Blog article
See all stories »

Banks can do for Daily Deals what Amazon did for e-Commerce

The popularity of Daily Deals sites has exploded in recent years with a plethora of providers vying for the attention of an increasingly price-sensitive consumer base. However, while Daily Deals are a highly effective means of increasing awareness and driving consumers to a particular retailer, the current offerings lack the ability to target the offer to the desired consumer segments, thus limiting the medium to long term effectiveness yielded by the promotion.

It’s in optimising this long-term effectiveness where issuing banks can really bring value to the table. A recent Aite Group report found that consumers would be willing to receive daily deals offers from banks and indicated that the financial institutions would be well placed to provide these relevant offers. Issuers have access to the detailed purchase behaviour of their cardholders, with the ability to understand not only what their customers are interested in, but also where they shop, how often and how much they spend.

As consumers become increasingly desensitized to generic and often irrelevant digital marketing, one way of retaining engagement is to ensure that the offers communicated are not only interesting but relevant to each individual consumer, this is essential in reducing the current dependency on motivated consumers.

It is not only the consumer who benefits from a personalised and relevant experience. Retailers can target offers to specific and desirable consumer segments, ensuring that the offer is delivered to the right consumers. This is in stark contrast to the current environment where the majority of offers are often snapped up by price-sensitive ‘cherry pickers’, who are unlikely to ever become valuable long-term customers.

Just as Amazon revolutionized the e-Commerce landscape by offering a personalised and relevant experience to each individual consumer, issuing banks are in a unique position to revolutionise the Daily Deal landscape with a similar personalised and relevant experience for the consumer. They must step up and make use of this valuable data to avoid missing a trick.


Comments: (4)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 19 October, 2012, 19:54Be the first to give this comment the thumbs up 0 likes

After working with many banks to introduce daily-deals based on transaction data, I've realized that this is like "preaching to the converted". Most banks recognize the potential of such a service to deliver an additional revenue stream as well as improve customer retention. If they still don't go ahead with it, I've learned that it's because of the challenges involved in building a big enough deal inventory. Although they're still loss-making, VC-fueled daily deal operators like GroupOn can afford to continue to grow their salesforce - which reportedly stood at 3,000 people at last count over a year ago - to work with merchants to sign up deals. Banks can't or won't do so. Secondly, merchants don't seem to like personalized deals. Counterintuitive as this might sound, there's a strong reason for this: Suppose a bank analyzes transactional data and learns that a certain John Doe spends a lot of money on pizzas every month. The bank will surely generate additional revenue and improve customer retention by targeting John Doe with a daily deal for, say, 40% off on, say, Marios Pizza assuming Marios Pizza is located near John Doe's home / office (since pizza delivery is a fairly local business). Problem is, Mr. Mario believes that John Doe anyway buys pizzas at full price from Marios Pizza, so finds it pointless - even loss-making - to offer 40% off to John Doe. Therefore, merchants are not too enthusiastic about signing up a daily deal for targeted audience. 

Now, it could be argued that Marios Pizza would be happy to sign up a daily deal if the targeted audience includes people like, say, Jane Doe, who spend a lot of money on eating out in general but nothing on pizzas at all. But, if the bank makes an offer for Marios Pizza to Jane Doe, it could be argued that the offer is irrelevant, which defeats the basic purpose of banks entering this business based on their access to transactional data.

A Finextra member
A Finextra member 22 October, 2012, 08:10Be the first to give this comment the thumbs up 0 likes

There is also the "deal fatigue" factor to keep in mind. Consumers are showered with offers, 99% of which are irrelevant.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 22 October, 2012, 09:13Be the first to give this comment the thumbs up 0 likes

There's a bit of a conundrum here: As @AlexanderP rightly points out, consumers are wary of irrelevant offers. However, as I pointed out in my previous comment, many categories of merchants are wary of relevant offers.

A Finextra member
A Finextra member 22 October, 2012, 09:22Be the first to give this comment the thumbs up 0 likes

Ketharaman is right: merchants need to be educated/sold. Joe buying pizzas from you does not mean he will continue doing so. Things to consider: loyalty, cross- and up-sell etc.

I.e. from my perspective, simply offering "pizza buyer" to a competitor is dumb and will not lead to a sustainable relationship.

Now hiring