Loyalty programs have been around for decades. Some of us even remember the S&H Green Stamps our grandmothers used to paste into books to trade for small appliances and cookware. In fact, trading stamps have been on the scene since the 1800s as an incentive for people to pay for goods in cash rather than on credit. Unfortunately, from a consumer’s perspective, some of today’s loyalty programs look as dated as yesterday’s trading stamps.
FIS’ evidence shows that as few as four percent of point-holding populations are engaging with their card programs on a regular basis. You might conclude that consumers are getting bored with rewards, but FIS PACE index™ research shows that consumers still value rewards. However, their financial institutions, on average, are failing in that arena as exhibited by the huge gap between what consumers expect and what they perceive they are receiving. Of no surprise, millennials feel least rewarded by their banking providers.
Consumers want rewards for their business, but why are so many loyalty programs ineffective at increasing engagement? Here are my top three reasons:
- Many rewards programs aren’t relevant to cardholders. They receive rewards with limited value to them personally.
- For most consumers, it takes too long to accrue enough points to redeem them for anything of value. This is particularly true for non-road warriors trying to collect airline points. People aren’t going to fly more often or dine out more often just to accrue more points.
- Because points accrue at a lower rate for debit and prepaid cards than credit cards, people using these payment methods – e.g., millennials – are even less likely to make a connection between card usage and rewards.
So what is the point of all these points? Does your current loyalty program boost profitable engagement – e.g., high revenue per card, high average balances and high profitability per card? If not, then it’s time to consider a loyalty refresh.
Start by removing barriers to redemption. Provide consumers with different options through new loyalty programs that offer relevant rewards and quick earns:
- Engage consumers at point-of-sale (POS) with surprise rewards they can use on the spot when they use their loyalty and/or payment card. Examples include:
- Coupons offered at checkout that consumers can use on the purchases they are making in real time.
- Fuel discounts at the pump. Consumers are prompted to use their rewards points for fuel discounts when they swipe or dip their card at the pump. FIS’ research on its own flagship rewards program, Scorecard®, shows an 86 percent satisfaction rate with this program.
- Provide low-point options to enable consumers to redeem in small point increments. Digital downloads – e.g., iTunes downloads – have been around but now there are new programs with auction functionality. Consumers only need to use a few points to enter into a sweepstakes for chances to win prizes such as iPads, GoPro cameras and Xbox game consoles. Program analysis shows that consumers are engaging in these auctions multiple times. These new programs apply to all types of cards and all types of consumers, not just those whose spending is lower.
Rewards programs are changing more swiftly and rapidly. It’s time to review new options to better serve the large community of people who think rewards programs could offer more than the rewards they are receiving for their business. who aren’t satisfied with the rewards they are receiving for their business. FIS’ research reveals that these types of programs elevate the status of the program, thereby driving usage and engagement.
When reviewing your current loyalty program, ask if it:
- Creates immediate engagement (vs. the traditional rewards model that requires long-term participation before the consumer gains anything of value).
- Gives consumers multiple redemption options. Consumers should be able to choose the rewards that are most relevant to them.
- Provides opportunities to redeem at low-point values. Low-point options drive engagement of younger customers, which can incentivize them to stay and grow with the institution.
- Optimizes engagement of the customers you’re seeking to attract and retain.
What loyalty programs would engage your customer base most effectively?