If the blog-o-sphere is any indicator, big banks may be thinking about downsizing the quality and scope of their rewards programs in response to a flagging economy and restrictions on interchange income in the wake of the Durbin Amendment. We’re not so sure. Considering how invested consumers are in loyalty programs, now is hardly the time to cut back. In fact, if you aren’t already offering a robust rewards program, this is a great time to consider doing so.
“Quite simply, rewards programs have become a staple in virtually every business that deals with consumers,” says Steven VanFleet, President and CEO of RewardsNOW, a Dover, N.H., provider of loyalty programs for financial institutions. “Financial services is one of the last bastions where loyalty programs are not being used routinely. But to get and keep customer loyalty, you need all the ammunition you can get.”
Why consider a rewards program when your card revenue is at risk?
- Loyalty programs encourage usage. Weak participation isn’t going to strengthen your card program – or drive up revenue. The reason rewards programs are so pervasive is that they work.
- Collecting points equals engagement. And the impact goes beyond cards. You can use rewards points to incentivize referrals, new accounts and switching to paperless statements. “Pick five or six behaviors that you want to drive,” says VanFleet. “Rewards help you get there, and the results are trackable.”
- Reward benefits fit the membership model.
- A well-designed program can also promote your brand. Rewards aren’t limited to free travel or retail items. Consider adding a charity option: Your members can donate to Children’s Miracle Network or any cause that’s near and dear to your community.
A new merchant-funded program called ShoppingFLING helps participating credit unions build community through their rewards programs. ShoppingFLING serves as a portal for national and local merchants offering program members bonus points on their purchases. So, for example, visitors to ShoppingFLING’s demo site can click through to receive an extra four points per dollar spent on Nike.com.
“We create a unique site for every credit union, so they can have a local component as well,” says Anne Gaudette, Vice President of Product Development for RewardsNOW. “If a credit union has a relationship with a local merchant, they can feature that merchant on the site,” which builds relationships and a sense of community in all directions. Because the program is merchant-funded, sales benefit the host credit union and help defray costs.
In the same way that having a rewards program is now key, credit unions also must work to make sure their programs are – well, rewarding. “You don’t want your members talking to ‘Peggy’ from the Discover commercials,” says VanFleet. “When we answer the phone as ‘Royalty Credit Union,’ the member thinks we are the credit union. We work very hard to make sure we represent them well.” Similarly, crummy rewards or impossible-to-get benefits can result in more than indifference – they may actually breed contempt.
That’s yet another reason we don’t think rewards programs are going anywhere, except maybe up. The price of discontinuing benefits is high. On the other hand, as big banks restructure their priorities – and perhaps scale back their rewards efforts – there’s a potential opportunity for credit unions to shine.
“We think the value of a loyalty program goes beyond interchange revenue,” says VanFleet. “There are a ton of reasons to develop one, and the benefits can have an enterprise-wide effect. But if the big players are saying they’re going to drop their rewards programs, this also becomes a point of differentiation for credit unions. It’s a way of delivering value to members and, in the process, enhancing those relationships.”
To check out ShoppingFLING for yourself, click here – then choose “Shopping.”