Make your customers pay you for their loyalty

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Make your Customers Pay You for their Loyalty by Charles Alder CEO Dynamic Rewards

Dynamic Rewards Ltd:

Dynamic Rewards Ltd Public company incorporated in 2006 Developers of the Dynamic Rewards loyalty program and affiliated stored value applications utilising the Thor Transactor™ Added value Transaction Processing System Over 9 years experience in the loyalty industry backed by partners with over 20 years of experience in the development of technology to operate value-added transaction processing systems for loyalty and payment programs Dynamic Rewards systems now being deployed in several countries in Asia Pacific, UK, Europe and North America Partnerships with retailers, transaction processors and payments processors Development and QA teams in Auckland, New Zealand and Manila, Philippines and USA

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Offer rewards (typically points) based on value of transaction More sophisticated programs offers rewards on actual items purchased Additionally some programs offer rewards for cumulative behaviour such as: the count of items purchased over a period of time the cumulative value of spend over a period of time the re-purchase of product following a trial or sample Rewards values range widely between programs - less than ½% to over 4% of total spend The cost of operating a program can add a further 1% or 2% Traditional Models for Loyalty/Reward Programs

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The funding of a rewards program is usually a combination of margin erosion and third-party support This model may be fine for retail environments that can ‘lean’ on their suppliers to assist in the program funding (typically FMCG or Pharmaceuticals) High-margin environments can afford to shed a few % points For other retail sectors, the opportunities are slim Few – or no – major brands to support them Low value ticket items that may not attract ‘piggy-backing’ on other reward programs such as Credit Cards Limited opportunity for shared-cost multi-merchant coalition programs High operating costs to run their own programs Funding of reward programs

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An emerging opportunity created by the changing payment landscape

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Cash (actual, physical cash) has been king of payments at the lower end (under AUD$30 in Australia) …. but the payment world is changing Cash has been ‘king’ for small ticket purchases Study conducted by Edgar Dunn and sponsored by Australian Federal Government (June 2006)

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What is pre-pay (or stored-value)? Definition of pre-pay is a payment mechanism that draws funds from a ‘pre-funded account’ to pay for multiple purchases This does not require a bank – nor indeed a bank account Typical of pre-pay is the mobile phone market (in many countries, in excess of 70% of phone accounts are on pre-pay) … or the transit industry with programs like the Hong Kong Octopus Card The explosion of the pre-pay market Definitions courtesy of Greg Storey – Visa International Credit “Buy now – pay later” Debit “Buy now – pay now” Pre-pay “Pay now – buy later”

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Transactor Technologies’ estimate US$0 1997 US$4 Billion 2002 US$83 Billion 2006 The USA market growth VISA International estimates the Asia Pacific market potential for pre-pay to be close to one trillion US$

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Cash handling issues Cost of handling and security New technologies Mobile phones (eg. Payzy, PaGo) RFID / NFC Internet and wireless technologies Virtual ‘cash’ New challenges to traditional bank products Credit Cards Debit Cards Pre-paid Debit Cards The emerging unbanked markets Consumers who do not qualify for Credit Cards or bank accounts Some reasons behind the explosion

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Consumers will be inundated with choices What will make consumers move from cash to pre-pay? Consumers may move if: Simple to use Low (or no) cost to them Secure Convenient Incentivised / Rewarded What will make merchants move to accept or implement pre-pay? Consumers want to use them Operating costs are low Reduction in transaction time Potentially increases purchase value What will help the consumer choose? Courtesy - Greg Storey – Visa International

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Convergence of Loyalty Reward systems and Payment systems Introducing the Ultimate Program Scenario

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The Dynamic Rewards Program

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The loyalty proposition is simple Earn Dynamic Rewards Points with every purchase Points balances are updated in real-time and printed on the receipt The Dynamic Rewards program can run anonymously but cardholders are encouraged to register online Bonus rewards for online registration Additional benefits through Member-only promotions Full Card replacement if lost or stolen The Dynamic Rewards card is also a Stored Value Payment Card May be loaded with up to AUD$500 worth of ‘credit’ Simple and convenient for customers and staff Unique combined reward card and payment method using one mechanism

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Online Access for card holders

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Cardholders encouraged to register online Member Registrations Through online registration accurate membership data is captured at minimal cost Preferred Communications Members choose to receive updates via email , sms or direct mail

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Full Transactional Reports online Members Reports Each member can view their stored value and points transactions and balances online Live Updates All reports are live in real time due to the data methods used in collecting and processing transactions.

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Full Merchant Transactional Reports Full Reports Each merchant is able to view a full suite of reports based upon range of variables Anti Fraud Reports Velocity Reports provide access to frequency of transactions and show up any suspicious transactions due to set rules Communication Tools Merchants are able to email or sms customers through a full blown suite of communication products. Specific campaigns can be sent to top tier customers, incentive communications to customers based upon product history and more

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Supporting POS materials

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Dynamic Rewards results SALES UP COSTS DOWN Sales up to card holders through retained value Costs down due to database marketing and reduced advertising expenses

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Cash in the bank Pay now – buy later (Almost) guaranteed loyalty The cardholder will come back and spend Reduced fraud Every transaction and redemption fully tracked in real time Embedded reward and loyalty system Every Dynamic Rewards transaction earns reward points Cross-outlet settlement system Each outlet pays its way when issuing rewards Each outlet is reimbursed for every redemption it performs Full CRM marketing system backing the program Dynamic Rewards results - benefits and bonuses

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The cardholder happily pays in advance Convenient Simple Rewarding By doing so pays for their own loyalty The pre-payment earns interest to offset the cost of rewards Any ‘breakage’ is returned to the pool – all merchants share Fraud and ‘leakage’ dramatically reduced – the consequent savings are a further offset to program operating costs The system ensures that there is cost equalization across all retailers The CRM component offers targeted database marketing Data analytics provide valuable consumer insights The Dynamic Rewards cardholder pays for their own loyalty

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The bottom line …… …. everyone happy …….!

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Dynamic Rewards Ltd Ph 07 3711 6277 Fax 07 3272 2989 Charles Alder charles@dynamicrewards.com