With the marketplace being as consumer driven as it is today, financial service providers and merchants need to pay keen attention to consumer demands regarding their loyalty programs. As the world of loyalty moves towards a more consumer-centric point of view, the structure of these programs needs to be based on what credit cardholders value and want in a card.
Mintel conducted research that highlighted several key factors that consumers value in a credit card. The research revealed consumers prefer to earn special deals; special experiences, which include luxury destinations; cash rebates, which lessen everyday expenses; and spontaneous travel rewards such as flight upgrades and hotel stays.
The IHG and Chase joint effort to develop a new product using direct feedback from a core group of their customers is an innovative way to give customers exactly what they want. IHG and Chase saw the need for a new credit card that would reflect the things their consumers valued in a card. The product development process was centered on constant feedback from a core group of 300 frequent travelers from the Priority Club Rewards cardholders group. This was a tactical group since the new credit card would be travel specific. The feedback revealed that cardholders value features such as annual free nights usable around the world, no foreign transaction fees, increased point earnings at IHG hotels, point earnings on every day purchases and a unique redemption rebate.
The findings led to not only a revamping of the current card, but also the ensuing development and testing yielded the Priority Club Select Visa Card. Appreciation for the new product is evident in the increase in new customers and the move by a number of existing cardholders to upgrade their account. Email marketing campaigns for the Priority Club Select Visa Card showed an increase of 80% in new accounts over the previous email campaign for the older product. Similarly, when compared to the previous email campaign for the legacy product, the response rate to the email campaigns for customers to upgrade to the new product showed a 53% increase.
Research has shown that customers prefer using cards that offer rewards over cards that don’t and, like IHG and Chase, some financial institutions have taken note of this, and have launched new products geared towards satisfying this demand. One example is Bank of America, which offers customers a card that will give them 1% cash back on most spending, a 2% on groceries and a 3% on gas purchases. Capital One also rolled out their cash back Mastercard in August. Customers are offered a one-time cash back bonus of $100 if they spend $500 in the first three months, and on the anniversary of opening the account, they will receive an additional 50% of the total cash they received during the first year. (Source)
Some companies like Truaxis are also testing out a new type of unified reward program that will give each customer the rewards they want with no additional effort or research from the customer or the financial institution. Truaxis’ StatementRewards analyzes customers’ transaction data to provide personalized in-statement rewards for the places these customers already shop. A study conducted by Truaxis shows that 94% of online bank users want these in-statement rewards for their debit and credit cards. The study also reveals that 76% of consumers would consider a card that offers rewards on their statement, if their current card doesn’t.
Credit card customers want a card that offers them easy to understand savings and benefits for things they will use, especially if they need to justify paying an annual fee. Service providers need to either involve customers in the product development process or utilize the data they already have on-hand to better understand their customers’ wants and needs to guarantee their card will be the card customers choose to purchase with.
