The Elusive Product Solution -- How to Recognize Portfolio-Expanding Opportunities

Now that you have developed a few products and services to introduce to consumers, and are finally reaping the rewards from this, what is next? It’s time to do it all over again. But to ask again, what is next? Is there one solution within your segment of the prepaid industry that would make the perfect addition to your product portfolio?

After speaking with a number of key individuals in the prepaid marketplace, we were able to pinpoint the best ways to find this solution. In addition to this advice on expansion, we also learned the important steps to adding these new products and services to your repertoire.

The majority of company representatives we spoke with stated that the main ingredient in the additions is knowing what the customer needs and wants. Answering these questions will put you in the position of not only being successful in this area of your business, but being a successful company as a whole.

Q: What is a must-have addition?

A: I think the areas we see as most important are training and education. Our challenge, because we are prepaid VoIP, is to explain the key benefits that VoIP offers vs. TDM function and features. There is a lot of flexibility that’s there and we think as the existing prepaid market gains access to the internet more and more, markets and communities will be able to use VoIP on a prepaid basis. But they’ve got to want to. Our challenge is to educate them with regard to what this new enabling technology we developed provides from a beneficial standpoint.

-- Rick Henderson is the Director of GlobalTouch Telecom, a service provider of vertically-integrated hosted VoIP platforms.

A: Be focused on those markets that present the significant opportunity for growth. We have seen rapid margin impressions in business, like gift cards. By exploring new markets you are going to ensure that you’re going to be the beneficiary by being first to market, driving those businesses that are able to have win-win-win for all the stakeholders.

The healthcare and insurance arenas are examples of types of applications we are developing to meet the demand in these markets. In many cases we have to cultivate that demand. And as a bank, we are going to invest in that, where historically we haven’t had to do that to make sure that we are there. The key to the must have addition in my mind is having a proactive view of the marketplace, understanding where the opportunities are going to arise and then having a plan to execute the opportunities.

-- John Barbella is senior vice president of Bank First Stored Value Solutions, a business unit of BankFirst. BankFirst Stored Value Solutions offers secure, creative and innovative solutions for the prepaid card industry.

A: A broad product portfolio is certainly important, but the “must-have” in the industry, above and beyond products, is getting the most productive products into the most productive sites. From the card side, the most important factor is getting the biggest retail brands into the card portfolio. The category-leading brands sell exponentially better than the No. 2 or 3 retailer in a category. You need top-down buy-in from the leaders of the retail operation. If you do not have senior support to market a “destination” program, you will not get the marketing and consistent placement you need to develop a long-term, winning program.

-- David Tate is group vice president of Blackhawk Network, a subsidiary of Safeway Inc. and a prepaid and payments network.

A: Our segment of the industry is really prepaid calling card for voice services and other enhanced services including prepaid wholesale; its almost all voice oriented. We see the ability to have flexibility, which is key for any type of calling card and prepaid company. As far as being able to offer services that can be billed flexibly, it is important to have flexibility in the markets they are targeting and flexibility in the types of enhanced services. Some of the things we have seen as being good aren’t just about prepaid long distance or prepaid services. You might have a computer specialty organization and you might have a prepaid card for a certain amount of hours of prepaid consulting for trouble shooting your PC, or figuring out how to optimize your iPod. Things like that are the kinds of things that we feel are important to being able to flexibly add.

-- Frank Lauria is president Compro Technologies, a provider of telephony solutions for VoIP, TDM and converged networks.

A: The way we look at having coverage in the prepaid space is by looking at it in three areas. Closed loop, for example, would be your traditional Starbucks card. Second is open loop and gift/general spend card, where a gift card is considered a single load card and a general spend is a card that has a reload component, but limited functionality beyond POS – prepaid debit usage. Then the third is the payroll card. We describe it as prepaid checking, a fully-functioning card that actually provides people that don’t have a bank account or are in a prepaid demographic the full capability of accessing mainstream electronic payments with the full functionality of the equivalent of a checking account.

-- Kevin Grieve is president of First Data Prepaid Services for First Data Commercial Services, a division of First Data Corp. First Data Commercial Services is a provider of payment processing solutions.

A: We are a bill pay company. Our strategy over the past few years has been to go through other channels like the prepaid channel, for example, money transfer, and offer bill pay as a complimentary product. We can validate the strategy that says prepaid companies are looking for other products to compliment what they do and bill pay seems to be a hot product in the market right now.

-- Alex Cooper is vice president of IPP of America Inc., a payment solutions provider. A: I think it is worth saying that prepaid wireless still drives the majority of our business; it is still 70 to 80 percent of the dollar revenue. The must have additions that are driving the most growth are the financial service related products, whether it be debit, open loop gift cards, Visa, MasterCard, American Express branded gift cards, or bill payment. Those are the key categories that are growing the most, and we think over the next year or two will really expand the over all category.

-- Bryan Zingg is vice president of sales for PaySpot, a subsidiary of Euronet Worldwide, a prepaid electronic payment processor.

Q: How should you add new products and services?

A: We have been the beneficiary of our partners over the last five years, where our partners would bring opportunities our way – MasterCard, Visa, Discover (we are issuers of all three), but then our processors, such as Metavante, would bring business our way. That served us really well, but we need to be looking outward to see what new opportunities are there. It is not just the things that have been uncovered already, but what market can we research and explore the existing practices. So, if we know the insurance marketplace – there are about a billion checks that are cut – there is a great opportunity there. Where do they have the largest checks? What do they look like? How often do they come? We have really honed in on those payments that are recurring in nature. In the insurance market we have specifically identified workers compensation, because the typical claim might be 10 checks. If you talk to an insurance company, they are going to tell you it takes a lot of work to make sure those checks go out on time, every time.

-- John Barbella

A: I think it comes down to progressive merchandising techniques that create awareness and expectations around where consumers can buy products and services.

-- David Tate

A: The key is having the right prepaid platform that allows for these quick, onthe- fly changes that you can add different things to your service so that you can be more competitive and react quicker to market demands.

-- Frank Lauria

A: The first thing is that you need to be very customer-centric and very market driven to understand consumer needs and merchant needs relative to understanding what the needs of that customer are and building applications around that. As we talked about the number of different segments, you’ve got to get deep on what the value proposition is going to be to that particular segment. Second, have a formalized stage gate innovative process going from ideation through launch and scale. Third, you can do as much market research on the front end – focus groups, interviews – but you really don’t understand true demand until you get out in the market and test it. Test, sell, learn, sell some more, learn some more and then scale.

-- Kevin Grieve

A: It is a matter of evaluating whether the products fit your current channels. Does it fit the current POS platform? Does it fit the way that you sell through your sales agents? Does it meet consumer needs similar to the demographics of your current business? I think bill pay does that.

-- Alex Cooper

A: Our company does not originate products; we don’t create our own. Rather, we resell other companies products. The best way to approach adding new products is to No.1: work with the provider to create some marketing programs that are specific to channels we serve. Typically, we will test the product in a live-field environment. Once we have tested it and have some experience and traction with the product, we will roll it out to the different channels – whether it be chain stores or independent stores. I guess it is a three prong approach. Work with a supplier to create a custom marketing message or collateral for our channels. Test it. Roll it out.

-- Bryan Zingg

A: One good way is having the option to introduce them with promo cards and special discounts until they get to know the product well. A strong marketing line will help, too.

--Tino Patel is president of The Phone Card Warehouse, a wholesaler and manufacturer of prepaid phone cards.

Q: How do you plan to keep pace with your industry?

A: Keeping in touch with customers to look outside the box is important. You’ve got to try new things. The demand that is being placed on communications as the world shrinks is incredible, and your ability to meet that demand and react to it is going to be the thing that is the delineator from a success standpoint. At the end of the day it comes down to execution. If people use it and it works, people find the features, benefits and pricing to be at the benefit, then they will continue to buy and use it. Again, not relying on third parties to support our customer’s needs, with that level of control we believe we will be able to keep pace. Listening to your customers in the market is what makes you successful.

-- Rick Henderson

A: I’d prefer to set the pace – that gets back to creating the demand. If you go out to all the insurers today, they are not saying they need a new way to make payments for workers compensation, they might recognize there are opportunities for efficiency improvement, but we have to demonstrate how we are doing that. We are advertising in insurance publications, which is new to BankFirst. We are proactively pursing advertising to get new business. We believe that a unique approach for us to take is to not only get the industry thinking about it, but to think about BankFirst in that way. Our brand isn’t going to take us to the Cignas and Aetnas of the world, we need some help to get there. And the advertising approach is a way we can do it. The other thing is really scouring the landscape for those new arenas that have been identified as having the variables we are looking for being corporately funded or corporate incentives, what are the new ways we can make things go. Is it going to be mobile payments? Are we not going to be using cards anymore? We are really keeping our ears to the ground and getting the ball moving. It’s really about innovation, then the flexibility of our business - that we are able to quickly adjust to the needs of our clients. We are perhaps more nimble than others in the business; we can work with multiple processors today in order to meet the needs of the partner and what they like to see done.

-- John Barbella

A: We hope to continue to set the pace for the industry, not just keep pace. We understand that content is one of the key factors in our success, and it is a core focus for our organization. Approaching this business as a distribution company is significantly different than approaching it as a product company – we think the latter is critical to being a good, long-term partner for our distribution network. Our aim is to simplify the consumer experience by creating new, easy-to-use offerings and make them readily available through an exclusive, productive retail network.

-- David Tate.

A: This is all about adding relationships and having our flexible service creation environment in our prepaid platform. It is about adding relationships from a technology perspective, which includes the open programmable platforms and the service creation environment. It also includes having relationships on the content side and advertiser side.

-- Frank Lauria

A: I think we are constantly looking for other products that complement. The fact that IPP is a bill pay processing company means that one of our differentiators are that we are licensed to do money transfers and do financial services. We are looking at offering additional products and services that complement prepaid distributors product offerings.

-- Alex Cooper

A: In general we keep pace with the industry by piloting new products and expanding on those that sell well. Prepaid wireless it is our biggest revenue. It has helped expand prepaid wireless by offering more MVNO carriers. We also push handsets. We see a future in our distribution selling financial services.

-- Bryan Zingg

A: Keeping the high quality in service to our customer and giving them our No.1 rule, which is 100 percent customer satisfaction in our products. Another one is attracting and giving good discounts on an extensive variety of phone cards.

--Tino Patel