Merchant funded deals have become an important credit card feature. The challenge is to negotiate more and better deals in a crowded market where major banks and now even payment brands are actively sourcing for deals. Fan clubs provide a fresh, new way for banks and payment brands to get merchant funded deals for their cardholders.
An established business model already exists: merchants agree to give cardholders a discount in exchange for advertising paid by the bank or payment brand. This case study shows how merchants are more willing to give discounts to fan club members because they value the social media benefits and word of mouth more than other types of advertising that payment brands traditionally bring to the table. With fan clubs, merchants get a big boost in fans (5-7 times increase in fan acquisition rates), more word of mouth advertising (10,000 to 20,000 friends reached each month per outlet) and valuable CRM data (20-40% of visits are by return fans). We have seen restaurant managers agree to offer a fan club benefit within 15 minutes of learning about the service.
Fan club offers are linked to payment with a sponsoring bank or card brand. This directly drives payment preference at the point of sale. Merchants are reporting a 3-4 times increase in debit card usage after launching fan clubs sponsored by Singapore’s national debit card brand, NETS.
A fan club is a new generation loyalty program designed to increase sales from repeat customers, much like discount card programs. To join, customers essentially just need to “like” the merchant on Facebook and register their mobile number. When they pay, they give their mobile number to the cashier for fan verification, and present a card by the sponsoring bank or payment brand.
Unlike traditional programs, it’s easier to grow the membership base because fan clubs are social by design, connecting directly to the restaurant’s existing page on Facebook, and creating opportunities for word of mouth engagement with friends of customers.
It’s easy to set up a Facebook Page, and just as easy to enhance the page with loyalty program fan club features. Last but not least, the fan club platform is free for merchants, as it is sponsored by payment brands like NETS, another major benefit over traditional loyalty programs.
When customers present their mobile number at the counter, a wall post is published on Facebook promoting the merchant and the card brand. Wall posts highlight the customer’s activity in a neutral fashion, with no mention of actual purchases and no hard sell to friends. The card brand appears as the enabler, the card to have in order to enjoy lots of offers.
It doesn’t take much to get high visibility. Wall posts produced by fan club members at Rock and Ash are seen by 20,000 friends each month. A card brand could reach 1 million friends each month with less than 200 local business fan clubs. Larger deployments with national chains will ensure that the payment brand gets seen more often and more effectively than with print ads, at a fraction of the cost.
Singapore’s daily newspaper Today usually carries several full page ads by banks, mostly advertising their merchant tie-ups. Daily distribution is 300,000 copies with readership estimated at 700,000. This is the advertising that banks promise merchants in exchange for cardholder discounts. The city-state’s major banks spend from US$500k to US$1 million yearly on this single advertising channel alone. With fan clubs, banks can attract better merchant deals with less money, and achieve similar advertising reach.
Fan clubs are sticky. Once merchants make their Facebook Page and fan club an important part of their marketing strategy, they tend to stay with the same payment brand sponsor and tend to drop other marketing techniques.
“Without the fan club, I would have to spend on other types of marketing which are more expensive and don't encourage repeat business,” said one restaurant owner. “Sales would be much lower if not for our fan club.”