Table of Contents
- INTRODUCTION
- Who is the target reader?
- Scope of the briefing
- How to use this briefing
- MARKET CONTEXT
- Introduction
- Co-branding was first introduced in the US in the 1980s
- Co-branding brings together the strength of an issuer and merchant
partner
- Co-branded cards are issued in partnership between an issuer and
merchant
- These partnerships leverage the assets and resources of each player to
create a strong value proposition, frequently including a loyalty offering
- On the product side, the key input from the merchant is loyalty
- Co-branded card programs are formed through either straight
partnerships, self issuance or the conversion of a private label portfolio
- Straight partnerships are the most common form of co-branding
- Private label conversions are on the increase
- Self-issued cards are quite uncommon
- Co-branding offers significant benefits to both parties
- Issuers benefit from higher spending levels, access to a customer
base, lower acquisition costs, cross-selling opportunities and added value
in a competitive market
- Access to the merchant' s customer base is the primary benefit
- Issuers can leverage the merchant' s customer base and distribution
network
- Lower acquisition costs compared to mass marketing is strong
motivation
- Co-branding adds value in a competitive market
- Higher spending levels relative to other payment cards generates
additional revenue
- Co-branding allows issuers to operate on a greater scale
- The primary benefits for merchants are additional revenue and sales
- Co-branding can lead to stronger brand attachment and loyalty from
customers
- A deepened relationship with cardholders increases customer loyalty
- Customer data can be used for marketing purposes
- The secondary benefit is revenue sharing
- The potential costs for both partners are considerable
- The issuer risks losing its own customers and reputation.
- The merchant risks losing revenue and reputation
- TRENDS IN CO-BRANDING
- Due to a combination of competition and the potential benefits,
co-branding is growing in importance
- Intense competition in many markets has forced issuers to look more
closely at co-branding partnerships
- Consumers expect more from their credit cards
- The proportion of co-branded cards in the market place has grown
- Co-branded cards are increasing in number relative to the rest of
the market in the UK
- This growth has played a role in the decline of the private label
card in this market
- Co-branding is now prevalent in many merchant sectors, leading issuers
to look beyond this "traditional" list
- The size of new co-branded card schemes has fallen as issuers search
for suitable partners
- Relationships between card issuers and their partners have evolved
- Merchants are becoming more involved in the distribution of other
financial products
- PRODUCT FOCUS
- Club models
- Basic Club models are the simplest form of loyalty program
- UK - The Jeep MasterCard is a typical automotive co-branded payment
card
- France- The Carrefour Carte pass is a typical department store
payment card
- Advanced Club Programs give cardholders a greater range of benefits
- Germany - The Porsche Card offers cardholders a wide range of
benefits
- Spain - The Champions league Card allows supporters to access
exclusive football based offers
- Points based models
- Basic points based programs
- United States - The Toys "R" us Visa card is aimed at young families
- UK - The Amazon Card aims to generate loyalty in a price competitive
market
- Advanced points programs
- Canada - The President' s Choice MasterCard is an example of a
self-issued card
- UK - The Tesco Clubcard credit card is attached to one of the UK' s
largest loyalty programs
- Multi-retailer programs
- UK - The Nectar American Express Card is part of the most popular
multi-retailer scheme in the UK
- Germany - The Web.de Barclaycard is part of a web-based multi-retailer
program
- FUTURE FOCUS
- The market outlook varies by region
- Co-branding will provide an opportunity for growth in slow growing
markets
- Co-branding will provide product differentiation
- Competition for merchant partners is likely to increase
- Co-branding relationships will continue to evolve
- Co-branding will allow issuers to increase market share in growing
markets
- Co-branding will only occur when it is profitable
- In the longer term, growing markets will mature
- However, co-branding will not be the answer for all issuers and
merchants
- The costs are high
- For issuers, margins will get tighter
- For merchants, the value of loyalty programs is contentious
- Both parties face reputational risk
- Ultimately, there are other ways for issuers and merchants to
achieve their aims
- APPENDIX
- Research methodology
- Cards and Payments database
- Future Readings
- Cards & Payments Team contact details
- How to contact experts in your industry
- List of Tables
- Table 1: Presidents Choice points awarded by PC Financial Services,
2006
- Table 2: President' s Choice, cinema redemptions, 2006
- Table 3: Datamonitor' s forecast for pay later card numbers across five
markets, 2005 - 2010
- Table 4: The number of co-branded revolving cards in the UK, 2001-2005
- Table 5: The proportion of co-branded revolving credit cards in the
UK, 2001-2005
- Table 6: The number of co-branded and private label payment cards in
the UK, 2001-2005
- Table 7: Current relevant Datamonitor publications, 2006
- Table 8: Future relevant Datamonitor publications, 2007
- List of Figures
- Figure 1: Defining card partnership models, 2006
- Figure 2: Combining brand and expertise in a co-branding relationship,
2006
- Figure 3: The average co-branded card has twice the average annual
spend levels, USA 2004
- Figure 4: Payment cards offering rewards have increased in popularity,
USA, 2004-2005
- Figure 5: The proportion of co-branded cards being issued has grown,
USA, 2003 - 2005
- Figure 6: The proportion of co-branded cards in the market place has
more than doubled, UK, 2001 - 2005
- Figure 7: In the UK, co-branded cards have tripled in number, whilst
private label cards have declined, 2001 - 2005
- Figure 8: The Travelocity credit card rewards consumers for staying
loyal to the brand.
- Figure 9: Datamonitor' s classification of co-branded card loyalty
programs
- Figure 10: The Jeep MasterCard, essential statistics, 2006
- Figure 11: The Carrefour Carte Pass - essential statistics, 2006
- Figure 12: The Porsche Card - essential statistics, 2006
- Figure 13: The Champions League Card, essential statistics 2006
- Figure 14: Toys "R" Us Visa card - essential statistics, 2006
- Figure 15: Amazon.co.uk MasterCard - essential statistics, 2006
- Figure 16: President' s Choice MasterCard, essential statistics, 2006
- Figure 17: Tesco Clubcard credit card, essential statistics, 2006
- Figure 18: Nectar Credit Card, essential statistics 2006
- Figure 19: Nectar Card holder can redeem their points for a variety of
goods online
- Figure 20: The Web.de Barclaycard, Essential statistics, 2006
- Figure 21: Datamonitor' s core consulting capabilities
|
Related Report
|
View Cart
