According to a just released research brief from Card Services for Credit Unions (CSCU), “loyalty is the most critical metric that credit unions can use to measure performance,” yet only half of credit union credit card offering include loyalty programs. CSCU a card processing association for credit unions.
The research brief pointed out that a 2008 ComScore survey reported that 30 percent of respondents said that a loyalty program is the main reason that people select a new credit card. About two-thirds of respondents said that they would consider getting a new card if it offered different rewards.
“Credit unions must recognize that cardholders are a lot savvier than they used to be and expect more from their rewards programs,” said Bill Lehman, vice president of portfolio consulting services for CSCU, wrote. “In fact, cardholders are much quicker than banks or credit unions to understand what they want from their financial institutions. Consumers will change financial institutions if they are presented with a rewards program that has a stronger value proposition that better matches their needs.”
Lehman urged credit unions to differentiate themselves by establishing a credit card loyalty program if they didn’t already have one and to market it aggressively.
The loyalty program itself should offer bonus points that don’t expire as well as bonus points for seasonal activities or destinations, for 90 days for new accounts and balance transfer promotions that offer bonus points as part of the balance transfer benefits, Lehman recommended. He also recommended offering a travel card offering double miles for bonus-related activities as well as promotions that reward spending totals over certain time periods, such as $5,000 over three months.
The program must also be flexible enough to evolve with changing market conditions, Lehman said.
“Leaders must sit down and determine the right model and how it pertains to the overall strategy,” recommended Robert Letgers, senior vice president of loyalty services for FIS. “A value must be assigned to every product or service. Less than one percent of our clients offer relationship programs because of the time and effort involved.”
Cost is another often-cited reason that credit unions don’t embrace a credit card loyalty program, according to Letgers though he dismissed that argument. “There is very little up-front expense. Redemption costs do increase a little as the program continues, but the credit union is also building loyalty and generating more revenue from the increased use of products and services, which is an effective way to offset those costs.”
Letgers also urged credit unions to balance national, local, online and in-store options that members (credit union participants have shares in the financial institutions, so are referred to as members rather than as customers) can use for additional rewards, otherwise members will change programs.
“If you don’t want to be left in the dust, develop an integrated mobile strategy and social media strategy that seamlessly delivers your rewards programs and brand message,” the research brief urged.