By Kevin Lewis

As the old saying goes, the cream rises to the top. In the midst of an economic downturn, customers that have shown themselves to be reliable sources of profit should be treated as the veritable life rafts of your portfolio. But how do you adequately entice consumers that are becoming more and more in demand — and rare?

In challenging economic times, maintaining strong relationships with your best customers is more important than ever. In the face of massive write-downs and bankruptcies, the advent of decoupled debit and other industry disruptions, an elite rewards program can help keep your most profitable customers right where you want them.

Several emerging trends in the loyalty space can help financial institutions meet the evolving needs of today’s consumer in ever changing economic conditions, now and in the future.

Enterprise Rewards

As financial institutions leverage their existing assets for greater returns, it is a natural extension to utilize a current rewards program framework to reward customers for purchasing other bank card and non-card products. Mortgages, home equity lines of credit, savings accounts and card-related rewards products can incur points that are then pooled to boost the customer’s buying power.

Offering rewards to account holders who purchase additional banking products has proven to increase retention and customer satisfaction, as well as provide additional fund­ing for traditional credit-card based rewards programs. Not to mention, the cross-selling potential among consumers who want greater eligibility for rewards is quite attractive as well.

Using Pavlov in Your Portfolio

Current economic conditions require that you keep a razor-sharp focus on the bottom line of credit portfolios to prevent any deterioration of asset quality. A very common, albeit erroneous, theory holds that rewards programs are a disposable expense that should be cast aside in tight times. However, savvy financial institutions are realizing that their current rewards programs can help protect their portfolios by rewarding good payment behavior. Giving bonuses for payments above the minimum payment; paying on-time for a consecutive number of periods; and maintaining or increasing FICO scores have shown to be an effective alternative measure to maintaining portfolio performance.

Perfecting the Basics

Amidst all the noise, it’s surprisingly easy to lose sight of the fact that a rewards program’s intent is to increase card usage at every available payment opportunity. Programs have been guilty of moving past this core tenet too quickly towards loftier goals that can only be accomplished in the advanced stages of rewards program engagement. By moving too far ahead in the engagement life cycle, a financial institution risks losing relevance, and, most importantly, response rates. This is usually the case in a one-size-fits-all rewards program.

Recognizing that different account holders, even within the same portfolio, are at different stages of engagement and communicating to them differently can provide powerful returns in response rates. With this in mind, financial institutions can avoid making the mistake of treating a new account holder the same way as someone who has had an account for many years.

Segmentation Means Never Having to Say You’re Sorry

Real estate has the well known mantra of “location, location, location” for explaining the inherent value of certain properties. A perfect correlation for rewards programs is “segmentation, segmentation, segmentation.” Analytically driven segmentation can deliver the right message to the right client at the right time.

The benefit here is potentially three-fold: Segmentation can be a cost savings in and of itself by allowing a financial institution to intelligently select the account holders to whom it markets itself — thereby saving the costs of blanketing an entire portfolio. Also, delivering the most relevant message to the right account holder vastly improves response rates, making the effort more cost-effective. Third, using analytics to talk to an account holder at the right time can provide real portfolio improvement. For example, the time when account holders redeem all of their points on a redemption item also is the time when they are the most vulnerable for switching to another bank’s card product, as the account holder has no remaining equity (i.e., points) in the account. As such, this emerges as the perfect point in time to reach out to the account holder with a positive, relevant message that encourages them to remain engaged in the program and potentially offering them bonuses if they do. Timing is everything, and aligning with an experienced partner focused on your cardholder’s unique qualities can pay dividends to your loyalty program.

Multiple Touch Points, Single Message

Rewards programs have long engaged multiple channels for customer service (Web, contact center, interactive voice response, etc.); however, recognizing the importance of synchronizing those touch-points could prove to be a key driver towards success. One of consumers’ biggest complaints is the headache of mixed messages, which often vary according to the channel through which they are delivered. Account information, general cardholder information and promotional offers should be synchronized across all customer touch points at all times. Failure to maintain this “single message” concept leaves the door wide open for customer dissatisfaction. With that being said, there are opportunities to communicate differently based on the channel; however, it should never be in a way that causes confusion or discourages someone from using your card products. Alignment is key.

The Mobile Frontier

Banks of all sizes are now actively engaged in mobile banking trials. Some are embracing SMS, mobile browsers or installed applications as communication mediums, while others are utilizing all three to provide information to banking customers. Even greater leaps into mobile payments are on the horizon as well. Will rewards programs be far behind? With the consumer growing more sophisticated and demanding by the day, intuition says that those who want to stay apprised of their account balance and limit while on the go will also want to know their rewards balance and special offers at the same time. Merging loyalty programs with mobile strategies seems to be a natural progression.

It’s no secret that all customers, especially those who are most profitable, are looking for richer, more innovative rewards. As well they should, just for the sheer virtue of being customers who hold up their end of the terms and conditions. Taking advantage of savvy loyalty strategies can bring more of these valuable customers on board and, most importantly, keep them from jumping ship.

About the Author

Kevin Lewis is director of business development for TSYS Loyalty, responsible for leading all sales and business development and identifying strategic partner relationships.