Feature: Motivation: Prepaid cards stack up

At last month’s VA conference for the voucher and gift card industry, there was talk of a bewildering array of prepaid technology that is on offer. From closed loop to open loop to restricted loop, there are now all kinds of stored-value cards available for use in sales promotion and motivation.

As the latest figures published by consultancy Giftex Prepay revealed, the number of gift card programmes in the UK has now grown to over 100. But with 10 per cent of UK retailers offering cards compared to 80 per cent in the US, Giftex Prepay’s chief executive, Tony Craddock, told delegates that the trend was upward in spite of any economic downturn.

However, the corporate market – which makes up 45 per cent of voucher sales – is even further behind. According to a survey carried out by motivation specialist The Grass Roots Group, only two retailers are specifically making their gift cards available for motivation programmes, with the rest preferring to concentrate on the B2C channel.

Speaking at the conference, Grass Roots’ deputy director of supply chain management, Daniel Gillborn, said it was partly driven by clients not demanding a switch from vouchers to cards for staff incentives. “If they do, we will push it forward. We have the internal ability to do it. We are ready when they are.”

Outside the conference, Jackie Barker, Grass Roots’ head of product development and management, revealed that this change was starting to take place. “Speaking with clients in the last 12 to 18 months, we are seeing growth in the corporate market [for cards] because of the growth in the consumer sector where people are getting used to seeing them in the retail market,” she said. “It’s 200 per cent up on where it was this time last year.”

She added that Grass Roots’ own Pure cards, which are useable at selected retailers, were starting to receive a lot more interest. “The client base has trebled in the past year, and that will become more prevalent.”

Marilyn Bochicchio, the former president of the Network Branded Prepaid Card Association in the US, spoke at the conference about the exciting “potential and opportunities” for the prepaid market in the UK, from cards to other solutions such as mobile phones. But she warned that the industry needed to cut through the complexities in order not to hold back growth. “Nomenclature is incredibly important,” she told delegates. “Prepaid is complex. That’s all because of its flexibility. Therefore, you have to have a common language…so that you can talk to each other and make sure you are all on the same page.

“It’s not important for us to press this kind of nomenclature onto the consumer. The consumer doesn’t care how the sausage is made. The consumer cares only that the sausage tastes good. It is always important to talk about the benefits for that individual.”

Yvonne West, manager of Sainsbury’s Business Direct, also stressed the importance of not putting customers off. “This is an exciting time for our industry but I believe we are in danger of creating something so complex that customers will simply not buy or use our cards,” she said at the conference. “These prepay networks offer great opportunities for the corporate market but the terms being used – such as open-loop, closed, semi-closed – makes defining prepay difficult. And if we can’t define it, how can we expect a customer to understand it?

“We do need to work together as an industry to get clarification and encourage all networks to use the same terminology. I would recommend that we test ruthlessly and re-engineer our processes so that, at every step, they are as simple as possible for customers to understand and use.”

Sodexho, which is behind the SayShopping voucher, is planning to introduce cards for incentives, benefits and gifting in the UK “in the near future”, according to its research and development director, Kevin Harrington. Speaking outside the conference, he agreed that the different ways of using cards and running schemes “is a source of confusion with clients in the UK”. “The industry has managed to confuse the market before it has really got going,” he said. “However we now need to work to convey the many benefits that stored-value cards can bring.”

Organisers of incentive schemes need to understand the benefits of different types of stored-value products before deciding which to use. Mike Davies, director of performance improvement at motivation and communication company BI, says that it is best to offer the widest possible range of rewards when targeting a large and diverse audience but, with a smaller audience that is less diverse, a single-store or closed-loop card would be a solution. “This is due to the fact that, if the reward matches the audience’s demographic profile, this can prove more memorable and convey the message that the management have given the reward option more personal thought,” he explains.

Barker at Grass Roots says that gift cards, such as its newly launched Bonusbond card, are ideal for one-off rewards, including long-service awards. However, the Pure prepaid debit card, which operates on a closed loop on the Visa network, is more suitable for schemes where you want to regularly upload rewards. “It is more for longer-term incentive solutions for clients that want to regularly reward and communicate with participants,” she explains. This is in contrast to open-loop cards, which can normally be used at any Visa or Mastercard outlet in the world. “These are more for expenses and commission, when where you spend your card is not so important to the client,” she says.

Capital Incentives & Motivation offers the open-loop Incentive Award Card as well as the filtered-loop Compliments Card, which can be used at selected retailers. Managing director Derrick Hardman says both cards are suitable for programmes where the client wants to make “a connection” with the end user over time. “Both employee and third-party recipients also benefit from the fact that card balances can be topped up almost instantly as an award is earned,” he explains. “This means that it is possible to make frequent awards and also ensures that awards are fulfilled as soon as they are announced, both of which are crucial factors in maintaining motivation.”

He says cards are generally more memorable than giving cash rewards because people tend to keep them for a “treat”. “Cardholders are likely to save rewards on a card and buy more expensive purchases. In fact, some recipients have very large balances, with examples of big purchases being two Ducati motorbikes and a swimming pool. Open-loop cards lend themselves to more luxury and personal items. It’s guilt-free spending – a bit like spending on a credit card but without the bill.”

However, Davies at BI adds that programme organisers need to weigh up the benefits of using cards as incentives against other types of rewards. “It is necessary to consider whether such cards and the value they hold is enough to motivate people to change their behaviour, given the fact that participants can use them to purchase general household items such as pet food, groceries and petrol,” he points out. “In cases such as these, the reward experience is over quickly and is forgotten about. Research shows that rewards of a more memorable and aspirational nature have greater motivational impact.”

He believes it is unlikely that prepaid cards will ever totally replace the impact generated by staff competing for and attending a memorable incentive event. “The question remains: is rewarding people in this way truly motivational and will it deliver return on investment?”

Tecan

Tecan, a global supplier of solutions for the biopharma, forensic and diagnostic industries, was looking for a new and effective way to deliver rewards and bonus payments to its 30-strong UK sales team.

It issued them with the Spree prepaid debit card, supplied and managed by motivation company P&MM. The cards were loaded with various amounts up to £700 for the Christmas bonus, which could be spent at any Visa card-accepting retailer.

Tecan had previously used cash through the payroll system, but this was judged not to be effective as a reward as it was “swallowed up” on bills and household expenses. Instead, the card provided positive brand reinforcement every time a purchase was made.

Tecan now hopes to use the cards for long-service awards and further bonus payments. Jill Warren, manager at Tecan, says: “The proposition of the Spree card being a convenient, attractive and retailer-friendly solution has been a move welcomed by our staff when it comes to bonuses and rewards.”