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Wal-Mart Stores is readying a TV campaign to herald next month's launch of its own co-branded MasterCard credit card program.

The No. 1 retailer waited longer than all of its major retailing rivals to devise a strategy for such a card, but analysts expect the card issued by Chase Manhattan Bank to quickly become one of co-branding's most successful.

GSD&M, Austin, Texas, is putting the finishing touches on at least one TV spot for Wal-Mart. The agency also handles media for MasterCard.

Although competition in the saturated co-branded card field is brutal, Wal-Mart is favored to do well because it plans to use more marketing muscle than its retailing rivals. Wal-Mart also could beat many non-retail co-branded card issuers by pushing its card heavily at point-of-purchase in its 2,265 stores nationwide.


Wal-Mart's discount positioning is a plus, say analysts.

"The market is bursting with new card offers, but Wal-Mart has a large group of intensely loyal customers who will line up to get a co-branded bank card carrying the Wal-Mart name, which they associate with good deals," said Robert McKinley, an industry analyst who is president of RAM Research.

Neither Wal-Mart nor the bank would reveal details of the card's user incentives. GSD&M executives also declined to comment.

Supermarkets and general retailers are currently the fastest-growing category of co-branded cards, but most advertise co-branded cards exclusively through direct mail.


Analysts expect Wal-Mart's offer will include extensive direct marketing, offering incentives similar to those offered by many regional supermarkets, such as rebates of up to 3% on store merchandise based on total charges to the card.

But despite promising appearances, Wal-Mart still faces obstacles in the cutthroat arena. The field is overcrowded with offers, and consumer delinquencies and bankruptcies are at an all-time high, says RAM Research.

Also, veteran co-branded credit card marketers have discovered that customer incentives sometimes cost more than they're worth. General Motors Corp. recently rejiggered its customer perks for its co-branded GM Card.


Wal-Mart must also balance its commitment to rock-bottom operations costs while giving perks to customers.

"It's going to be tricky for Wal-Mart to give consumers back something that won't cost them too much. The key to the company's success so far is its no-frills approach and reliance on very thin operating margins," said Peter Lucas, associate editor at Credit Card Management.

In mid-August, No. 2 retailer Sears, Roebuck & Co. launched a nine-month test of a co-branded MasterCard in six Midwestern markets, called the Sears Preferred MasterCard. The card carries no annual fee and is being marketed exclusively via direct mail.

A program carefully structured to also drive up customer usage of Sears' own credit card gives Sears Preferred MasterCard customers credits for Sears merchandise based on 1% of total charges made with the co-branded card. Users of Sears' own charge card get 2% back in Sears merchandise credits.


No. 3 Kmart Corp. recently announced a new Kmart credit card offering up to a 6% rebate on purchases through a new "Kmart Rewards" program. The card, offered through Beneficial National Bank USA, carries only the Kmart logo and is advertised via direct mail; it carries no annual fee.

All three major retailers accept major credit cards, although Sears only began accepting American Express, MasterCard and Visa as late as 1993.

Contributing: Alice Z. Cuneo

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