The modern consumer landscape is awash in loyalty programs. In fact, according to HubSpot, 65 percent of companies have a loyalty program in place. And the American Bankers Association reports that rewards cards today make up nearly 80 percent of all new account volume.
While the average American household belongs to a record 29 loyalty programs, the troubling reality for marketers is that they actively participate in only 12 on average, according to the 2015 Colloquy Customer Loyalty Census.
“The average U.S. consumer is enrolled in more than 20 rewards program today and active in over 10, all vying for the customer’s attention,” said Mike Knoop, president, financial institution loyalty, for Augeo. “To compete in this market, it is absolutely imperative for credit unions to construct a program that resonates well with their members.”
According to Tyson Nargassans, CEO of Saylent Technologies, a truly engaging loyalty program is always data-driven, built on a deep understanding of member behaviors and preferences.
“The digital world has changed consumer expectations dramatically,” said Nargassans. “Your members today expect every interaction to be personalized – that is what Google, Apple, Amazon and the like have taught them. And credit unions face unique challenges because they are blessed with so much relevant data that it can be difficult to distill the important nuggets.”
Segmenting is Key
Knoop and Nargassans both point to data analytics software as a powerful resource every credit union should enlist in its quest for member engagement. “Data analytics can help you pinpoint at the transaction level which members are traveling, shopping high-end, improving their home and dining out frequently,” said Knoop. “Having this information allows you to segment your program and tailor offers accordingly.”
Nargassans notes that credit unions are frequently surprised by what they find in the data. “They may assume that their members are very engaged in electronic behaviors only to learn that just 40 percent have signed up for e-statements,” he said. “Credit unions should spend some intellectual capital upfront working to cluster ‘like members’ into segments.”
He adds that segments can range from people in their forties with families who enjoy sports to wealthy baby boomers that travel and to millennials living in apartments that like to go dancing. “And you can’t just personalize a program once and put it on auto pilot,” said Nargassans. “You’ve got to have the systems in place to get feedback, measure your success, and evolve your loyalty program as your members’ lives, values and behaviors change.”
Knoop emphasizes the importance of bringing only relevant offers to members as well. “For example, if I am a high-end shopper and you continually serve up Kmart and Target offers, not only does this illustrate how little you know about me, but the program becomes a nuisance of sorts,” he said. “Conversely, if I am clearly into the music scene and you offer $10 off a concert ticket, I will take you up on that offer – and appreciate you all the more for it.”
Rewards as Digital Currency
Both experts advise credit unions to view their loyalty program as an ecosystem of digital currency – and to value points accordingly.
“Consumers are very savvy, and they can quickly calculate how much your points are worth, whether you are offering gift cards, merchandise, travel discounts or everyday-spend offers,” said Nargassans.
Knoop adds that a credit union’s own products are both viable and valuable redemption options. “Allowing members to apply points toward checking account fees, closing costs on a mortgage, or a ‘skip payment’ on an auto loan ties them into your brand. By the same token, any member behavior you would like to encourage – from downloading security apps to banking online or even updating contact information – can be rewarded as well.”
And while there is much fanfare today around “cash back,” Knoop cautions credit unions against adopting an exclusive “cash-back” strategy.
“Our philosophy is that ‘cash back’ is simply one of many rewards, and not the basis for an entire program,” he said. “‘Cash back’ may work well until a competing card comes out offering higher cash back. Because the program isn’t interesting, fun, engaging or meaningful, there is no reason for members to stay with it. After all, you have already given them the cash.”
One way for credit unions to engage members meaningfully is to integrate charitable giving into the program. “This is a great way for members to utilize extra points that are ready to expire,” said Knoop. “Charitable giving also fosters a sense of community by establishing a common cause for members, and they feel good about that.”
Nargassans adds that the easier the program is for members to understand, the more likely they are to embrace it. “In terms of your rewards offering, too much flexibility can lead to confusion and result in poor adoption,” he said.
Reinforcing Your Brand
While the types of rewards you offer is fundamental to your success, branding your loyalty program well is just as important.
“The program’s name, design elements and messaging should all reflect your credit union’s unique brand,” said Knoop. “And it is always a best practice to feature your loyalty offering prominently across channels, from branch ATMs and the website to your online banking and mobile platforms. One of the biggest mistakes credit unions make is hiding the program on its own separate website.”
Nargassans notes that the most successful loyalty programs view the investment in member engagement as just that – an investment.
“Make sure you look at the messaging and benefits of the program through the eyes of your members – and not just from your CFO’s perspective,” said Nargassans. “ROI and the member experience should carry the same weight in any program’s design. Keeping this balance is the best way to achieve your ultimate goal – which is to engage members and grow relationships over the long term.”
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