Why do discount card systems die?

I will tell you about my experience of participation in discount card systems. What I own - I'll tell you everything). It will be a question of clubs and systems of discount cards which connect to themselves b2c institutions. Most often shops. It was in Ukraine.

He managed to try his strength in his own discovery of a club of discount cards, became a gold client of another system, advise a third. I saw these systems measured, not measured, I even managed to dissuade someone from such a venture.

Post posted on the blog "E-commerce" due to the spread of the above systems on the Internet.

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Own experience

I tried 2 times to merge stores under one discount system. For the first time (it was about 4 years ago) I prepared a presentation, developed working principles. True, everything is on paper. The chip of the system was to connect the stores to the database, from where the information about the customer, his discount / bonuses would leave.

Without any cards, the visitor simply registers in the base of the club (system), and then makes purchases at partner stores.

According to this scheme, snimislivki is now working successfully.

Then there was a dawn of similar systems of discount cards, there were quite a lot of offers. But unlike my idea, similar developments spread plastic among their audience. They all bent.

Why did the project fail then?

Well, first, I was too young. It is necessary to punch any project, go talk with each partner personally, show not a piece of paper, but a working draft. And I had a piece of paper, and I did not go anywhere.

At that time, almost no online store had its own loyalty programs (except for the discount). Therefore, the main reason, named by the representatives of the stores, was: “we will not use someone else’s code in our website”.

Second try

At the beginning of autumn 2010 I made a second attempt, with the new Grasse store, to make discount cards. This time I simplified everything to a primitive level.

I did not set goals to merge stores under one system. I just wanted to give my customers the opportunity to buy in other stores at a discount.

An agreement was drawn up, a system of mutual settlements was developed. As an experienced entrepreneur, I calculated and calculated all the processes. As an incentive, he promised in the presentation a potential audience of 5,000 active customers.

The principle of the card was simple: the client informs the partner’s store of the availability of the card (in any way), which in turn provides a discount. Shops chose middle peasants to value their reputation and not to deceive customers.

Presentations and letters were sent out ... I did not receive a single response. Most likely, the problem was not that the proposal was not interesting to anyone (considering that I sent it to info @ type soap) if I wanted to start calling to the shops, offering to meet the managers. I am sure that I would persuade some stores.

But the plan was prevented by events from my personal life and the subsequent change in the orientation of the development of my activity.

"Accumulator"

It looked like a map

Shortly before my second attempt, Evgeny Paliy, who at that time worked at NMT Group, which develops the bonus system - “Accumulation”, approached me. I will dwell on this project in detail, because I was his gold member, I had an insider there who told the main problems of the company. By the way, in March of this year the system ceased to exist.

It all started very pompously. The 10-page contract, which I studied in detail. We discussed all the issues with Yevgeny at the meeting, and I gave preliminary consent.

After 2 weeks, a meeting of partner stores, which managed to persuade to participate, took place. Only 11 stores. There was a presentation, stories about the bright future of the club, about the potential, and so on. In fact, it was difficult not to believe, and this is why:

The company has an agreement with the National Bank of Ukraine;
The billing part was provided by the State Express Bank, on the balance of which hung the entire railway of Ukraine, and this is almost 400,000 people who were promised to be connected to the club automatically. A representative from the bank attended the meeting and led a fiery speech;
Negotiations were held with a large network of gas stations and a network of grocery stores Buffet (a very large network), allegedly almost agreed on a test of cards somewhere in the Simferopol branch of Buffets;
Pos-terminals were issued, which will serve bonus cards. By the way, the cards themselves worked on the chips of NSMEP, the internal processing system of Ukraine, which was supported by the same Nat. Bank;
Constant connection of new partner stores, not only via the Internet;
Advertising in social. networks and everywhere in Ukraine.
We were promised gold mountains in half a year, in all respects, ideally, due to the bonus system we could get rich :).

The principle of the system was as follows:

• The customer buys the product from the partner store at full price;
• Bonuses are credited to the customer’s account, and the store pays the cash equivalent of these bonuses to the system;
• At the expense of these bonuses, the customer buys goods in the partner store. The system transfers a cash equivalent to this partner shop, reimbursing a certain part of bonuses (I omit the complexity of the mutual settlement algorithms, since this is a long and confusing process);
• The system lives at the expense of percent from the bonuses turning around in it.

The principle is simple and work has begun. For a month through my store, I faithfully issued the agreed number of cards. We were sent statistics on the shops, staged shares and so on. In general, the activity was boiling. During the month of work, the technological problems of the work of the bonus card opened and the disassembly began:

• Processing of cards on the spot, during the transfer of goods to the client, took a very long time - 3-5 minutes. This went against the majority of scenarios for the transfer of goods to customers - “gave, took the money, goodbye”, usually was given up to a minute;
• Cards were paid (30 UAH / 120 rubles / 4 USD), customers did not really want to buy cards, which may never be used. “Selling” them was very hard;
• Some stores for a month have not issued a single card. Most likely, due to the fact that they simply could not “sell” them;
• Our money went to customer accounts, but did not return to the stores. That is, customers did not make purchases from partners;
• Bonus cards were not advertised in any way, distribution was only through online stores.

After 5 months, NMT Group gathered partners, where they called gold customers (including me), and the discussion began, why the results are so bad. Naturally, all the stones online stores poured on the organizers - if something goes wrong, then the organizer is to blame. He, in turn, brushed aside, arguing that we (the partners) had to pull over, hand out more cards, then everything would be class. We were fed a little - perhaps it was the only tangible impact of my participation in the "Accumulation" :)

I realized that the investor, seeing the fig results, simply closed the financing of the project (we were told that about $ 1 million was invested). Therefore, “Nakopilka” has slowed down in its development and there can be no talk of any advertising.

But personally, I think that the problem of the whole undertaking was in the manual. According to insider information, the manager changed plans and strategies every week, forcing him to give up the old and start a new one.

Large retailers have not connected. In March of this year, they sent me a notice of termination.

Total problems due to which the company collapsed:

• The constant change in the development strategy of the bonus club;
• Unsuitable staff who oversaw the project and worked with partners;
• Poor organizational work and encouragement of partners, lack of control over the fulfillment of the terms of the contract;
• The budget was squandered before planning to launch advertising;
• Difficult technological process on the side of the final client;
• Difficult distribution of bonus cards;

New partners did not connect for the simple reason - “Accumulation” was a decision that meant switching the store to someone else’s loyalty program. In the case of system expansion, the store would become a hostage of the bonus club. I knew this even before the connection, so I put my old shop there, unimportant to me.

Other examples

After all the "crutches" I began to understand why almost everything, not only for online stores, discount clubs failed.

• Difficult integration into business processes of the enterprise: automation of the accounting of the cards, the issued bonuses / discounts, the miscalculation of profitability, accounts department;
• Reluctance to sit down on someone else's loyalty program, with the prospect of complete dependence on it.

In Ukraine, I know only one example of a well-functioning discount program - "Trump Card". Here are just its success due to reasons not visible to ordinary people. As one businessman told me, “Trump Card” gave an interest-free loan to open new establishments, which then were to some extent controlled. Naturally this is not the only reason for success, but the most significant. Other similar club cards "World Map" and "City club card", quietly exist.

And again in battle

And in January of this year, a businessman found me, called me to advise him on a new project of bonus cards. The man with the big money decided to create his bonus system. At first, I did not believe in the success of the enterprise, but having understood his proposal, I felt that this project could fire. Its two main competitive advantages are:

• The ability to pay bonuses for a huge number of services. The services already connected to the system are the same as in the mobile phone payment machines. That is, having made a purchase, the client could then pay off the housing and utility bills, refill the mobile phone, etc.;
• Absolute flexibility. A partner could present a bonus card to his clients as his own loyalty program, with the functionality of the system.

Unique offer on the market. Now we have agreed that we will roll cards at my store. Let's see what happens.

I would be glad to hear examples of failed and successful projects in other countries, and in Ukraine, if I missed something.