Strength in numbers

Thriving companies begin with a solid foundation, the basis of which is that all-important business plan. But sometimes, as times change and a business grows, it can outgrow its original vision. Changing an organization's direction can take as much research and planning as developing an initial business plan. The right new direction, however, can set a company into a better niche, strike a better balance of offerings or help it communicate its message more effectively.

Just as a company can outgrow its business plan, so too can it outgrow its founder. Such was the case, on both counts, with Vesdia Corp.

Baby grows up

Vesdia began in 2000 as BabyMint Inc., which offered programs that allowed consumers to receive cash-back rewards for shopping at participating merchants. In the BabyMint model, the rewards went to college funds. The company applied this model to similar programs for charitable giving, retirement savings and investments. These programs are still available through Vesdia on a direct-to-merchant basis.

"It was simply a way to bring the loyalty program concept to some of those life events," said Lars Holmquist, Chief Marketing Officer for Vesdia. The landscape changed when Citibank N.A. approached BabyMint in 2004, requesting a private-label loyalty solution for its cardholders. BabyMint executives soon saw the potential in the loyalty space for private-label opportunities and shifted the company's focus to concentrate on loyalty.

In 2003, the company changed its name to Vesdia Corp. to communicate a broader purpose to both its microinvesting programs and its private-label customer relationship management loyalty solutions. Vesdia launched its first private-label loyalty program in 2005; now such programs are the company's mainstay.

"We actually evolved into a company that's right in the middle of payments and loyalty and marketing," said Pete G. Davis, founder and President of Vesdia. Davis recognized a couple of years ago that his company had outgrown him. "I think one of the best decisions that we made, or I made, was to bring in an experienced manager/Chief Executive Officer who I now report to," Davis said.

Vesdia's new CEO, Jim Douglass, had been serving on the company's board of directors. Before that, he was Executive Vice President of Corporate Development and Chief Financial Officer for CheckFree Corp., a large online bill pay company. Though it was a difficult decision to relinquish the title, Davis said it enabled him to focus on strategy and business development, which he prefers over managing people.

Reaping rewards

Vesdia's entire focus is still loyalty programs. In the case of Citibank, Vesdia's patented loyalty program is tied to Citibank's general purpose credit card and debit card Thank You program. Vesdia added a merchant network to the Thank You program that increases rewards for Citibank consumers, according to Holmquist.

The merchants in the network have agreed to offer bonus points to patrons who pay with their Citibank cards, he added. Consumers may earn one point per dollar spent, but the bonus points for patronizing participating merchants can be as high as four points per dollar, Holmquist explained.

As has been widely reported in The Green Sheet and elsewhere, debit use has seen a significant jump since the economic downturn, and an increasing number of companies offer debit loyalty programs. With Vesdia, the rewards potential for consumers, and in turn the consumer retention for merchants, can be increased with the addition of merchant networks.

"[Debit loyalty] has grown dramatically already over the last three to five years," Holmquist said. The reason Vesdia's programs are attractive to debit card issuers is because debit cards come with lower interchange fees than credit cards, so there is less margin to work with; connecting a merchant network to the loyalty program is a great way to enhance the program's value, he added.

Vesdia works with bankcard issuing and processing partners such as MasterCard Worldwide, Visa Inc., Total System Services Inc. and First Data Corp. Vesdia offers loyalty programs for financial institutions, affinity groups, loyalty companies, commercial enterprises large and small, nonprofit organizations, and for the hospitality and travel industries. American Airlines Inc. uses Vesdia for its AAdvantage program.

Matchmaker, matchmaker

One of Vesdia's strengths is its extensive merchant network. "Not only do we have virtually all of the [nationally recognized name brand] online retailers in our programs, we have a very significant in-store merchant network both on a national basis and a local basis," Holmquist said.

"In an interesting way we actually are a very large clearing and settlement type company where we act as a matchmaker between merchants and the offers that they have and consumers that are participating in loyalty programs," he noted. Vesdia added major retailers to its merchant network last year. Holmquist said the company signed home improvement retailer Lowe's and AMC Entertainment Inc. The agreement with American Airlines was also secured in 2009. Vesdia implemented a program with the airline that includes a shopping mall and an in-store network, Holmquist said.

Vesdia also entered the prepaid market last year. "We see [prepaid] as an emerging market," Holmquist said. "Oftentimes the loyalty proposition on a prepaid card is one where if [the cardholder uses] that prepaid card at participating merchants, they have the opportunity to earn cash back that can be loaded back onto the prepaid card."

WWW for mom-and-pops

For the e-commerce sphere, Vesdia leverages consumers' online shopping and browsing histories to tailor e-mails or offer placements on Web sites to suit each customer's preferences.

To adapt the merchant networks for local and regional merchants, Vesdia invested about 90 percent of its research and development budget "on a new technology and services solution to efficiently manage and report to local and regional merchants," Davis said.

This resulted in the company's revamped and updated online shopping portal, which went live in 2009. The site offers increased functionality, including detailed product search, price comparison, offer comparisons and a local participating merchant locator. Merchants can log in and see their transaction history and reports.

Holmquist said the decision to upgrade the functionality and look of the online shopping portal was the best decision Vesdia has made because "it gave us not only a series of Web sites that are attractive, easy to use, intuitive et cetera, but it gave us a lot of data to work with that we are continuing to reap some benefits from." Davis agreed, adding, "Now the local merchants and these regional guys are banging down our door."

Additionally, Vesdia sealed a deal with Open Table Inc. in 2009 to provide more consumer opportunities for loyalty earnings. When consumers book reservations through Open Table via Vesdia's shopping portal, they receive bonus points or miles.

According to Holmquist, when it comes to building online merchant networks, acquiring the transactions and setting up the infrastructure is relatively easy. "The challenge is to make it consumer friendly so that consumers will be motivated to return to the site and use it as a reference when they're going to do some online shopping," he said.

Reaching critical mass

Regarding the in-store network, "the challenge there is to actually sell and manage the in-store merchants," Holmquist noted. "It requires direct selling. It requires a lot of analytics and reporting to demonstrate to the merchant the value their participation brings in the form of new customers." He added that if anything in the loyalty space is difficult, it is building and managing the network of merchants.

This is where the ISOs and merchant level salespeople (MLSs) have an opportunity to shine. Getting the first few merchants on board in a given network is the hard part. But ISOs and MLSs have relationships with merchants, know their pain points, and can communicate the value proposition to their merchants and prospects.

Mentioning the significant brands that Vesdia has signed helps ISOs to reach that critical mass, according to Holmquist. He believes merchants recognize the value of tapping consumers who participate in the loyalty programs that Vesdia offers with these major brands.

"One of our biggest challenges is to be relevant in all of the places where the consumers that participate in our loyalty programs might be located," Holmquist said. "Our objective is to continue to grow our in-store network as quickly as we can and to become more and more relevant." ISOs selling Vesdia loyalty solutions have little follow-up responsibility post-sale. Vesdia handles the customer relations and technical support.

Pick and choose

Vesdia offers companies complete loyalty programs or will work with companies to enhance existing programs. Companies can choose from the following:

• Consulting services
• Credit, debit, and affinity reward program design and management
• Customer database management, targeting and analytics
• Loyalty and reward program design and management
• Marketing services
• Merchant-funded rewards solutions
• Relationship marketing tools and services
• Reward redemption solutions

Together we can

Cynergy Data Inc. recently partnered with Vesdia. "There's definitely work to be done in trying to understand the price point that the small to mid-sized merchant is going to perceive as the proper value for loyalty," said Randy McCoy, CEO for Cynergy Data.

Vesdia believes its ISO reseller channel could play a crucial role in expanding its merchant network. Vesdia also employs a direct sales force to target large national retailers.

In addition, Vesdia teams with numerous companies for lead generation, business development, and product and functional capabilities. As Vesdia continues to grow its merchant networks and partner relationships, it is taking that old saying, There's strength in numbers, to the bank - both figuratively and literally.

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