Why has Google arguably become the most popular advertising platform on the planet, attracting a whopping $36.5 billion in ad spending in 2011? And why has Facebook, with an expected IPO valuation of around $100 billion, become such a juggernaut in digital marketing?
The short answer is both Internet platforms combine huge audiences and some capacity to understand individual preferences (based on online behavior and conversation) in order to help brands engage the right consumers with more relevant advertising content and dialogues.
Ultimately, search and social are predictors of consumer behavior, they don’t know actual behavior and measurement continues to be a challenge. The ability to truly understand incremental behavior in a store remains a challenge.
If you agree with my premise so far, allow me to make a bold prediction...Retail banking is the next big medium for advertising and consumer marketing.
I believe banking to be the next big advertising medium - particularly for retailers - for some of the very same reasons Google and search marketing and Facebook and its marketing platform have succeeded. It offers advertisers the ability to access a massive audience while engaging just the right consumers based on actual behavioral preferences. The difference is that with this medium, there is no guessing. Marketers know the exact behavior of consumers, target messages and offers with high precision and, arguable most importantly, can measure true ROI.
Consumers engage with their digital banking channel (online or mobile) more than 9 times a month when their mindset is to ‘make the money go further’. The precision and relevance of the targeting available through this channel is based not on search and click behavior, but on actual past purchase behavior - the best predictor of future purchase behavior.
One vital thing: if digital banking is to become a new platform for relevant marketing on a mass scale, consumers will demand the same high levels of privacy and security protection they already expect and receive from their banks.
Relevance is King
Serving advertising and offers based on the actual preferences of consumers addresses a tremendous need among marketers by allowing them to become far more precise in whom they target with their marketing dollars. Clearly, there is also tremendous value for consumers. At the same time, the use of bank cards, and particularly debit cards, is ubiquitous in North America. Receiving information and, better yet, special offers or rewards for the type of retailers you really care about is inherently worthwhile. Getting irrelevant offers you don’t care about – not so much.
Consumer transaction data in the banking industry is, in this regard, a potential mother lode for marketers. Transaction data from debit and credit cards can help merchants direct marketing campaigns at consumers and businesses that spend significantly in specific categories -- say grocery stores or restaurants – and even those who spend with competing brands. They can provide rewards and offers to attract individuals who have proven by their spending history that they are potentially valuable consumers for a retailer.
For decades, banks have been processing millions of card transactions daily without monetizing either the data’s potential or, more recently, the capacity to fully utilize the online and mobile experience to provide customers with special rewards and offers from other non-competing businesses. Some banks have offered customers rewards programs within their banking environments, but these offers have not been integrated into the consumer’s online or mobile banking account statements – the only destination most customers care about. These generic rewards typically were of minimal value, and because they were not directed at consumers based on their actual transaction history, they were of very little relevance to those who actually bothered to click out of their banking statements to look at them. Consequently, response rates were extremely low.
The opportunity to make digital banking a richer experience for consumers and a highly targeted advertising medium is huge. If merchants can reach the consumers they most want as customers based on past transaction history, they can deliver highly relevant offers and rewards that these individuals will truly value and use. Advertisers can also build more interactive and rewarding relationships with these high-value consumers via programs leveraging web, mobile, SMS messaging and email channels. They can also deliver these offers in a context (right next to previous transaction record in a similar spending category) that makes sense to the consumer.
Transaction-driven marketingTM offers numerous benefits for the consumer. Consumers benefit financially from participation in transaction-driven rewards programs through cash-back rewards on established everyday purchases of goods and services. On average, consumers can benefit from $100-$200 in savings per year, and there is no cap on the potential savings.
Security is Key
However, to be successful, transaction-driven marketing must completely protect bank customer information. It must also put the consumer and their trusted provider, the bank, in control – not marketers or advertisers. To do so, customer account information needs to be separated from the system that delivers the targeted offers. The financial institution creates an arbitrary Account ID for each account holder. Only the bank knows the correlation of Account IDs and actual Account Numbers. A retail offer placement system – installed on the bank’s hardware, in the bank’s data center and under the complete control of bank personnel - matches offers to suitable transaction histories associated with that arbitrary Account ID. Marketers choose the parameters of their own campaigns, e.g. based on zip codes and purchasing patterns of the transaction data all masked behind the arbitrary Account IDs, but no personally identifiable information is ever used in placing the targeted offers, and no transaction-level data ever leaves the security of the bank’s data center.
An effective transaction-driven marketing approach makes consumers feel safe:
Personal information is secure: All consumer personal data remains secure within the financial institution at all times.
Transition history is not given to sales or marketing entities: Because there is no access to personal account holder information, transaction marketing providers, banks or retailers cannot provide any personally identifiable information on consumers to advertisers or third-parties.
It is simple to opt out when you want: As account holders, consumers expect access to programs that can help them save money; however, it’s just as important that account holders can easily opt out of the program at any point if they wish. The truth is, however, very few consumers actually will opt out as they see the relevance and protection inherent in the new model.
Marc Ginsberg is EVP merchant services at Cardlytics, the pioneer and leader of the cutting edge field of transaction-driven marketing. The platform is entirely merchant-funded with advertisers targeting consumers based on spending patterns: where, how much and how frequently they spend at a store and in the broader retail category.