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Loyalty reward systems are the de facto standard for both retail and credit card companies. Especially since loyalty programs have been shown to increase retention and a study by Baines and Company found that a mere 5% increase in company customer retention will translate into as much as 75% profitability. Credit card holders revel on the benefits of credit card rewards as well. Statistics show that as many as 85% of US households are members of a credit card rewards program – one of the most important factors that influences a consumer’s choice of credit card. The benefits of effective loyalty programs for both industries, and consumers, are clear. As such, with all the loyalty rewards program strategies available, companies need to consider how to continually innovate to create a loyalty rewards program that best fits the needs of its target consumers.
The best “fit” often lies in matching the credit card rewards system with the consumer’s standards of living. Marketing efforts should be focused on defining the lifestyle and buying tendencies of customers as this offer clues on what valued customers prefer. For example, a UK retailer used customer data in promoting products that appeal to parents of students who are about to start college – such as towels, cookware and bed sheets – at the start of the school year. Similarly, DVDs, alcoholic drinks and software receive are promoted more during the holiday season, when the students are expected to return home.
Understanding Your Brand
Understanding the nature and purpose of your product will determine how it should be promoted and to which group of consumers. Capitalize on this information to reinforce customer behavior and generate strong emotional attachment to the brand. This principle was used by an airline company to increase the use of frequent flyer miles. This company found that customers had difficulty redeeming their frequent flyer miles points due to reduced airline capacities, which decreased satisfaction ratings down to 48%. To resolve this problem, they allowed customers to redeem their rewards points as either flight or cash. This increased redemption to 35% after only 30 days, thereby pleasing the customer by changing how they can interact with the program and the brand.
Finding the Perfect Fit
Fox Business News reports that as many as 80 million Americans use credit cards with rewards. Aite Group also found that the type of loyalty program had greater impact on credit card choice than the interest rates. Experts agree that the primary reward goal should focus more on “practical profitability” rather than creating alluring marketing strategies. Virtual cash and cash back programs are more appealing to many credit card users than points or miles.
However, with the advent of transaction-driven services, companies can expand their reward offerings to go beyond a simple cash-back strategy. Vendors like Truaxis analyze customer purchase behaviors to perfectly match users with their ideal rewards. By adding this extra analysis and context, reward programs are automatically tailored to the individual with no additional effort from the bank, retailer or customer.
As customers desire more and more personalization, loyalty programs will be able to harness the power of data and collaboration to continue to evolve and please their customers.
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