Dexit’s objective was to launch a wireless payment system as the standard payment method for small dollar amount retail transactions in the Canadian Market. •Company has strong investment financing behind it in the form of two large Canadian banking firms. •Fast 3 second transactions via RFID would create simple convenient transactions that could be tracked easily by consumers. Environment: •“Big 6” Banks controlled the Canadian industry Current market via issuing Credit and Debit cards and the corresponding retail processing systems. Canadian shoppers were routine users of electronic payment methods •Customers were satisfied with the credit and debit payment methods and viewed them as convenient to use. •By 2003, Canadian cash purchases projected grow to $270 billion with the average transaction totaling roughly $4. 50 each •Although acceptable in the marketplace, Canadians were not traditionally using debit or credit cards for small purchases, which were viewed as sales requiring cash. KEY •Over 70,000 of 350,000 Canadian retailers focused on low value transactions. 30% percent of debit users were in major metropolitan areas –
Vancouver, Montreal and Toronto. •Avg. value of electronic retail transactions in Canada was far lower than any other developed country. •RFID had not been widely introduced into the Canadian marketplace at this time. Organization and Marketing Mix: Strengths •Company has strong investment financing behind it in the form of two large Canadian banking firms. •Dexit has a strong highly experienced management team that is highly knowledgeable in the area of ecommerce and electronic payment systems. Electronic payment is already highly acceptable practice by both Canadian retailers and consumers •Product provides a fast convenient method of payment that rivals cash typically used for small transactions. •Faster than using a debit/credit card •No direct competition in the marketplace Weaknesses: demonstrated that RFID was unsuccessful in Canadian markets. •Costly to retailers to maintain a different system other than the traditional magnetic card readers. •Hardware would have to be supplied to merchants at substantial cost •You have to get customers to sign up on their own
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Opportunities •High speed, high frequency transaction retailers and patrons would welcome the technology as brings added convenience, which is perceived as most valuable in these situations. (Gas stations, book stores, coffee shops convenience stores, etc. ) Threats •Debit/Credit cards were already accepted forms of electronic payment making them competitors in these retailers. •They could lower transaction fees on the retail side to encourage use •Retailers were marketing their own company cards (i. e. Exxon Speedpass, Starbucks cards, etc. ) Problem Definition/Substantiation Objective:
To launch a RFID payment technology as the standard transaction method for low value transactions in the Canadian market place. Success Measures: •Increased market share resulting from increasing usage among merchants and patrons. •Increased profitability •Maintain 40% contribution margin Constraints: •Which customers to target •Which pricing strategy to use •Which locations to launch the product •Which geographic areas to launch the product Alternative Solutions and Evaluation Customers to Target: •Retailers accepting Debit and Credit transactions in their establishments •Retailers with cash intensive operations All merchants in the three major areas of electronic payment usage –Toronto, Montreal and Vancouver •Convenience stores, Bookstores, Grocery Stores (which were moving to smart checkout), Fast Food Restaurants, Gas Stations, and other stores having high volume, low dollar value transactions. •Wal-Mart – They were implementing the technology anyway. Pricing Strategy: •
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Charge a transaction fee to the consumer •Charge the consumers for the hardware •Charge the merchants for the hardware •Charge a transaction fee to the merchant Decision/Justification Customers to Target: Merchants that accept Debit and Credit transactions •All younger customers, regardless of location, because they are more willing to use the internet to replenish accounts and sign up for the service. •All customers in the high volume geographic area mentioned •Particularly merchants who survive on high volume, low dollar amount transactions •All merchants in the Toronto, Montreal and Vancouver areas •Cash only businesses in the 3 high volume geographic areas previously mentioned Pricing Strategy: •Charge the merchants for the hardware •Charge a transaction fee to the merchant Charge a transaction fee to the consumer Product Launch: •Canada Justification and Implementation: Dexit should target all merchants that accept Debit and Credit transactions in the geographic areas in which electronic usage is most prevalent. The culture of using electronic payment is already established in Canada and RFID will be more readily accepted in the areas where the most electronic payments occur. In areas outside of the three metropolitan locations mention, Dexit should target younger consumers who will be more willing to enroll and replenish the accounts via the internet.
All consumers who engage in high frequency low dollar amount transactions should be targeted as well because the premise of the technology is ultimately to find a safer, faster alternative to cash. All stores, particularly grocery stores, which were naturally shifting away form manned checkout counters, should be pursued because of the decreased cash management involved with using RFID. Dexit could use these retailers to market the technology because it naturally folds into the business strategy of such Grocery stores and Wal-Mart, which were shifting toward a larger implementation of the technology on their own.
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Transaction fees should be charged to both merchants and consumers in a manner that is more competitive than credit/debit cards currently offer. However, offerings should be tailored such that they are not triggering a potential price war with credit/debit merchant fees. On the consumer side, customers should be charged a small fee; however, the marketing message has to emphasize that ATM fees would be higher if consumers withdrew cash.
The stores should be charged for the processing equipment with a rebate made available if the retailers reach a specifically targeted transaction volume for using the product. This action will incentivize retailers to promote Dexit technology at the store level. Dexit must make sure that the equipment reaches as many stores as possible through the rebate program mentioned above prior to initiating a large scale marketing campaign. Merchants must be sold on the technology’s convenience and safety from a high-volume cash management perspective 3-6 months prior to getting the consumer on board.
Once you have merchant understanding of the technology’s ability to bring value to their business model, you can target individual consumers. It would be frustrating for consumers to be aware of the technology and later find out that it is unavailable at their favorite retailers! For the consumer, you are selling pure convenience, which is why it needs to be implemented in stores when they come to shop. Dexit should offer a 10% credit to consumers on the first purchase made (under $10. 00) using the Dexit fob in their favorite retailer as an incentive to sign up for the program.
