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At Discover Card, Cash is King

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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?


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