3 Basic Steps to Rewarding Credit Card Rewards
Andrew Gates, Managing Partner, Financial Loyalty Partners
Whenever I am talking to a client about rewards, especially when they are launching a new program or trying to revamp an existing one, I get two of the same questions over and over. “How much effort will this take?” and “What about the costs?”
While these are natural questions to ask, they are the wrong ones. Simply put, it takes a lot of effort to gain your members loyalty (and it is worth every bit), and if your program is being run well, the costs are high from the redemptions – but the incremental revenue being driven far outweighs and offsets those added costs.
Andrew is joining GoCUCards Oct. 11 webcast as Ondine’s special guest. Learn more here.
I ask clients to take a step back. What do we want to have happen as a result of adding rewards?
What are you trying to do?
Sounds simple, but the answer needs to be detailed. “Make our members loyal” is not an answer. “Move 30% of cardholders using their card five or fewer times in a month to 10 or more” is what we are seeking. This answer will change as you program matures. I like to have 3-7 specific goals that are assessed and revamped semi-annually. It keeps you and your members engaged in the program.
What is the ROI of those goals?
Once you have detailed goals, what does achieving them mean for your credit union? If you have an active card rate of 50% and active cards earn an annual profit of $75, then you can quickly see what the value of moving that active rate to 60% means. Or if you earn 1.8% in interchange, you can quickly assess what moving the number of transactions or average ticket up will do for your interchange revenue. These are just a few examples of how we can easily understand ROI. This is critical.
What does success look like?
While this is similar to the above, it is important to define what has been the norm and what the success vision looks like. You need to understand what your current growth rates are. If you are growing your card base 5% a year, then that is the base line from which you measure success. Meaning if you see a growth rate of 6% the following year, something is wrong. If it is 10%, you’re on the right track. And when the program is humming, people are redeeming. That means the CFO will begin to see a big line item. They need to look at that and rejoice! Members are using your card and rewards are working! Make sure you recognize success for what it is—and not as an expense.
I call this getting back to the basics and resetting our bearings. Heavy lifting is required in understanding, managing, marketing and growing your program, but the rewards, no pun intended, are worth the journey.