With so many credit card options available to consumers today, reward programs have become the pivotal factor when signing up for a new card. They’ve rightfully become the sole focus of most marketing campaigns geared towards signing up new customers. Research has shown that consumers don’t undertake particularly long or involved qualification processes. A compelling value proposition that resonates with customers up front is key for financial institutions looking to capture their share of the market.
Customers have been shown to favor reward programs that offer clear and intuitive benefits, like cash back or a sign-up bonus. Additional key motivators include flexibility, immediacy of value, and respect for a customer’s communicative boundaries. When it comes to choosing a credit card rewards program, here are the top factors most consumers take into consideration:
Non-Invasive Communications
Customers don’t mind when companies contact them for things like marketing offers or security alerts, as long as they’re not intrusive. A study by the U.S. based payment processing service provider, Total System Services, found that customers unanimously prefer that financial institutions contact them by email. “This was especially true when respondents were asked about purchase transactions, where 46 percent preferred to receive such communication by email,” states the study’s authors, who conducted online surveys of over 1,000 U.S. consumers. “When answering specifically regarding changes in terms, mail was a close second to email.”
Points Pooling
Sharing and cooperation also rank high on the list of attributes consumers look for in a credit card rewards program, especially among younger customers. “A high level of importance is accorded to the ability to share loyalty points with friends and family,” claims a 2017 joint study by financial software firm Amdocs and London-based independent analysts Ovum. “The youngest age demographic in the survey (16-24-year-olds) were the most enthusiastic about sharing loyalty points with friends and family, with 51% saying it was very important and 40% rating it important.” The study goes on to identify a significant opportunity for loyalty marketers working in finance, noting that only 21% of companies offered point-sharing capabilities at the time of writing.
Instant Redemption
Most customers would prefer to choose between immediate and long-term value. In their 2016 loyalty report, customer engagement agency Bond Brand Loyalty found that 70% of consumers consider the option to redeem points instantly on credit card purchases appealing. While many providers typically give one-time annual payouts, some offer customers greater flexibility including control over when and how their points are redeemed. The end result can often be in the bank’s favor. The study found that among those who would prefer the option for immediate redemption, 43% were willing to pay a premium for the convenience.
Cash Back
The overwhelming majority of consumers want cash rewards. Multiple surveys consistently rank it as the highest motivating factor among those considering a new credit card. One survey by U.S. News found that a majority 27 percent of the 1,271 card holders surveyed said they signed up for their card in order to receive cash rewards as opposed to alternative factors like low APR or a lack of annual fee. Offering customers cash back illustrates a clear and familiar path to value. It also stands in stark contrast to more restrictive rewards like gift cards, which limit a customer’s options and make it harder to attach a clear and applicable ROI to their choice.
Travel Rewards
A close second to cash are travel rewards. 21% of customers surveyed cited airline, hotel and airfare rewards as the pivotal factor in their decision. Airline and hotel rewards were the second and fourth most commonly redeemed among card holders, accounting for 19% and 11% of all annual rewards respectively. Offering travel rewards often aligns with the reason customers signed up for a card in the first place. Many are looking for reliable payment options while away on business or vacation, making travel incentives an effective motivator.
Customers haven’t been ambiguous in communicating what they want from their credit card rewards plan. All studies point towards an overwhelming preference for flexible and immediate value. While that might mean more work for financial institutions, it’s becoming increasingly necessary. The financial services market is dominated by long-standing incumbents, offering little room for newcomers. The cost of that security has proven to be the prioritization of service and a willingness to accommodate customer demands.