The Acid Test of Perceived Value

  It's been exactly 13 years since I had the privilege of helping pen a MasterCard International press release introducing the first cobranded credit card to the American consumer.
  It was March 1990 in New York, and MasterCard Chief Executive Alex W. "Pete" Hart coined the phrase "cobranded" to the media throng in attendance for the announcement of the AT&T Universal Card. How many that day realized the impact the AT&T Universal Card would have on the card industry?
  On the heels of that announcement came a flurry of cobrand activity as the GE, GM and Ford cards followed with media launches that introduced reward and rebate offers to consumers through the use of a financial payment vehicle.
  In a year, these new cobranded programs were changing the dynamics of the credit terms that fueled the explosive growth of Visa and MasterCard and their members up to that point. "Free for life" or "turn your plastic into steel" were the marketing cries of the new cobranded card programs emanating from these prominent brands.
  In the heat of the early '90s cobrand launches, Visa proclaimed at an industry conference that it would never be known as the card association that introduced the "pizza card." Well, pizza had never gained recognition as an item of high perceived value for cardholders, but the categories of gasoline and groceries certainly became an early focus of cobranders.
  While more than a decade of debate has addressed whether cobranding has worked-from evaluating databases and distribution channels to program economics-I conclude that it's really the consumer's perceived value that makes a program successful, no matter the cache of the brand or the amount of mailable names the brand's owner can deliver.
  To defend that conclusion, would we not agree that cards offering frequent-flier miles and lodging rewards generate the highest usage? And while 13 years ago, retail was considered one of the more lucrative cobrand opportunities, a whole set of other problems related to co-existing with private-label programs has needed to be addressed.
  We can point to the failed attempts with the grocery and gasoline categories and conclude that their rewards weren't compelling enough for the consumer. That leads to the conclusion that travel and entertainment possesses the most compelling consumer proposition in cobranded card programs. It's also helped me to formulate a simple perceived-value acid test that I address when evaluating a new cobranded card product:
  * Is the cobrand rebate/reward program aspirational? Will the cardholder see real value in the reward? Travel, dining, and entertainment score high. Grocery, gasoline and "me too" retail discount rebates are perceived as valueless.
  * Is the loyalty program attainable through points and rewards? Grocery cobrand cards offering luxury cruises require a lot of spend, and a card offering a sleeve of golf balls at a $3,000 redemption threshold isn't motivating to the average golfer.
  * Finally, is the program sustainable? This question probably reflects the failure of so many well-intentioned programs. One law of marketing states that any consumer campaign has a lifespan of five years. Faced with that challenge, it's hard to keep cardholders focused. What was once a loyal brand shopper is now a fickle consumer. Keeping a program fresh and vibrant is where the partner alliance sometimes fails.
  So might there be a hybrid spinoff of today's T&E-oriented credit card rewards? I think the next generation of rewards can be created through lifestyle products, or what many call "experiential" cards. This would be a card that can deliver access to a hiker, biker, or adventure traveler's favorite lifestyle or passion.
  Successful cobrand issuers state that they can deliver marketing and consumer payment information that is most valuable in a partner relationship. But I say many issuers really haven't provided that skill set.
  With their large databases of demographic information, more issuers should be looking at their cardholders who are traveling, golfing, skiing, cruising or enjoying a healthy lifestyle. If issuers spent more time showing how they can separate the demographics of their portfolios to identify large lifestyle segments, then partners would be more apt to embrace the cobrand concept.
  The Coca-Colas, Procter & Gambles and Gaps, just to name a few, are major brands that would certainly like someone to help identify their customers' lifestyle habits. Nothing would make them look smarter or generate a more loyal consumer than knowing how to reward such habits.
  Cobranding has seen a resurgence in the past year. Many partners are changing issuers, new and exciting programs are about to be announced, and many categories of retail are revisiting the cobrand strategy.
  Can the news be as big as AT&T was 13 years ago? It's up to the issuers to lure these brands back for another look. And only improved marketing strategies and segmentation analysis to find a better way to increase the consumer's perceived value of these programs will make potential partners stop and look ... again.
  Steve Apesos is managing director of Corporate Sports Incentives Corp., a Burlington, Mass.-based loyalty program developer, and a former MasterCard International marketing executive. He can be reached at steveapesos aol.com.