Activating a Community of Brand Evangelists

Digital Verification: Loyalty Marketing 2.0

August 3, 2015 | Affiliate Summit East

Confidential & Property Information of ID.me 2| Digital Verification

My Background: I led a platoon hunting HVTs in Iraq (1 of 3)

Confidential & Property Information of ID.me 3


| Digital Verification





My Background: I went from Baghdad to Harvard Business



My Background at a Glance


• Education:• Vanderbilt University: Graduated magna cum laude, Economics• Harvard Business School: MBA

• Professional:• Captain, United States Army• Associate, McKinsey & Company• Founder & CEO, ID.me

• Awards: • Recognized as one of the top 100 tech leaders in the Washington

DC metro area for 2015• Top 40 Under 40 for the DC Metro area for 2015• Recognized in Inc. Magazine as one of five extraordinary veteran

entrepreneurs for 2015


I have a weird life as an entrepreneur: I met the President while wearing shorts (I looked like an easter egg) (1 of 2)



I have a weird life as an entrepreneur: shortly after, we helped KISS & Def Leppard setup a special program (2 of 2)



I love America and I proudly wear red, white, and blue pants from time to time to let everyone know



Why is price discrimination important? Let’s define it first.


Three Types of Price Discrimination

• First Degree Price Discrimination: Seller charges a different price to every single buyer.

• Example: Individually negotiating the price of a car. • Second Degree Price Discrimination: Seller charges a different price as

the quantity of the order increases. • Example: Lower ticket prices for group orders.

• Third Degree Price Discrimination: Seller charges different prices to different demographic groups.

• Example: Military Discounts, Student Discounts, Senior Discounts, etc.

Goal of Price Discrimination: To set prices based on demand, or what customers arewilling to pay, rather than costs.


Price discrimination can often increase profits and, sometimes, access for consumers


Examples of Profitable Price Discrimination for Sellers

• University Education: Financially well off students pay full price while less wealthy students receive financial aid.

• Airplane Tickets: Seller charges a higher price as the time of the flight draws closer.

• Bazaar: Wealthy tourists will typically get a much higher price quote relative to a local.

• Matinee Discounts: Encourages large families on a budget to attend movies.

• Student Discounts: Students generally have low, fixed incomes, and therefore a different demand curve.


Challenges to effectively implementing price discrimination programs


1. Sellers must figure out what each customer is willing to pay (huge challenge)

2. Competition e.g. a firm may not be able to raise prices to a consumer, even if willingness to pay is higher, if competitors would undercut them on price

3. Sellers must prevent consumers who receive lower price points from re-selling their product

4. Sellers must avoid the perception that the program is unfair to certain groups of consumers


First degree discrimination is more accessible to companies that have frequent interactions with the same customers



Price discrimination techniques are employed by most major consumer brands because it is profitable


Examples of Price Discrimination (2014 Northeastern University Study)

• Cheaptickets & Orbitz: Logged in users saw lower price points relative to shoppers who were not registered.

• Home Depot: Displayed higher price points to shoppers using mobile devices relative to desktop browsers.

• Expedia & Hotels.com: Some searchers randomly received higher price points as the sites tested the optimal price point.

• Staples: Charges different prices based on where the shopper lives.

These major brands price discriminate because it is very profitable to do so.


Loyalty marketing can be distilled to two questions:


1. How do I get my existing customers to spend more? • Valuable Behaviors

• Frequency: How do I increase shopping frequency?• Order Value: How do I increase AOV?

2. How do I get my existing customers to refer new customers?• Valuable Behaviors

• Quantitative: How do I get my customers to talk about my brand more often?

• Qualitative: How do I get a higher proportion of my customers to talk about my brand in a positive light?


Loyalty Marketing 2.0 combines the advantages of 3rd degree price discrimination and authentic consumer relationships


True Customer Lifetime Value

• (Revenue from Customers Purchases – Costs of Servicing that Customer) + (Customers Sentiment About Brand * Customer Influence) = True Customer LTV

Price Discrimination

• Optimize for customers willingness to pay

Sentiment

• Develop a positive, emotional relationship with the customer

Homophily def.:“love of the same” -- the tendency of individuals to associate and bond with similar others. The presence of homophily has been discovered in a vast array of network studies.

Takeaway for marketers: How to position your brand so that it is perceived as an important part of a community?



Defining your most profitable customer segments is an important first step in order to craft an effective loyalty strategy

Platinum

Gold

Iron

Lead

Most Profitable Customers

Least Profitable Customers

What segment spends more with us over time, costs less to maintain, spreads positive word of mouth?

What segment costs us in time, effort, and money yet does not provide the return we want?Reference: The customer pyramaid: Creating and serving profitable customers

Valarie A Zeithaml; Roland T Rust; Katharine N Lemon, 2001.


Identifying aligned communities with profitable customer segments, current and future, sets the foundation for outreach

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Corporate Employees Affinity Groups

Professionals Students Non-Profits Age

Military Membership Groups Veterans Teachers

Firefighters Alumni Accredited Investors EMTs

Social Influencers Bloggers Moms Contractors

Professional Athletes Celebrities Experts

Senior Citizens Government Employees| Digital Verification

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Problem: absence of digital ID cards for military, students, etc. prevents brands from securing exclusive promotions online

1. Buy Tickets with Military Discounts 2. Verify Military ID at Checkout

BOX OFFICE

1. Shop with Online Military Discounts

2. Unable to Show Military ID Online

ONLINE

Military DiscountTo use military discount, show your military ID at checkout in store.

| Digital Verification Confidential & Proprietary Information of ID.me

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TrustStrength of Identity &

Authentication

Netw

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Nod

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on

su

min

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Iden

tity

Port

ab

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FB and Google can’t move right because consumers don’t trust them

Less widely adopted social credentials don’t have market position to move right

Amazon can’t move up to ubiquity because large retailers are scared of them

Banks have trusted credentials but do not generally make them portable

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Digital ID is deeply flawed because your most trusted logins aren’t portable & your most portable logins aren’t trusted


23 23| Digital Verification Confidential & Property Information of ID.me

ID.me created a network that empowers consumers to present their digital IDs to brands just like they do offline

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ID.me has won $9.45M in Government AwardsThe US Dept. of Commerce, GSA, and CSDII Selected ID.me for Awards

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National Strategy for Trusted Identities in Cyberspace

Connect.Gov (formerly Federal Cloud Credential Exchange)

$2.6M awarded in 2012

One of three companies certified to login citizens across govt websites

$6.4M, 18 month contract awarded to ID.me in 2014

ID.me and Verizon are the only companies selected by GSA as contract winners

Cross Sector Digital Identity Initiative

$450k awarded in 2014

Platform at intersection of DMVs and INOVA Health System

| Digital Verification Confidential & Property Information of ID.me

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Virginia is using ID.me to launch the first digital drivers license in the country

25| Digital Verification Confidential & Property Information of ID.me

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How Brands Use ID.me Verification of Key Consumer Groups

39 Million military members

$1 trillion annual purchasing power

2.4 million first responders

$130 billion annual purchasing power

6.8 million teachers


21.4 million college students


3.9 Million government employees

$17 million annual purchasing power


Individuals trigger exclusive promo codes via ID.me by sharing verified identity attributes with brands

Military member signs in or verifies with ID.me.

Active Duty Military sees button on SeaWorld site.

1 2 3SeaWorld offer is claimed by user post-verification.


Caesars Total Rewards reservation platform transforms one integration into implementation for more than 40 locations


Group status verification is available across multiple booking and search result pages.

Customers discover group discount on the Caesars Entertainment home page.

1 2


Platform integration allows users to discover and use your discount on multiple pages

Verified users immediately see discounted rates in room listings.

Offer information and verification are conveniently located near search options.

3 4


Individuals trigger exclusive promo codes via ID.me by sharing verified identity attributes with brands

Veteran verifies with ID.me to receive discount

Veteran sees button on UnderArmour.com1 2 3Member claim is verified

and account is registered



+

ID.me’s verification technology is compatible with third party publishers so any referral source can drive sales for the program

New Sales Channel


New Sales Channel

New Sales Channel

New Sales Channel


+

Under Armour promotes the military program on mass market affiliate sites as ID.me filters out ineligible users



Under Armour Case Study ID.me drove 30% affiliate revenue growth YOY

70% of those who have used ID.me credentials at checkout since November 2012 were first-time customers.

–Under Armour, Internet Retailer Case Study

Looking at a 3-month timeframe before and after ID.me was added to the site (in 2012 vs. 2013), the Military and First Responder offer drove over 30% revenue growth for the affiliate program.

–Under Armour, Internet Retailer Case Study

I am so pleased that I am able to use my Troop ID every time I order. This is the main reason I keep coming back. I used to be a NIKE girl...but I’m all UA for life!

–Under Armour customer on social media

1

2



Success stories: over three years, ID.me has never lost a major account because Loyalty Marketing 2.0 is profitable


Top 250 Internet Retailer

• 45% customers new to file• 60% of repeat purchasers hadn’t made a purchase in the previous year• 30% increase in AOV for ID.me verified customers• $700k generated through program in first 60 days

Overstock.com

• Reported veterans were twice as profitable as the typical Overstock.com user• Expanded program to include Students, Teachers, and First Responders

Streaming Subscription Promotion for Professional Sports League

• 31,300 unique subscribers verified as members of targeted communities • 11% average click to purchase rate


KISS & Def Leppard setup an exclusive presale



Purchasers follow an automated process to verify eligibility for tickets (brand captures e-mail, name & community)



Community focused media sites generated earned media



Over 300 brands leverage ID.me’s technology in order to market exclusive offers to specific communities of interest



MLB.tv & MLB Shop are using ID.me for Students & Military


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E-mail subject lines targeted by group: “Military Discounts…”, have open rates 33% over industry average for offers sites

16%Group-TargetedSubject Lines

12%

11%Non Affinity Targeted

Non Affinity Targeted

RetailMeNotEbates

IndustryAverage

| Digital Verification Confidential & Proprietary Information of ID.me


For special, relevant holidays, e-mail subject lines targeted to communities have open rates 100% over the average

Campaign Highlights

Two emails were sent around the holiday in order to Optimize our reach, and provide our customers ampleTime to enjoy the exclusive military offers.

Primary Veterans Day Offer Email

25.3%Open Rate (+12% Over Industry Average)Sent 2 days prior to Veteran’s Day

Primary Veterans Day Offer Email

19.2%Open RateSent 2 days after Veteran’s Day



ID.me is excited to debut our native integration with Tickets.com


Blake HallTwitter: blake_hall

E-mail: [email protected]

Questions?


Reach the Military Community

$1 TrillionAnnual Purchasing Power

85%Seek to buy from brands that offerMilitary discounts

21.3MMilitary Veterans

2.7MActive, Reserve, Guard Military

15MMilitary & Veteran Spouses

90% 85% 10%10% 15% 90%



Reach the Student Community

$417 Billion Annual Purchasing Power 21.4 MillionEnrolled Graduate &Undergraduate Students

78%Say they are very likely to buy from brands offeringStudent discounts

50%Make purchases online

Age Range

18-24

56%

44%


Confidential & Property Information of ID.me 46| Presentation Titles

Reach the Teacher Community

$339 BillionAnnual Purchasing Power

6.8 MillionTotal Population

[K-12, Post Secondary & Technical Education]

Gender

13% 87%

Age Groups

49%21% 31%

18-29 30-49 50+

50%

95%

Make Purchases Online

Hold College Degrees

Recession-ProofIncome


Reach the First Responder Community

$130 BillionAnnual Purchasing Power

2.4 MillionTotal Population

[EMT, Fire Fighters & Police Officers]

Gender

85% 15%

Community Influencers

50%Make Purchases Online



Reach the Government Community

$1 TrillionTotal Purchasing Power

17 MillionTotal Population

[Federal, State & Local Employees]

Gender

13% 87%

90%Shop Online
