Private Label

Concept

Assessment & Recommendations

By: David Carrithers, Businesshive

General Insight “For retailers, the value of private label credit cards is undeniable.

Research shows private label customers are more likely to read circulars and visit stores. They’ll also make purchases twice as often as bankcard or cash customers, and are more likely to make impulse purchases and buy expensive SKUs. For these reasons, a growing number of retailers are turning to private label programs to stimulate sales by giving customers added buying power.” April 2000, Discount Store News

“ Frequent flyer programs are the strongest of all co-branded programs. They are, in essence, the No. 2 currency. People typically spend $18,000 to $20,000 a year on cards that accrue mileage points, versus $3,000 on all other types.” April 1999, Advantage Consulting Group Research

Standard Definitions

Private Label - allowing a client to put its own brand on another companies’ product(s) or services, without any representation or awareness by the marketplace/buyers of the private label brand of the true manufacturing/ supplier.

  Co-Branding - takes place between two companies by

placing both their brands/logos on one product or service, making the marketplace and end-user aware of both brands. Each party gains increased market reach and awareness, plus the brand value extension goes from one company’s brand to the other.

High Level Findings

Confusion around private label

Team is extremely busy Not sure of the timing on

private label Positive & supportive Forced sense of urgency

on private label Growing pains and

stabilization

Private label and/or co-branding can be done

Utilize existing resources to develop and launch

Additional resources to sale, grow and support

Timing to launch between 30 and 45 days

Should have a co-branding option to WebMiles

High Level Findings Bankcard and private label

credit cards “ripe opportunity”

Bankcard market will require a “menu” pricing approach

Infrastructure has been build use it for private label

Concern on a single retailer earning program = “attainability”

No merchandise awards

Whatever is done it needs to be easy and right for the partner

Look at establishing a private label network approach

Change the name of the company from WebMiles

Minimal development efforts required

Recommendations Private label is not co-

branding Develop co-branding

approach Develop private label

approach Categorize private label

under “Alternative Distribution”

Marketing drive co-branding (they own brand strategy)

Business development incubate private label

Hire a sales person for the bankcard & private label market

Sales person sells both co-branding and PL to card markets

Co-branding pricing should be WebMiles Plus

Private label is menu pricing (charge for everything)

Recommendations

Private label should be targeted at big opportunities (100 million points +)

Co-branding should be offered to tier 1 and top level tier 2 WebMiles partners

“Powered By” and traditional co-branding

Launch co-branding in 30 to 40 days

Launch private label sooner, long sell in (200 days +)

Hold off on private label network until private label approach defined and underway 90 days

Concerns on implementation and CSR phone support (either approach)

Name owners quickly

Recommendations

Rename WebMiles company around loyalty and technology theme

Do not offer merchandise Maybe develop travel

related options:- Cruise- Land packages- Experiences- Anything needing air travel

Hire a private label manager, in the interim name an internal owner

WebMiles Definitions Alternative Distribution: Any application of existing WebMiles

technology, processes, reward fulfillment and people in a non-standard way, new market or private label approach.

  Private Label: The selling and use of WebMiles technology,

processes and services where as the WebMiles brand is not promoted and/or used.  

Private Label Network: The creation of regionalized WebMiles partners and offerings, that could either be branded WebMiles OR not branded.

  Co-Branded WebMiles: The use of the existing WebMiles brand in

tandem with a sponsor partners brand and logo. Each brand having equal representation.

Marketplace Insights

Netcentives & MyPoints offer both private label & co-branding

Netcentives & MyPoints staffing up on both

S&H adding a co-branded card person

Beenz focused on international development

MyPoints, S&H, Beenz all have a co-branded card

Examples

Examples

Review Of Co-Branding Existing WebMiles product Access to all partners Everything in the existing

program except branded About promotion &

communications Pooling of earnings allowed Increased sales of 20% over

3 years Allow entire sales force to sell

(except to card programs)

Includes:- Co-branded Web Pages- Co-branded Enrollment - Co-branded T&C- Co-branded account page- Co-branded shopping

page- CSR support- Co-branded member

communications

Review Of Co-Branding Pricing Approach:

- Add on pricing- Site set up ($10,000 to

$20,000)- Monthly page support fee- Set up CSR ($3,000 to

$6,000)- Any materials produced

at cost plus (i.e. newsletters, e-mail campaigns, etc.)

- If someone wants a menu pricing approach, turns into private label

Development Needs:- Template ability for co-

branded sites- Sales support materials- CSR Kana set up- Co-branding agreement- Implementation process &

statement of work- Sales force training- Database set up for

tracking co-branded programs & pooling

- Finalize pricing model

Sales & Market Opportunities

Regional/ Niche Bank Cards Smaller Private Label Cards “Targeted Programs” a program within a program

(i.e. resorts, hotels, universities) Debit Card/ Web Accounts Shopping Malls/ Shopping Portals Loyalty program enhancement opportunities (i.e.

partner funded programs) Other…

Why Offer Co-branding?

Builds longer term relationships Association with established brands Better acceptance by potential partners Free partnership marketing opportunities Companies like to see and use their brands Open new doors The competition is offering it The market wants it Can add value and profit to WebMiles

Co-Branded Decision Support Can the approach be development by WebMiles relatively

easily? Yes Can the approach be supported/operated by the WebMiles

team? Yes Can the approach add value and revenue potential to

WebMiles? Yes Is there market demand for the approach?

Yes Does it support the WebMiles mission and plan to be the

“leading provider of long-term networked customer loyalty solutions”?

Yes

Review Of Alternative Distribution

Private label is not co-branding

Offer all the elements of WebMiles but no brand

Custom, very large programs 1 million + members

Will take time to sell in Pricing is a menu approach,

charge for everything Managed within and by

WebMiles

Requires a private area within the database (not shared data)

Customer Service perceived to be sponsor client

Work with sponsor client customer service

No marketing by WebMiles Client may want additional

partners, WebMiles will negotiated at a fee

Review Of Alternative Distribution

Allow sponsor client specific awards with a fee

Conversion to WebMiles (i.e. spurt activity, etc.) at a fee and only one way

Only sold by the card sales person at start

First year may generate 0 to 1 sale (500,000 to 1 million members) growing to 5 to 8 programs in year 3 at 9 million members

NO WebMiles brand

What Private Label Includes:- Web support

- Program promotion page

- Enrollment page

- T&Cs

- Account balance

- Shopping

- CSR Support- Member communications- Reporting

Review Of Alternative Distribution

Pricing Approach:- .01 per point – minimum order

100 million points- Breakage retained by

WebMiles- Sponsor client gets float- Set-up Fee ($50,000 to

$100,000)- Monthly member account

processing fee (2 cents to 10 cents an account)

- Monthly Reporting Fee ($5,000 to $10,000)

- Monthly Site Hosting Fee ($6,000 to $25,000)

- CSR Support ($35 to $45 an hour)

Member communications (cost plus 15%)

Any cost for stand alone or custom hardware (cost plus hours fee)

Order processing fee for reward ($12.50 to $14.00)

Any special handling fees at cost plus hourly consulting rate of $125

Review Of Alternative Distribution

Development Needs:- Template ability for

private label sites- Sales support materials- CSR Kana set up- Private label agreement- Implementation process &

statement of work- Hire sales person- Database set up for

private label - Finalize pricing model

Sales & Market Opportunities

Large Bank Cards Large Private Label Cards T&E Corporate Cards Large Debit Cards/ Web Accounts Banking/ Financial Web Sites Card Management Companies (i.e. Household, GE

Capital) CRM/ Loyalty Companies Other…

Why Offer Private Label?

Already made investment into technology and infrastructure – available capacity

Builds longer term relationships (hard to eliminate) Larger clients will want it Companies like to see and use their brands Open new doors The competition is offering it The market wants it Can add value and profit to WebMiles

Private Label Decision Support

Can the approach be development by WebMiles relatively easily? Yes

Can the approach be supported/operated by the WebMiles team? Maybe

Can the approach add value and revenue potential to WebMiles? Yes

Is there market demand for the approach?Maybe/ Yes

Does it support the WebMiles mission and plan to be the “leading provider of long-term networked customer loyalty solutions”?

Yes

Conclusion

Demand for co-branding now! Private label will be harder to do than perceived Discover Card was a chance happening If WebMiles gets Discover Card “overnight” in the

private label business Competitive situation in both co-branding & private

label Private label = long-term opportunities Co-branding = short-term opportunities