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As brands look to differentiate and enhance their customer loyalty programs, private-label credit cards (PLCC) are an attractive strategy to build strong connections with program members. The customer insights leveraged on both the brand and partner sides offer a treasure trove of customer behavior data to form more personalized communications, offerings, and a deeper value proposition. Seeking the right match for a co-brand credit card is critical to achieving program success.
There is much to consider. For brands that plan to move from one bank to another for their credit card offerings, annual fees can become an issue. If the fee is raised, there will be some program attrition. If a loyalty program member is not approved for the co-brand credit card, it can reflect on the brand. Some rewards programs offer more than one card, based upon customers’ needs and creditworthiness. Developing and communicating rewards benefits for each card/tier is imperative. A clear understanding of how the program works — by the brand’s employees and bank employees — is essential.
Loyalty360 spoke with supplier members and loyalty strategy experts about how co-brand credit cards can enhance an existing customer loyalty program, what brands need to consider when evaluating partnerships, and how innovation and trends can bring opportunities and challenges.
Eric Dean, Head of Platform Partnerships, Banyan
Brian Gloede, VP of Partnerships, Banyan
Jehan Luth, Founder & CEO, Banyan
Stephanie Meltzer-Paul, Executive Vice President of Global Loyalty, Mastercard
Mike Nolan, VP of Marketing, Banyan
Jonathan Silver, CEO, Engage People Inc.
Drew Slater, Sr. Manager of Strategic Consulting, Kobie
Apply Careful Consideration
Deciding to partner with a credit card issuer or offering a store-branded card should be thoughtfully approached. Key factors must be considered when evaluating the potential benefits and challenges of launching a co-brand or private-label credit card as part of a brand’s customer loyalty strategy.
“When evaluating co-brand credit cards, first ask, ‘How does this card integrate with my brand’s macro-level loyalty strategy?’ Determine if the card intends to serve as the loyalty program entirely or if it enhances an existing program,” says Kobie’s Slater. “No matter the goal of a co-brand card, to successfully launch it, the value proposition and benefits need to be clear to the future cardholders while considering impacts to the customer journey.”
Slater goes on to explain that brands need to understand the customer journey and where/how the card fits in. This is crucial to identifying potential challenges or “friction points.” The customer must have a seamless experience with attainable benefits to derive value. If launching a new program that is solely based on the co-brand card, Slater advises brands to consider the desired journey from the start and whether the card lowers or increases barriers to entry into the program.
Engage People’s Silver sees brand alignment as the most important factor when thinking about the benefits and challenges of launching a co-brand credit card. He notes there are many others, ranging from regulatory requirements through operational considerations to the financial benefits of the initiative.
“Evaluating the alignment between your brand and the potential co-brand partner or the private label credit card in advance is imperative and guides all other areas of the partnership,” says Silver. “To produce a successful and profitable partnership, the partner brand should have a similar target audience, brand values, and market positioning. It should enhance your brand image and resonate with your customers.”
As a strategy to increase engagement while collecting critical customer data, Mastercard’s Meltzer-Paul also sees co-brand credit cards as a means to deliver greater sales, provide valuable insight into consumer spending, and unlock powerful ongoing marketing opportunities. In fact, tying together a co-brand card and the brand’s base loyalty program creates one value proposition that achieves all those considerations. Meltzer-Paul cautions brands to make sure the co-brand card is aligned with their current redemption offer to offer real value.
“Any addition to a loyalty program should align to the brand’s overall strategy, positively contribute to the economics of the program, and make the consumer experience seamless and flexible,” finishes Meltzer-Paul.
Successful Integration in Existing Customer Loyalty Programs
When asked which brands have successfully integrated credit cards into their customer loyalty strategy, these loyalty experts shared those that were top-of-mind and the key elements that contributed to their success.
Banyan’s Nolan points to the travel industry for best practice co-brand credit card examples, noting brands leveraging spend behavior insights of their customers and their partner banks’ customers can enhance the value proposition, increase customer engagement, and boost loyalty.
“Notable examples can be found in the travel sector, such as the Southwest® Rewards Visa® offered by Chase® and the Hilton Honors® Aspire card from American Express®, which offer loyalty status boosts and exclusive perks to cardholders,” shares Nolan. “In the retail space, the REI Co-op® Mastercard® from Capital One® elevates cardmember loyalty by enabling access to unique outdoor experiences, and to support causes aligned to the brand.”
“The perennial and gold standard here is Starbucks and the Starbucks Rewards™ Visa® Card,” says Silver.
In 2018, Starbucks partnered with JPMorgan Chase to launch a co-brand credit card integrated directly into the Starbucks Rewards™ loyalty program, offering rewards and benefits to Starbucks customers. Customers who use the card can earn Stars with every purchase wherever Visa is accepted. Silver attributes the success of the program to strong brand alignment, a unique rewards structure, and seamless integration.
“The partnership between Starbucks and JPMorgan Chase leveraged the popularity of the rewards program and the trust associated with the Chase brand,” Silver elaborates. “The card offers generous rewards for Starbucks purchases, allowing customers to earn Stars that can be redeemed for free food and drinks while allowing for seamless integration into the existing Starbucks Rewards™ program.”
Slater also looks to the travel industry. “Amtrak’s recent co-brand card launch is a great example of a well-executed strategy that drives value for Amtrak Guest Rewards members. As the clear next step in the loyalty journey and brand relationship, the card’s value proposition is easy to understand with incentivized limited-time offers (LTOs) throughout the year.”
The card appeals to the different or evolving needs of members by offering a fee (Amtrak Guest Rewards® Preferred Mastercard®/$99 annual fee) and no-fee (Amtrak Guest Rewards® Mastercard®) card to lower barriers to entry. Earned points do not expire, and cardholder benefits provide instant value with food and beverage rebates. The Preferred Mastercard® offers members lounge passes, companion coupons, class upgrades, and tier status that can be earned faster.
Strategies To Spread the Word
Forming a partnership is just the beginning. A brand needs to determine the right strategy to effectively promote and market its co-brand credit card to its existing customer base while attracting new customers. This is where personalization plays a vital role.
“We’re seeing the most forward-thinking brands put personalization strategies into effect that are built around item-level purchase behavior and rewards,” says Banyan’s Gloede. “Card offerings have been relatively static for a long time, so when SKU data capabilities are used, they can fundamentally reinvent card value propositions and increase their value to current and new customers alike.”
In a post-COVID world with continued economic uncertainty, customers continue to evolve. Slater notes, “Consumer needs are always changing. To not fall behind, brands must constantly test acquisition offers and engagement strategies throughout the year. Mixing in different offers that include various hard and soft benefits is incredibly important.”
This is a crucial part of the engagement process. Slater recommends that customer loyalty teams consider if a lower point total is as effective as a larger one, and if consumers value certain soft benefits more than certain hard benefits. When brands add targeted questions to their strategies, program costs can be better controlled.
Let the Data Drive Enhancement
Without leveraging customer data and insights from a co-brand credit card offering, a brand will not enhance its overall customer loyalty strategy and drive personalized experiences.
“Use insights about customers’ preferences, purchase history, and behaviors to create customized offers and communications that resonate with their needs and interests,” instructs Silver. “These communication tools can then both be used to incentivize referrals increasing the size of the customer base further.”
Banyan’s Dean highlights a collaboration opportunity for merchants to drive sales and banks to gain top-of-wallet card spend engagement: bring together the distinct card transaction data insights each has to create more relevant and tailored products, marketing, and experiences for their shared customers. He provides the following examples:
Item-level data-enabled card-linked shopping offers that create precision performance marketing tools
Co-brand card rewards tailored to purchasing behaviors reflecting customer lifestyles and shopping interests
Personalized marketing communications demonstrating a brand’s understanding of customers’ purchasing needs based on prior category and item-level behavior.
With a unified co-brand card and loyalty program, a brand can be more effective with its consumer engagement efforts. Meltzer-Paul recommends that brands streamline the technology on the back end to more easily recognize loyalty members who have the co-brand credit card and understand how often they use it to shop with the brand.
“Further, brands can gain better insight into how the card is used outside of their storefronts using anonymized trends from banking partners,” says Meltzer-Paul. “Properly analyzed and activated data is key to serving better promotions and redemption options.”
Slater echoes the others. “Data is paramount in the business landscape. When a brand gains access to its cardholders’ spending data, it becomes a game-changer. This data not only benefits the card program but also has a significant impact on the brand’s loyalty program.”
By examining cardholders’ spending data, brands can reap valuable insights into where members are spending — and where they are not. It’s critical for brands to understand if customers are solely making purchases with the brand (a classic co-brand behavior), or if they are also spending elsewhere, particularly in top-of-wallet categories.
“Answers to these questions enable brands to gauge the level of engagement their cardholders have with the brand.” Slater goes on to explain. “If cardholders exclusively spend with the brand, it indicates a strong brand engagement. However, if they are spending with the brand but also taking advantage of the value proposition for purchases elsewhere, it demonstrates clear engagement with the card program as well.”
Slater also points out that a deep dive into data can allow brands to see how much money their cardholders are spending with competitors.
Emerging Trends and Innovations
With the ongoing shaping and reshaping of the customer loyalty landscape, and as customers evolve and adapt, certain trends and innovations have risen to the surface — and will continue to do so. Brands need to keep their fingers on the pulse of what opportunities and challenges are available when considering the integration of credit cards into their customer loyalty programs.
“In the past, the lack of a good way to connect purchase data insights across merchants and banks limited the ability to customize products, marketing, and experiences,” says Banyan’s Luth. “We’re seeing card-linked offers that leverage a merchant’s item-level receipt data to create category and brand-level promotions that are more relevant and compelling for what, not just where, consumers are shopping.”
Fueled by the recent pandemic, innovations in the payment space have grown, and the expanded usage of contactless payments and mobile wallets indicates that consumers are embracing these new technologies. Brands must take note.
“Brands should consider incorporating contactless payment technology into their credit card offerings, allowing customers to make secure and convenient transactions with their smartphones or wearable devices,” advises Silver.
Silver goes on to explain there is a second and expanding opportunity: embedded rewards, where rewards and loyalty points are automatically earned and redeemed within the payment process, eliminating the need for separate loyalty cards/accounts while providing a seamless experience for customers.
Meltzer-Paul wants brands to think about how the credit card links and ties to the broader loyalty program. It should be seamless. To have this close connection between the credit card and the core loyalty program, brands should think about how their marketing technology allows them to act on the rich insights presented by co-brand card spend data, both to drive more relevant “on us” campaigns and offers from the brand, and to launch “off us” campaigns and offers tied to general card usage and spend.
“Brands should also lean into unique redemption experiences that other members don’t have access to,” says Meltzer-Paul. “Whether that’s exclusive or early access to events (both in-person or virtual), select promotions, or limited-edition merchandise, providing greater choice in redemption will be a differentiator for brands that do it right.”
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