In its second-largest acquisition, Amazon buys the company for $970 million.
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“A large part of equity is still offline so we need to reach critical mass on the Web first,” says Bonefas. Discover will mention its Web site prominently in its advertising campaigns, including print, cardholder statements and television.
Although Discover’s plans for online shopping may seem small, analysts say the company is on the right track in concentrating its marketing efforts offline. “The way to go is to communicate to consumers through traditional media the virtues and values of using a credit card on the Web,” says CyberDialogue’s Clemente.
Turning to TV
Visa’s Vause believes that one reason Visa is building brand awareness on the Web is that consumers see Visa as a trusted payment brand, which is helpful in enticing them to shop online. To that end, Visa is adding online merchant references to its traditional advertising, including television and print media.
During the 1998 holiday shopping season, for example, Visa ran a TV spot featuring San Francisco-based eToys Inc. similar to its other merchant-oriented spots touting Visa as being “everywhere you want to be.” While eToys did not provide numbers, Vause claims that the commercial helped boost eToys’ sales volume by tenfold over the previous holiday season. And in one of the first TV spots to combine online marketing in the offline world, MasterCard spotlighted its newly signed Excite deal in a high-profile ad that aired during the series finale of “Seinfeld” last May.
American Express, which is highly regarded among analysts for matching the medium to the message, also is using traditional advertising to promote online card usage. AmEx plans to tout its loyalty program for MovieFone Inc., one of the largest movie ticketing and listing services, with 30-second trailers at participating movie theaters, ads on 777-FILM and in The New York Times. (Leaving no medium unturned, the card company also plans to push the MovieFone deal through the AmEx Web site, on MovieLink.com, in statements to cardholders and eventually on TV.)
Such co-marketing deals that give online retailers exposure in association advertising also gives the associations inroads into the new legions of online merchants. Signing the big online merchants gives associations and card companies exposure in the online world and may eventually lead to more deals with legions of smaller online merchants.
Historically, the associations have had to woo traditional merchants first to get them to accept credit cards and most recently to promote their brand over competitors at the point-of-sale. Nailing down the biggest and most popular retailers is considered the first step in creating brand preferences among shoppers. That is where the battle is just beginning on the Web.
For example, MasterCard is focusing on striking deals where there are the highest levels of online transactions, especially in the travel and entertainment segment. “We are very interested in co-marketing deals with a few key merchants,” says MasterCard’s Flanagan. “We bring one of the top-branded products in the country, more than 200 million payment cards and credibility to even the biggest online merchants.”
Duality won’t do
The association is working off an A-list of top retailers in major online segments that do not already have relationships with its competitors because MasterCard is seeking exclusive partnerships. “We’re not into duality,” Flanagan declares.
The association’s co-marketing approach, in which it trades online promotion for offline promotion, has resulted in some high-profile alliances. San Francisco-based Preview Travel, which has a marketing deal with MasterCard, says making the user feel confident and comfortable using the site to make travel plans is paramount to generating repeat customers. “We are going to have to prove by performance that our site is secure for transactions, but having MasterCard there reinforces that,” says Chris McAndrews, executive vice president. “The MasterCard name adds credibility at a time when electronic commerce is trying to overcome a huge threshold of security concerns for potential online customers.”
Not all merchants want to be limited to one card company, however. Westbury, N.Y.-based
1-800-FLOWERS, which has done online deals mostly with Visa and Discover and has had talks with American Express, believes it’s better to work with all four card companies to drive traffic. “What we don’t do is preferred deals that prod customers to use one card over another,” says Robert Befumo, relationship marketing manager for 1-800-FLOWERS’ interactive division. “We let the customer make their own decision.”
Quid pro quo
American Express, which has been devising its online strategy since 1995, also sees the online world as a new place for its higher-end cardholders to shop. “It is becoming an increasingly important channel,” says Andrea Levine, vice president of global marketing. Those cardholders presumably are taking their offline charging habits into the online world, with an emphasis on travel and entertainment.
As such, the company is signing merchant deals that fit that background, including MovieFone, the travel site MSN Expedia and The Disney Store Online. “AmEx has a strong track record of doing solid partner marketing,” says Levine. “We are experts in direct marketing and we know how to cultivate the most value for our customers and our merchant partners.”
Most of Visa’s merchant deals are co-marketing agreements, which work more like a quid pro quo than a flat-out payment deal for Web site real estate. For instance, Visa will be featured prominently on the home page of an online merchant, while the merchant receives exposure to Visa cardholders through Visa advertising and direct mailings from issuers. “We bring power of brand and access to Internet-ready purchasers,” says Vause. “And we have audiences that can be tailored for a merchant.”
Palo Alto, Calif.-based Virtual Vineyards, which has had similar barter arrangements with all four major players, agrees that the ability to target customers is the most valuable aspect of working with card companies. “These deals give us targeted exposure to a potential wine drinker, online shopper and affluent customer while associating us with a credible, trusted payment source,” says Rita Belle, Virtual Vineyards’ marketing director.