Thursday, June 23, 2016

For Better Security, Dip, Don’t Swipe

With Father’s Day celebrations and gifting bigger than it’s ever been, and with all those June graduations and weddings, consumers have been using their credit cards more regularly for more purchases. In fact, it’s expected that this year U.S. credit card balances are approaching $1 trillion. That’s a 1 with twelve zeros following it.

Just to put that amount into some sort of perspective, a stack of a trillion one-dollar bills would be 60,000 miles high, about a quarter of the way to the moon. It would weigh a little over 10 tons. You could put nearly 9 million students through a 4-year college or buy every NFL franchise and have money left over to buy a few professional baseball, basketball, and hockey teams. So a lot of money.

This $1 trillion is very close to the high of $1.02 trillion consumers reached in 2008 and a sign that consumers are more comfortable carrying credit card debt. Also that banks are taking advantage of those circumstances trying to capitalize – and differentiate – their offerings – because credit cards are a really profitable line of business for them.

If you’ve gotten a new credit card recently you’ll probably have noticed a tiny computer chip has been added to the front of the card. That chip means your card is now equipped with EMV technology, which stands for “Europay, MasterCard, Visa” and has been around in Europe for a while now (hence the “Europay” in the name). The chip makes a card really, really hard to counterfeit, by creating a unique transaction code that cannot be used again, thus adding another layer of security in an era of hacking, phishing, scaling of firewalls, and identity theft, in an market environment where nearly 75% of Americans worry that their credit card will be stolen from a retailer they use.

Under the Fair Credit Billing Act your liability for unauthorized use of your credit card maxes out at $50. If just your credit card number is stolen, you’re not liable for any unauthorized use, and most credit card companies give consumers a pass on the $50 anyway as a sign of contrition and good faith.

Currently, according to our 2016 Customer Loyalty Engagement Index, when it comes to credit card security, here’s how consumers rank the card that has their biggest share-of-wallet:
  1. Discover/American Express
  2. Visa
  3. MasterCard
  4. Capital One
  5. Barclaycard

So consumers should be pretty happy with a change to a more secure card, right?
Right! They are – or would be – if they actually thought about it. Right now the only thing a consumer has to remember is that a card with an EMV chip doesn’t get its magnetic stripe “swiped,” the chip gets “dipped” into a slotted reader at the bottom-front of the credit card terminal and gets left there until the transaction is completed. So a minor shift in payment procedure, but more security, so good for the customer, right? Right. For the customer. But not so much for the merchant.

Merchants are being pressed to install and accept more secure EMV-equipped credit cards because as of October 2015, a deadline created by MasterCard, Visa, Discover, and American Express, merchants that don’t have the EMV process in place become the ones liable for any fraudulent chip card transactions. The merchants, not the banks. That means if a stolen or counterfeit card should have been EMV-slotted, but instead – because the EMV system hadn’t been installed in the store yet – gets swiped, the merchant is one responsible for the loss. That used to be covered by the bank issuing the card, so the responsibility has shifted to the least EMV-compliant party, in this instance the merchant.

Bottom line: The change is intended to make the payment industry EMV-compliant to avoid liability costs, something the credit card industry and the merchants have been fighting about for the past 10 years. The EMV chip cards, while more secure, require retailer to install new payment terminals, which also have a slightly longer processing time. But the scales tipped in favor of the credit card industry after the hackers scaled the firewalls of companies like Target, Sony, Anthem, Staples, Ebay, Neiman Marcus Home Depot, British Airways, and Kmart, and those were just a few of the high-profile hacks over the past couple of years. So the chip-based credit-credit card transactions should please everybody, right? Not so fast!

It turns out there have been objections. Home Depot just filed an antitrust suit against MasterCard and Visa that the merchants are paying too much for credit card transactions, adding new assertions – years after Home Depot and others had opted out of a$7.25 billion settlement regarding price-fixing ­– regarding the effectiveness of EMV chip cards, now contending that MasterCard and Visa conspired to prevent the adoption of a chip that also required a consumer to enter a PIN, because banks don’t want to add the necessity of a PIN at checkout. For what it’s worth, it’s interesting to note that banks collect higher merchant fees for transactions that require a signature than those that just need a PIN. Home Depot isn’t the only merchant that has complaints. A Federal court in Brooklyn, New York is handling cases filed by Wal-Mart, 7-Eleven, and Target.

The banks have been issuing new cards for about a year now, but only about 25% of retailers can process them and court cases regarding credit verification options increase if not exactly abound. So those who are not EMV-ready could face much higher costs in the event of consumer data breaches, and money (or losses of money) is something retailers are bound to listen to, because “money talks.”

And a trillion dollars actually yells!

Postscript: Shortly after we wrote up these findings, MasterCard and Visa made an offer to merchants who hadn’t started to accept the chip cards yet, indicating they would accelerate checkout terminal certification and limit costs retailers would have to incur for counterfeit transactions. Merchants have said that the equipment certification delay forces them to pay for fraud even when they have equipment in place. Some merchants and customers have complained that chip-card transactions take too long. Yet another example of how consumer expectations (B2C and B2B) are always on the rise, and how it can only help to better understand what consumers really want. And how your brand can really deliver.

Find out more about what makes customer loyalty happen and how Brand Keys metrics is able to predict future consumer behavior: Visit our YouTube channel to learn more about Brand Keys methodology, applications and case studies.

Monday, June 13, 2016

2016 Father’s Day Buying Survey

A day born in memory and gratitude by a daughter who thought her father should be honored with a special day has turned into what’s expected to be a $18.8 billion retail holiday this year. That’s according to this year’s Brand Keys Father’s Day survey, a national poll of 5,800 men and women, 18-65 years of age, which asked if – and how –consumers were planning to celebrate Father’s Day. 

The 2016 average spend is up 6 percent this year, twice the increase from last year and equal to this year’s increase for Mother’s Day, which is good news. Steady economic conditions and consumer confidence are fueling holiday sales. This year’s survey also found a slight increase in the number of consumers celebrating Father’s Day this year (78%, +2%). Retailers are looking at an average spend of $157.00 to recognize Dad with relatively equal spends between Women and Men ($161.00 and $153.00 respectively).

Celebrants indicated they were looking to buy gifts in these categories for Dad with #s in parentheses indicating the percent-change from last year:

Gift cards                   40%    (- 2%)
Clothing                     35%    (+5%)
Tools                          20%    (- 5%)
Electronics                18%     (+2%)
Wine & Spirits           15%     (+5%)
Home Improvement  15%     (+1%) 
Sporting Goods         14%    (+1%)
Automotive                10%    ( - 0- )
Spa Services             10%    (+2%)
Smartphones               9%    (- 3%)
Books/eBooks             5%    (+3%)
DVDs/CDs                  2%     ( - 0- )

The biggest increases in gift choice were Clothing – Dad can always count on that perennial tie – and Wine and Spirits, mostly whiskeys, bourbons and scotches. We guess if you’re a Dad there are always occasions that call for a drink too! All other categories were relatively stable with only very slight decreases seen for Tools and Smartphones, both of which were up last year, so it all evens out. After all, how many phones (smart or otherwise) or hammers does Dad really need?

When it comes to “bricks and mortar” stores, and perhaps reflecting a willingness to spend a bit more this year, Specialty Outlets are up a little again this year. Department stores were down, continuing to reflect a general, marketplace retail trend. 

Department Stores  39%    (- 3%)
Discount Stores       36%    (+1%)
Online                      34%    (+1%)
Specialty Outlets     22%    (+2%)
Catalog                     1%     (- 1%)

In addition to the 70% of folks who intend sending send Dad a card (both e- and traditional), people intend to “connect” on Father’s Day at levels and outreach similar to those of last year, and pretty evenly distributed as regards “device”:

Phone                     52%                           
Personal Visits        30%                           
Online                     25%                           

In 1909, Sonora Dodd, raised alone by her father, listened to a Mother's Day sermon and conceived the idea for a Father's Day. She held a Father's Day celebration a year later and by 1956 Father's Day had been recognized via a Joint Resolution of Congress. In 1972, President Richard Nixon established a permanent national observance of Father's Day to be held on the third Sunday of June.

There’s an old saying, “A truly rich man is one whose children run into his arms when his hands are empty.” This year those children are bringing a few extra gifts to celebrate just that.

Find out more about what makes customer loyalty happen and how Brand Keys metrics is able to predict future consumer behavior: Visit our YouTube channel to learn more about Brand Keys methodology, applications and case studies.

Thursday, June 02, 2016

The Second-Most Exciting Indoor Sport. And Its Most Loyal Fans

The 2016 National Basketball Association playoffs have concluded but when it comes to the fans loyalty is much more than a team’s win-loss ratio.

Historically, making the NBA playoffs raises a team’s fan loyalty levels by about 10%. Winning almost doubles that. When a team makes the playoffs, they always get a lift in fan loyalty, according to the 24th annual Sports Fan Loyalty survey conducted by the New York-based brand engagement and customer loyalty research consultancy, Brand Keys.

The Brand Keys Sports Fan Loyalty Index (SLI) was designed to help professional sports team marketers identify the key drivers of fan loyalty in their home and national markets by identifying emotional aspects surrounding the team that require strategic brand coaching. Brand Keys assesses all of the teams in the league, interviewing 250 self-classified basketball fans from each of the 30 NBA teams’ immediate metropolitan areas. The current 2016 NBA top 5 and bottom 5 team standings follow:

Top 5 2016                                    2015

1. Oklahoma City Thunder            (#6)
2. San Antonio Spurs                    (#3)
3. Miami Heat                                (#4)
4. Golden State Warriors               (#10)
5. Chicago Bulls/Los Angeles
    Clippers                                     (#1, #2) 

Bottom 5 2016                              2015

30. Sacramento Kings                   (#30)
29. Minn. Timberwolves                 (#29)
28. Milwaukee Bucks                     (#27)
27. Utah Jazz                                 (#24)
26. New Orleans Pelicans             (#22)

Winning may be the only thing when it comes to a playoff championship, but when it comes to winning fan loyalty it’s not the only thing. Fan loyalty correlates very highly with broadcast viewership, merchandise purchase, and to a certain degree ticket revenues, and teams can count on “lift” to their fan loyalty levels – by making the playoffs any team sees about a 10% lift. Or if they win the championship they’ll see about a 20% lift. A team’s win-loss ratio is a component of the Pure Entertainment loyalty driver. But teams don’t automatically leap to the top of the roster just because they get into the playoffs or even a championship. It adds to the loyalty bond, but you need the complete package: relative success in three other emotionally-based factors, which include Authenticity, Fan Bonding, and History and Tradition. Each function like this:

Authenticity: How well they play as a team. Sometimes a new arena and, often, a new manager, can help lift this driver. A new name helped the Hornets. Which brands sponsor the team can matter as well.

Fan Bonding: Are there players ­who are particularly respected and admired? More is always better and it helps if the reason for that bonding extends beyond the ability to sink a three-point shot. If you have to think about “who” that might be on your team, or can only come up with one, maybe two names, your team’s Fan Bonding is likely to be low.

History and Tradition: Have the game and the team become part of fans’ and community rituals, institutions, and beliefs? For some teams it accounts for the lion’s share of loyalty they possess. Think about a team like the Washington Wizards, only a reasonable level of History and Tradition keeps them out of the cellar.”

Teams need to meet some minimum levels on all four factors to create reasonable levels of fan loyalty. If one of those drivers weakens, or disappears, so do high levels of loyalty. Want proof? Put aside your preconceptions and dissect a team like the Sacramento Kings or the San Antonio Spurs according to those four loyalty drivers and see where you end up.

The NBA again this year ranks third of the four Major League Sports. The National Football League is first, followed by Major League Baseball. The National Hockey League is last. Overall league and team rankings – no matter which league – correlate with viewership and merchandise and ticket sales and game attendance, and since rankings can be influenced by how loyalty drivers are managed, it’s critical that teams act strategically. And maybe philosophically, too.

After all, wasn’t it Phil Jackson who advised, “If you meet the Buddha in the lane, feed him the ball”?

Find out more about what makes customer loyalty happen and how Brand Keys metrics is able to predict future consumer behavior: Visit our YouTube channel to learn more about Brand Keys methodology, applications and case studies.