Credit unions have long been known for their commitment to customer service. But in an increasingly competitive financial services landscape — where providers ranging from big banks to fintechs are focused on delivering customer value — credit unions must find innovative ways to retain their members and recruit new ones.
A credit card rewards program is one option. Loyalty marketing isn’t a novel concept; many credit unions already offer their members extras like gift cards or discounts on car rentals. However, fewer of them offer members a rewards program with features like travel booking that encourage repeat interaction with the credit union.
Here are five ways credit unions can use a credit card rewards program to boost member satisfaction.
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1. Focus on value.
Tangible value should be at the heart of every loyalty program, and determining what that means to your credit union members should be the primary concern when designing your program. Are they interested in perks and status, or do they care more about savings and cash back? Use all the tools at your disposal — including surveys of members and data about their spending and banking habits — to zero in on what rewards you should be offering and how.
According to a recent study from J.D. Power, the top reason consumers switch credit card providers is to access better reward programs. As economic pressure mounts, consumers are more likely to prefer rewards that help them with balancing their budget, like cash back, the ability to pay for goods and services with reward points, and discounts on discretionary items like travel.
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2. Lean into experience-based credit card rewards.
Customer retention is one goal of a rewards program, but it’s not the only one. Credit unions should also tailor their programs to encourage engagement.
An ideal credit card rewards program is a “sticky” one. Stickiness suggests that members use the rewards program often, consistently find value in their participation, and keep the card top of wallet. They are less likely to abandon the program for a moderately better credit card rate because the benefits and experiences they receive are meaningful to them. The stickier a rewards program, the more likely consumers will continue spending on that credit card.
Let’s take the example of a travel loyalty program, which many traditional banks and credit unions offer in some form. According to research from Barclays, three-quarters of loyalty program members couldn’t imagine taking the trips they want without the program’s benefits; they look to lower the cost of the trips using loyalty points to cover flights, car rentals and hotel stays.
People also value experiences, so a loyalty program that includes travel could stand out by offering rewards connected to complementary activities like tours, concerts and dining. According to the most recent iSeatz “State of Loyalty: Credit Card Rewards Report,” only 52% of card programs offer redemption options for tours and activities, 37% for live events, 19% for dining and 15% for wellness.
3. Maximize flexibility for rewards program users.
If you want to create a sticky credit card rewards program, you shouldn’t limit the rewards to one category.
Today’s consumers want to be master of their own loyalty experiences. This means using their points when and how they want, having access to different payment options like buy now, pay later (BNPL), and being able to cancel trips for any reason.
Our research indicates that risk mitigation features like price freezing and price drop guarantees — which financial institutions like credit unions are in a unique position to underwrite — are particularly popular among loyalty program members.
4. Personalize offers.
Ideally, a loyalty program should have a website and a mobile app, along with self-service capabilities and itinerary management.
Credit unions have a lot of data about their members’ spending habits, which they can use to personalize interactions. When a member logs on to the website, the credit union can highlight offers and redemption options that are most likely to appeal to that individual.
Many credit unions personalize content via email communications, which is a good start, but doesn’t deliver as much value as dynamic content, according to another iSeatz research report, “The Tipping Point for Travel Loyalty.” About 70% of consumers who receive personalized recommendations through their travel rewards booking site say their current loyalty programs provide them with the value they are seeking, the report found. But for those that primarily receive the same recommendations through marketing emails, that number drops to 48%.
5. Act on feedback from credit union members.
For a credit union that’s starting from scratch, it could feel like launching a rewards program is the conclusion to a lot of hard work when, in fact, it’s just the beginning.
Check on the performance of the program regularly, using quantitative and qualitative methods. Are members logging in and spending as often as you had anticipated? Are they just redeeming their points, but doing little else? Are there new innovations or reward options that your members are interested in receiving?
Members will derive value from your rewards program and feel valued if the credit union listens to their feedback. So do surveys and act on what members tell you. That’s how you can build a “sticky” reward program that boosts member satisfaction and enables you to drive retention and engagement.
About the author:
Kenneth Purcell is the founder and chief executive of iSeatz, a technology company that specializes in loyalty programs.