More Personalised Gifting

Just in time for the holiday season, users will be able to design their own Visa gift card by visiting GiftCardLab.com. Here they can upload personal pictures or use stock images pulled off the site. In a market, estimated to be worth some $90 billion Visa’s new cards, being launched on 15th November, represent the latest attempt to win back some of the billions that have been siphoned off from the traditional credit-card business. One of the interesting facts about gift cards, and why they make so much business sense to companies is that many recipients never get around to fully redeeming them. It is estimated that about $8 billion of card value each year never get used, says research firm Tower Group. And some cards carry hidden fees, including ones that penalize holders for not using them right away. Visa, like the other credit-card companies, will collect a transaction fee again and again on the gift cards, until the value is exhausted. Visitors to the GiftCardLab site are told that the issuer, Marshall BankFirst, will deactivate them one year from their print date and charge an “account closure fee” before returning the balance in about three months. Such fees have drawn loud cries from public interest groups. Like any product these days, the Visa Gift Card site has a contest that gives out prizes for the best designed card.

Millionaire Boom

When the Indian stock markets hit the 20,000 level on Monday, many commentators began to hint that the world’s richest man could be in India now. While this may still be debatable, one thing is certain that the new highs reached by the index, not just in India but in China and other countries is creating more and more millionaires. The annual Boston Consulting Group survey on global wealth show that the total number of world millionaire households—those with assets of $1 million or more—grew by 14% in 2006, to 9.6 million, representing the richest 0.7% of all households and owning $33.2 trillion, or about a third of the world’s wealth. As expected the U.S. had, by far, the highest number of millionaire households, with nearly 4.6 million, and the highest number of $100 million-plus households, with 2,300. Japan, Britain, Germany, and China round out the rest of the top five countries with the most millionaire households, in that order. The number of millionaire households increased the most last year in China (up 39%), Spain (up 32%), and Britain (up 30.5%). More from BusinessWeek.

Community Credit Gains Ground

Readers of the newsletter are no strangers of social credit. We have covered many such initiatives in here in the past. While most of them are very small and niche, there are signs that some of them will soon go mainstream. The Economist looks at social credit at a time when banks are growing through some pretty rough times with all the subprime issues catching up. The credit crunch, the article says, is reinforcing areas of difference between social-lending firms and the mainstream market. Without the costly paraphernalia of a normal bank (branches, staff and regulatory costs), social-lending marketplaces have always claimed to offer borrowers cheaper credit than they could get elsewhere. That price gap has widened recently as mainstream lenders have hiked their rates and social lenders have largely failed to follow suit. And why aren’t social lenders raising their rates? One reason is that, unlike banks, they are not facing higher funding costs caused by the seizure in money markets. Another interesting angle is that
social-lending sites do a better job than their mainstream counterparts of assessing risk. Zopa, a UK based social lending site takes a stringent approach to credit assessment and will let only prime borrowers onto the site, boasts a default rate of just 0.1%. Prosper, from the US which is more laissez-faire and has a default rate of 3%, provides measures of “social capital”, such as endorsements by friends, that help lenders to judge the risk of a specific borrower. Read the article here.

A Bank, For And By Children

More than 1,000 street children from New Delhi have joined together to create a bank. This little venture helps them manage the small sums they earn each day. Created by volunteer aid group called Butterflies, the Children’s Development Bank aims to empower children in several important ways. Like any other bank, CDB pays interest on the deposits that the children make. That interest can be a vital incentive to kids who might otherwise spend their daily earnings on cigarettes, candy or other items – or worse, have their meager profits stolen. The NGO that created the bank hopes to make it a full fledged bank which functions according to the co-operative banking system which gives every street and working child the opportunity to save and withdraw money and take a loan and create a better life. On similar lines, EBay has started MicroPalace, a micro finance initiative where people in the US can invest small sums of money, (as little as $100) to help to support development in impoverished areas. Some more from PC World.

Intel’s Online

Intel has decided that its partners in the “Intel Inside” cooperative advertising program — which spends hundreds of millions of dollars each year on pitches bearing the logo — ought to accelerate their shift of ad dollars to newer media like the Internet from older media like television and print. The reason, according to Intel executives, is that research shows consumers are already turning more to the online media when they consider buying products like those with Intel microprocessors, which include desktop and notebook computers. So, effective in 2008, Intel will require companies that take part in the co-op program to spend a minimum of 35 percent of the money that Intel provides them on online marketing. “We’re going where the consumers have gone,” said Sean Maloney, an executive vice president at Intel in Santa Clara, Calif., explaining the mandated change in the media mix. Mr. Maloney is general manager for the sales and marketing group as well as chief sales and marketing officer. “For the longest period of time, consumers formed their attitudes through TV, print, radio,” Mr. Maloney said, “and from the middle ’90s onward, there was more influence from the Net.” More from the New York Times.

Do You Digg?

If you have seen blogs and news sites recently, you would have seen icons for digg, newsvive or reditt. While many experts think that these icons have worked to democratise news, why let an editor decide what is newsworthy and put them up on the front page of your newspaper, when a bunch of intelligent people can do it better? There has been another interesting offshoot of shifting the power to users – used intelligently it is possible to create news that people will digg and bring it up on the ratings. Here is an example, sometime in January this year, Cameron Olthuis was hired by LifeInsure.com to tackle what many would see as an impossible project: sparking a viral marketing campaign around the topic of life insurance. Olthuis’ solution? He created a page on LifeInsure’s site listing “19 Things You Probably Don’t Know About Death,” (try to resist from clicking on the link to read the article, we couldn’t) and posted it to Digg. The list–which enumerated “facts” like a person’s ability to remain conscious 15 seconds after decapitation–was a hit with Digg’s users, who voted for the page 1,332 times. Those positive votes, or “diggs,” pushed the list to the top of Digg’s home page and drew tens of thousands of visitors to LifeInsure. More important than that traffic, however, was the list’s role as “linkbait.” Users on Digg and other social media sites created more than 800 links to Olthuis’ list in forums and blogs around the Web. Because Google ranks a Web site’s relevance based on the number of other sites linking to it, LifeInsure now ranks fourth in Google’s results when the search giant’s millions of users search for “life insurance.” Suddenly, the company had free advertising that put its name right next to huge brands like Metlife and Prudential. Read more from Forbes.

Making Money Off Customer Ignorance

At a time when customers are getting more and more empowered with the free flow of information and sharing of ideas, comes this article. Harvard professors Gail McGovern and Youngme Moon writes that companies can profit from customers’ confusion, ignorance, and poor decision making in two related ways. The first evolves out of the legitimate attempt to create value by giving customers a broad set of offerings. The second emerges from the equally legitimate decision to use fees and penalties to cover costs and discourage undesirable customer behavior. In the first case, a company creates a diverse product and pricing portfolio to offer various value propositions to different customer segments. All else being equal, a hotel that has three types of rooms at three price points can serve a wider customer base than a hotel that has just one type of room at one price. However, customers benefit from such diversity only when they are guided toward the offering that best suits their needs. A company is less likely to help customers make good choices if it knows that it can generate more profits when they make poor ones. Of course, only the most flagrant companies would explicitly seduce customers into making bad choices. Yet there are subtle ways in which even generally well-intentioned firms use complex portfolios to encourage suboptimal choices—tactics that hasten the descent down the slippery slope. The article urges companies to look for warning signs: Are our most profitable customers those who have the most reason to be dissatisfied with us? Do we have rules we want customers to break because doing so generates profits? Do we make it hard for customers to understand or abide by our rules? Do we depend on contracts to prevent customers from defecting? Read the excerpt here.

Pheromone Marketing

Next time you feel a little more at peace with yourself during a shopping trip, thank Enhanced Air Technologies. It’s well known that the scents of fresh flowers, brewing coffee and just-baked bread makes us feel good. Now Canadian retailers are squirting a synthetic human pheromone around shop floors. The stuff apparently makes customers feel comfortable and secure and hence more likely to buy. The pheromone was originally designed for a big Las Vegas casino. Now Vancouver-based Enhanced Air Technologies (EAT) has released its Commercaire pheromone for general use. The idea taps into some serious science. As we all know, most species of insects and animals produce pheromones naturally. The Vomeronasal Organ (VNO) within the nose detects pheromones emitted by other people and sends response signals to the hypothalamus, the brain’s centre of emotions. Different pheromones trigger different instinctive responses. EAT researchers have identified and synthesised a proprietary pheromone that instils a sense of comfort and security in humans. “The compound doesn’t cause consumers to get into a spending frenzy so much as it causes them feel more at ease in an environment and more receptive to sales messages,” says EAT director of development Nigel Malkin. Consumers also return more often to stores infused with Commercaire. “At a subconscious level, the sense of comfort and security instilled by the compound gives consumers positive memories of any environment that provides it. They’re more likely to return as a result,” says Malkin. Read more about this crazy and dangerous innovation. As you will expect, there is controversy surrounding the product and both the company and the product sites are down.

Customer Experience A Competitive Weapon

A few months old, important nonetheless. A recent survey by Forrester and American Banker Magazine indicates that 97% of banking executives indicate that focusing on customer experience is important to competitiveness over the next three years. A great way to think about customer experience? It’s a production, just like a movie. Successful firms practice “experienced-based differentiation” (Read a summary of the Forrester Report) based on three key areas. Obsess about customer needs, not product features, says Forrester analyst Peter Kim. His examples, Disney mobile, with plans designed for the family  and Geek Squad . Reinforce brands with every interaction, not just communications. I.e. make promises and keep promises. For example, Westpac Bank. Treat customer experience as a competence, not a function. British sandwich chain Pret A Manger has some innovative ideas  in this space. Take the experience-based differentiation self-test . Consider hiring a Chief Customer Officer  . Start a customer listening/VOC program .

Banks Get Down To Fun

Bathroom humour takes over at ING Bank as it introduces its no frills online banking account in Belgium. I Need to Go takes you to the loo literally, in a cheeky sort of way and reaches you to Pauline who is a sort of gatekeeper holding you up from finishing the urgent business you have come in for. There are some very nice touches in the entire experience, including Pauline’s dialogue with you, that finally takes you to the ING site that promises no fees. Elsewhere, Fairfax County Federal Credit Union gets on the UGC bandwagon asking young people to create a 30 second commercial for for its GenY Extreme Checking Video Contest. They have a YouTube Channel where users can upload their videos. Back home in India, HSBC has embraced Web 2.0 with What’s Your Solution? a site that asks users to participate in a discussion on issues that are dear to them, like environment, pollution, road traffic, even cricket. The site asks people to post comments and upload videos on issues about which they have a point of view.