Survival of the Fittest: How the Best Merchant Network + Effective Partnership Marketing = Not only Survival but a Way to Thrive

October 19, 2009

Panelists

Kristin DavenportVP, Business DevelopmentAndrew BonichiVP, Sales & Marketing Cruise and Vacation Group

Stef Erik AndersonFirst Vice President, Loyalty & RewardsSunTrust Banks, Inc.

Lars HolmquistChief Marketing OfficerVesdia Corporation

Loyalty Landscape

Reward Generation (“Earn”) Redemption (“Burn”)

In-kind Earnings:•Airlines, Hotels, Retail•Miles, Nights, Discounts

Payment Earnings:•Cards and alternatives•Base and bonus

“Points” Bank

Points

Miles

Gallons

Cash Value

Enterprise Earnings:•Cross-sell other products•One time & ongoing bonuses

Direct Partner Earnings:•Co-brands, affiliates, barter•One time & ongoing bonuses

Merchant Network Earnings:•In-store, online, local, partners•Always on bonuses and periodic promotions

Fixed Rewards: •Catalog or fixed inventory•Travel•Merchandise•Gift Cards•Charity, Cash, Savings•Customer redemption or auto-redemption

Variable Rewards:•Points as a currency in circulation•Use points or cash•Split pay (points and cash)•Online -“Burn Mall” or open inventory•In-store

Merchant Networks: 3 Constituencies, 3 Winners

1. ConsumersIncrease rewards earning power by 25%+Receive special retail offers and earn rewards

2. Financial InstitutionsDrive additional card usageReduce reward program cost per point by up to 20%Partner with attractive consumer brands

3. MerchantsAcquire new customers on a pay for performance basisIncrease basket sizeIncrease purchase frequencyGain additional market sharePartnership marketing

• Direct access to program members• Leverage multi-channel marketing

Industry Cross Channel Shopping Metrics

1 Source: Forrester, How Consumers Shop Across Channels, July 16, 20082 Source: comScore, Shop Local Annual Summit, July 16,2008

3 Source: North American Technographics® Finance, Retail, And Travel Benchmark Survey, Q3 2007

• Online sales growing1

Will grow to 11% of total retail sales by 2012Some categories have online penetration greater than 20% (computers, music, video, books, event tickets)

• Consumers still love to shop in stores25% of all online product related searches result in a purchase of that product - 63% are converted offline2

Even though consumers research online, they still buy offline (ROBO)3

What is Survival of the Fittest?

We are captivated by it – just look at what we are watching on TV!

What is Survival of the Fittest?

We are afraid of it – just look at what is happening to our industry!

So What Do We Do?

We really did learn what to do in Kindergarten!

DeterminationHard Work

PersistentSteady

ThoughtfulDiligent

1. Must meet merchant goals2. Sustainable competitive differentiation takes time3. Marketing claims must be achievable, not fantasy4. Communications need to be steady5. Don’t be fooled by bells and whistles, value matters more 6. Respect consumer preferences and how they shop today7. Online shopping portals are a conduit, not an endpoint8. A diverse, large and growing in-store merchant network is critical9. Network performance measurement and reporting is essential

A successful, sustainable merchant network requires Hard Work

Some Stories of Survival…

Merchant Network Survival Secrets

Cruise and Vacation Group Overview

Business strategy focuses on closed loop reward and loyalty programs in the areas of cardholder accounts andemployee benefits. Working with Vesdia since 2004.

Sustainable Competitive AdvantageRepresenting all of today’s top cruise brands, two worldwide escorted tour companies and more

than 500 resort properties with primary focus in the Caribbean, Hawaii, Mexico and Florida

Proven Value• The lowest available industry pricing • A vacation reward (cash back or points)• Exclusive offers, special cruise sales and sweepstakes • A seamless process for cardholders as they link directly to a program-specific rewards site• Reservations center, online quotes and online booking capability

Cruise and Vacation Group - Differentiation

Advantage Versus AggregatorsRewards to cardholders (revenue sharing) up to 5x greater 95% of bookings through reservations center versus onlineAgency conversion rate in excess of 50%Participate in 11 Vesdia programs including Sun Trust

Focus on Partner Goals:• Focus on enrollment• Focus on spend engagement (best value / best brands)• Spend Trends – In addition to the actual vacation purchase:

Pre-vacation purchasesOnboard or resort purchases (excursions, alcohol, gifts and incidentals, transportation, etc.)

Impact of Current Economy:• In a down economy, reward and loyalty programs move to the forefront• We have seen an increase in revenue even with substantial cuts in the cost of vacation products. (30%

increase in transactions and a 16% increase in revenue for the period 1/1 – 10/15 from 08 to 09) • Approximately 25% of our business is repeat business (value and customer service)• We are constantly adding new suppliers (resort properties, spa,

golf and ski vacations)

Cruise and Vacation Group - Promotions

• Selective participation in merchant network loyalty programs

• Featured Offers• Sweepstakes – Win a Cruise• Online, Email and Print Channels• Measurable results delivered

quickly• Chose to participate with SunTrust

to attract new customers in the Southeast

SunTrust Overview

Data as of 12/31/08 unless noted

• SunTrust Banks, Inc. (STI) is one of the nation’s largest and strongest financial holding companies.

Total Assets: $189.3 billion1,692 branches and 2,582 ATMs across AL, AR, FL, GA, MD, MS, NC, SC, TN, VA, WV and DC Through its banking subsidiaries, STI provides deposit, credit, trust, and investment services to a broad range of retail, business, and institutional clients. Other subsidiaries provide mortgage banking, brokerage, investment management, equipment leasing, and capital market services.

• Consumer and Small Business Payment Products4.8mm cards (over 85% debit)Nearly $6bn purchase volume in Q408

SunTrust Rewards BonusBuys

• Use your SunTrust card online or in-store at participating merchants and earn more SunPoints

• Launched in 2009 with bonus earning opportunities at over 500 merchants, including:

Online merchantsNational brick & mortar merchantsLocal and regional merchants

• SunPoints awarded range 1-20 points per dollar in addition to base earnings

• Promoted with integrated, multi-channel marketing

Sample Program Marketing

• Statements and Newsletters• Emails• Website placement

Sample Promotional Placement

Online Mall – Travel Category Offer Placement

Partnership Marketing Survival Tactics

Enhance offering through merchant partnershipsIncrementality needs to be demonstrated everydayHistorical customer purchase process is linear – issuer influence is weak

purchase < product < merchant < supplier < manufacturerNarrow the degrees of separation using a merchant network to move the process from linear to dynamic - with issuer influence strongerSupports “Live Solid. Bank Solid” positioning

BankSupplier

Merchant

Buyer

Merchant Case Studies

Vesdia Merchant Network Services

Vesdia brings together merchants and loyalty programs to influence consumer shopping behavior

Loyalty Programs:• 30+ Programs• 60+ million participants• Support leading programs:

Merchant Network:• Online: 750+• National in-store & catalogs: 85+• Regional & local: 2,000+• Restaurants: 8,500+

• Marketing strategy & support

• Reporting, data & analytics

• Reward processing & billing

• Performance & financial reporting

• Merchant & offer management

• Online mall creation & management

• Confidential, secure data storage

Case Study: Incremental Sales

• Merchant Profile: Specialty apparel/home decor with 350+ locations• Situation: Generate incremental sales• Solution:

Participated in multiple partnership marketing programs• Shopping incentive of 4x points/cash/miles to loyalty program participants• Eligible channels included in-store, online and catalog

Offer promoted through multi-channel marketing campaign• Benefit:

Total sales during the period increased 37% YOYNew shopper annual sales increased 18% YOY

Case Study: New Customer Acquisition

• Merchant Profile: Sporting goods/specialty apparel retailer with 70+ locations• Situation: New customer acquisition• Solution:

Participated in multiple partnership marketing programs• Always on shopping incentive of 3x points/cash/miles to program participants• Eligible channels included in-store, online and catalog

Marketing campaign with over 39 million impressions featuring merchant• Website placement on loyalty sites• Direct mail promotional campaigns• Email to opt-in participant base

• Benefit: Incremental sales from new shoppers = 890% ROI after funding rewards

Performance Metric ResultsNew shoppers as a percent of total shoppers 70%

Percent of sales attributed to new shoppers 72%

Percent of transactions attributed to new shoppers 68%

AOV increase for new shoppers vs. existing shoppers 7%

Case Study: Market Share Shift

Month 1 Month 2 Month 3 Month 4 Market Share Shift

Merchant Partner 42.6% 43.2% 45.5% 47.0% 4.3%

Competitor A 57.3% 56.7% 54.4% 52.9% -4.3%

Merchant Partner 71.9% 73.4% 75.3% 76.6% 4.6%

Competitor B 28.0% 26.5% 24.6% 23.3% -4.6%

Merchant Partner 76.7% 77.9% 79.2% 79.8% 3.1%

Competitor C 23.2% 22.0% 20.7% 20.1% -3.1%

• Merchant Profile: Quick service restaurant with 8,500+ locations worldwide• Situation: Market share growth and shift • Solution:

Participated in a partnership marketing program• Points based program with an offer of 12X points per dollar spent• Promoted brick & mortar locations within 13 states

Marketing campaign included print, billboard, direct mail, online and statement inserts• Targeted participants that shopped at merchant’s competitors

• Benefit: Increased market share relative to 3 top competitors over 12%

Q & A