portfolio. Prior to joining Excentus in 2002, Brandon worked at GTE Internetworking, JPMorgan Chase, and iChoose, and was also the Co-Founder and Principal at Bloomin’ Partners Inc. Brandon holds a BA in Finance and Marketing from Texas Christian University (Go Frogs) and he is a board member for the North Texas chapter of the Folds of Honor Foundation. When he’s not spending time with his wife and three children, Brandon is making triple-doubles on the court or chasing that elusive first hole-in-one. You can reach Brandon at blogsdon@excentus.com.

Media

To schedule an interview with Brandon Logsdon, please contact:

Vanessa Horwell vhorwell@thinkinkpr.com (305) 749.5342 x232

Amanda Williams awilliams@thinkinkpr.com (305) 749.5342 x238

Fuel Rewards® program

Excentus Corporation 14241 Dallas Parkway Suite 1200 Dallas, TX 75254

info@fuelingloyalty.com

“The Fuel Rewards program began as a technology platform that facilitated grocer fuel discount programs, and since then, our common reward (fuel savings) has capitalized on the emotional connection between the cost paid for each gallon of gas and the ability to immediately see a rollback of fuel price at the pump. We wanted to help consumers with this pressing problem in a practical way, while also creating sustainable value for our network partners.” Brandon Logsdon, President & Chief Executive Officer

About Excentus At Excentus, we create programs that help lower the cost of everyday life. Whether through direct-to-consumer programs like Fuel Rewards® and fuelperks!, or through companies utilizing our Centego products and services, Excentus proprietary software is the engine helping numerous loyalty and marketing programs drive down the cost of everyday commodities like gasoline. In fact, since 2012 we’ve helped consumers and small businesses across America save over $500 million at the pump. Creating real savings that positively affect the everyday lives of real people — that’s what Excentus is all about.

Founded in 1996 in Dallas, TX, Excentus is a privately held company with more than 200 employees. For more information, please visit excentus.com.