Dexit Case

BACKGROUND

Company:

Dexit Inc. is a privately owned company formed in Toronto in 2001. The company's goal is to provide customers with convenient and easy-to-use electronic payment system that would be an alternative cash for low-value transactions.

Product and service:

Product/service 1 - On registration by filling a form at the Dexit enabled merchant locations, on the Dexit website, or by calling the Dexit call center, customers will receive a Dexit Radio Frequency Identification (RFID) tag that could be attached to a keychain. Once they transfer funds to their Dexit accounts, they would be able to pay for purchases at participating merchants simply by contact less 'tap and go' communication with the Dexit tag and an RFID reader located beside the till. With the Dexit tag each customer receives a username and a password which they can use to login to their Dexit accounts using the internet and check account balance and transaction details. They can also access their accounts by phone which will offer an interactive voice response system or a live customer service representative.

Product/service 2 - Merchants will be provided with a retailer account, an RFID reader and a point-of-sale terminal. The RFID reader will read the consumer's Dexit tag when placed in close proximity without the need of contact as needed by the debit or credit cards meaning hassle-free fast transactions. They will be provided with a user name and a password to access their accounts via internet. Transaction settlements will be executed on a daily basis by electronically transferring the funds to the merchant's account.

Competitors:

Even though Dexit does not seem to be in direct competition with any one, their competitors include:

Debit and credit card providers.

Retailers that issued their own proprietary payment cards (Starbucks Coffee).

National retailers offering 'gift cards'.

The issues / Problem:

In order to construct a sound marketing plan, Persofsky needs to analyse the market and find market segments in both the merchant side and the consumer side, decide on a target market the Dexit service could best be served and position the service. A decision on whether the launch of the product will be regional, national or Toronto-only also has to be made.

ANALYSIS

Market:

For the marketing plan to be effective, it has to be closely tied with the company's goal, which is, to provide customers with convenient and easy-to-use electronic payment system that would be an alternative cash for low-value transactions.

So we are looking at consumers and merchants dealing with low-value transactions. Dexit expects the average purchase transaction to be about $4, and that customers might use the Dexit service for purchases as large as $25. Dexit's research shows that consumers and retailers has embraced the debit/credit card solution for ease and efficiency in making transactions, yet low-value transactions are made in cash in the most part. This market has not been effectively serviced yet and Dexit has the opportunity to be the pioneer and capture this market.

Dexit's research estimates that the total value of Canadian cash purchases will reach $270 billion in 2003 at an average of $4.50 per transaction. The total value of purchases being estimated at $536 billion, 50.37% of all purchases will be by cash, while debit and Visa/Master purchases will account for only 21.46% and 28.17% respectively.

There are two markets Dexit has to consider, the consumer market and the merchant market, which works hand in hand with each other. Those being directly linked, choosing a market segment for consumers will give the criteria for selecting the merchant market segment.

Consumer market

1. Benefit segmentation

FEATURES ADVANTAGES BENEFITS

Customer account, user name and password Visibility of small value payments

Online top-up of account, check balance Small businesses: Track small cash transactions for business and tax purposes.

Parents: Track children's expenses. More control

Small key tag Easy to carry, stylish Teenagers: fashion component. No need to carry a wallet, the tag can be attached to any item carried all the time (mobile phone)

No-contact reading Ease of use, convenience Teenagers:

Transaction takes less than 3 seconds Shorter queuing time

No pin, no signature Ease of use. Fast, no-hassle transaction saves time

people on-the-go

E-cash No need to carry money

No need to wait for balance

No loose change or counting balance

2. Observable Characteristics

Income: low medium high

As illustrated in the graph, people with low to medium income levels tend to spend a high percentage of their income on low-value transactions while people with high income level spends a lower percentage of their income on low-value transactions.

One lifestyle criterion for the consumers could be whether they are trendy or conservative.

Although Dexit is a debit service provider, it does not use the traditional card and the 'tap-and-go' technology used at least looks more sophisticated. This will appeal to the trendy part of the market.

Majority of the trendy (cool, stylish, up-to-the-minute) segment are teenagers and young adults. So we also might want to consider life stage as a criterion too to better define the market segment.

Merchant market

Dexit's research has identified more than 350,000 retailers in Canada that accepted payment via debit card, some 20% (i.e. 7000 retailers) of which dealt primarily with low-value transactions. Dexit has to extend this research to find the total no. of retailers