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12 Jan
2015

Nastaran Heydari

Associate Consultant
 

This post originally appeared on Deluxe by Alan Jackson

 

To reward or not reward? Financial institutions have been struggling with variations and derivations of that question for decades.

Should you offer a rewards & loyalty program? If so, what product do you tie it to – debit or credit cards? Savings or checking accounts? What currency do you offer consumers? Does its value to consumers equate to value for your FI in an ability to influence account-holder behaviors?

Once, debit card reward programs were common, but as the costs to FIs increased and benefits waned, fewer banks attached rewards programs to such low-hanging fruit as checking accounts. Rewards program costs were better justified by more profitable credit card accounts. The advent of newer, lower-cost rewards programs, however, may mean it’s time for your financial institution to re-examine its position in this space.
Maximum impact at minimal cost

Historically, rewards programs have either been high-cost and high-impact, or low-cost and low-impact. Is it possible to find a happy medium, a program that marries palatable costs with results sufficient to justify those costs? It may be a smart move for your FI to explore the possibility.

Loyalty Progam ElementsRon Bergamesca explored the Essential Elements of a Best-in-Class Loyalty Program in a post earlier this year on this blog. Ron illustrated that great content (products that consumers want), competition (like sweepstakes) that engages consumers, and effective communication through multiple channels and touchpoints are the key ingredients of a winning loyalty program.

Given that criteria, it’s feasible for a financial institution to create a rewards program – either traditional or merchant-funded – that could serve to influence account holder behaviors at a reasonable, justifiable cost.
Influence the entire relationship

Ideally, your rewards program should be able to influence multiple behaviors, not just credit card or debit card use. In order for a rewards program to be successful, you need to first clearly identify what types of behaviors you want to influence and what outcomes you desire.

   -    Do you want to influence account-holders to spend or save more?
   -    Are you trying to create positive consumer sentiment to further your branding objectives?
   -    Do you want to drive more checking relationships to become profitable loan customers?

Determine what types of rewards might achieve those outcomes, and then weigh whether the benefits of those outcomes are worth the cost of the rewards.

Remember, to be successful, any rewards program must address consumers’ objectives and concerns – not just those of your FI. Your account holders will want to know what rewards you’re offering, how quickly they can earn their rewards, and what tangible benefits they’ll receive. All three considerations must be in perfect balance; great product rewards are useless to consumers if it will take years and thousands of dollars in spending to earn the rewards.

When was the last time your institution sat down and looked into a rewards and loyalty program that could affect the entire relationship? How does your financial institution approach rewards programs? What specific behaviors would you like to see influenced by a loyalty program? Tell us in the comments.

 

Source: http://goo.gl/QbfVMa

To reward or not reward? Financial institutions have been struggling with variations and derivations of that question for decades.

Should you offer a rewards & loyalty program? If so, what product do you tie it to – debit or credit cards? Savings or checking accounts? What currency do you offer consumers? Does its value to consumers equate to value for your FI in an ability to influence account-holder behaviors?

Once, debit card reward programs were common, but as the costs to FIs increased and benefits waned, fewer banks attached rewards programs to such low-hanging fruit as checking accounts. Rewards program costs were better justified by more profitable credit card accounts. The advent of newer, lower-cost rewards programs, however, may mean it’s time for your financial institution to re-examine its position in this space.

Maximum impact at minimal cost

Historically, rewards programs have either been high-cost and high-impact, or low-cost and low-impact. Is it possible to find a happy medium, a program that marries palatable costs with results sufficient to justify those costs? It may be a smart move for your FI to explore the possibility.

Given that criteria, it’s feasible for a financial institution to create a rewards program – either traditional or merchant-funded – that could serve to influence account holder behaviors at a reasonable, justifiable cost.

Influence the entire relationship

Ideally, your rewards program should be able to influence multiple behaviors, not just credit card or debit card use. In order for a rewards program to be successful, you need to first clearly identify what types of behaviors you want to influence and what outcomes you desire.

  • Do you want to influence account-holders to spend or save more?
  • Are you trying to create positive consumer sentiment to further your branding objectives?
  • Do you want to drive more checking relationships to become profitable loan customers?

Determine what types of rewards might achieve those outcomes, and then weigh whether the benefits of those outcomes are worth the cost of the rewards.

Remember, to be successful, any rewards program must address consumers’ objectives and concerns – not just those of your FI. Your account holders will want to know what rewards you’re offering, how quickly they can earn their rewards, and what tangible benefits they’ll receive. All three considerations must be in perfect balance; great product rewards are useless to consumers if it will take years and thousands of dollars in spending to earn the rewards.

When was the last time your institution sat down and looked into a rewards and loyalty program that could affect the entire relationship? How does your financial institution approach rewards programs? What specific behaviors would you like to see influenced by a loyalty program? Tell us in the comments.

- See more at: http://fi.deluxe.com/community-blog/deluxe-blogs/performance-management/revisiting-loyalty-checking-relationships/#sthash.xtrDBDt3.dpuf

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