Now that debit cards have "arrived," issuers are seeking a successful paradigm to help guide marketing strategies.
We've seen efforts ranging from "the uncredit card" to "plastic pocket money" to the "personal financial manager."
Unfortunately, most of these strategies are, by themselves, doomed to fail. They ignore an overriding reality of the marketplace: Customers still don't know what debit cards are. They don't quite know how they work. And they don't really understand the benefits debit cards offer.
Research is often no help. We've seen surveys indicating that consumers have heard of debit cards and know how they work.
Sadly, one-on-one interview follow-ups often reveal that consumers don't know how debit cards work at all.
Understandably, they are sometimes confused with secured credit cards, "for people who have a lot of debts and can't get a credit card."
Add to this the confusion over where automated teller machine cards fit in, plus whether a given card is an off-line or on-line instrument, and you've got a product whose marketing strategy requires an educational overlay - to teach consumers about the product and the category. In short, something that smacks of what marketers hate most: generic advertising.
Marketing wisdom holds that generic advertising - selling the category at the expense of the brand - is a waste of money. True enough, but only if consumers have sufficient category knowledge to make a brand distinction.
Remember, most marketing wisdom is derived from work with packaged goods - a far cry from financial services, where we can build real advantages into our products (if we can only explain them).
Today's debit card situation is very much like the one faced by the Interbank Card and BankAmericard in the early 1970s.
Americans already had charge cards issued by department stores, gas cards issued by the oil companies, airline cards issued by the airlines, plus American Express, Diners, and Carte Blanche for business travelers.
Who needed another card? And what for?
Obviously, sending out live cards helped sell the category in its infancy. But very early on, card marketers had to explain to a largely skeptical banking public just how a bank card worked, where it could be used, and what benefits it offered.
Only after the category was introduced would we hear slogans like "Not just Visa. Citibank Visa." Before that, it was strictly "Why a bank card? And by the way, why Visa?"
The same situation obtains for debit cards today. We believe that the credit card marketing model offers debit card marketers several important lessons on introducing the product, making the branding more effective sooner, and acquiring more bank customers through smarter debit card marketing, using techniques developed for credit cards.
More important, the credit card model identifies proven ways to maximize branding during the category sell.
Almost without exception, product introductions should begin with existing customers. If you can't sell something to a customer who has a relationship with you, chances are you won't fare too well with strangers.
This means marketing to your data base using direct mail to determine the identifiable attributes of promising debit card prospects.
A good place to begin is the credit card portfolio to determine what mix of attributes (ATM activity, checking account activity, revolver versus nonrevolver, home equity customer, auto loan customer, demographic skew) best predicts debit card acceptance.
Use your mail to educate your audience, not just brand your debit product.
If you're marketing an on-line card or if your debit card is subsumed under your ATM card, give your customers a detailed brochure that shows them exactly how the card works - not just at ATM machines but at the machines and PIN pads they'll find at gas stations, convenience stores, supermarkets, and other retailers.
Similarly, if you're marketing an off-line card, show it in action. Don't just tell your customers to use it just like a credit card, show them, again, in the places where they'll be most apt to use it.
And in both cases, don't assume your customers know what a debit card is. They don't.
Whichever metaphor you use, cash or checks, make clear the benefits of using a debit card over cash. When you're attempting to change an ingrained behavior, repetition is the tool of choice.
The advantages? By using direct marketing and capitalizing on the relationship you have with your customers, you can actually brand the category.
Aggressively assign proprietary names to every step and component in the debit card transaction. If you're the ABC Bank, everything can bear your brand: "ABC Cash," "ABC Card Reader," "ABC Cash Store," and so on.
In doing so, you begin to exercise de facto ownership of the category itself. (Just imagine, for example, if your bank owned the term "ATM Machine.") The time to begin naming things is now, while the category is still in its infancy.
When credit card growth slowed in the 1980s, issuers developed ways to acquire cardholders wholesale. Thus were born affinity card marketing, lifestyle marketing, and cobranding.
Instead of marketing to single prospects, issuers began to market to entire groups of prospects, capitalizing on the power of some preexisting relationship.
Hence, alumni cards, fraternal cards, special interest (lifestyle) cards, and, most recently, cobranded cards.
How does this impact debit card marketing, since debit cards are deposit product instruments? Two ways.
First, in the coming era of interstate banking, the debit card can be a deposit product customer acquisition tool in much the same way credit cards are debt product customer acquisition tools.
The future debit card, most likely something along the lines of AT&T's rumored 100-kb smart card, will represent the branch in the emerging global "bankless banking system." It will be the branch your customers carry with them.
Second, you'll be able to wholesale debit cards just as you do credit cards. Credit unions, the ultimate in affinity marketers, are already doing this, after a fashion.
Recently, Purity Supermarkets of Massachusetts took a step toward cobranding with a massive integrated POS marketing promotion built around an on-line debit product. This is just the beginning.
We expect cobranding activity to build in the retail sector, since it's widely viewed that debit cards promote incremental sales over cash and check purchases.
Moreover, mega-retailers want on-line debit cards because they pay smaller interchange fees. Look for them to lead the charge to cobranding of debit cards.
Modern credit card marketing is barely 25 years old. But those years have taught us a lot about selling personal financial services.
Consider those lessons well, for they will enable debit card marketers to avoid the pitfalls of the past and hasten the advent of the cashless society.
Ms. Valenza and Mr. Butler are the principal partners of Valenza, Butler, a marketing consulting firm. They are veteran financial services marketers who have, in recent years, worked on the launch of AT&T's Universal Card, American Express' Optima Card, and several MBNA affinity, lifestyle, and cobranded products. This article is based on Ms. Valenza's recent speech to the Direct Marketing Association in San Francisco.
