Capco Blog

Effectively playing loyalty currency swings

The financial services industry has long been at the forefront of loyalty currency programs. Today, many companies are re-examining their rewards programs, moving to an enterprisewide model and partnering with external merchants to generate card-linked offers and other merchant-funded rewards. Industry leaders are leveraging rich data sets and investing in interactive technologies such as smartphone applications to offer consumers a compelling rewards experience.

However, in the face of changing regulatory and consumer demands, financial institutions face challenges in capturing the value of loyalty currency. Regulations limit the collection of program fees. Multiple loyalty programs compete for customers’ attention. Loyalty offerings are often uninspiring to program participants. Companies need to establish metrics and keep up with technological changes to meet the needs of customers, who expect loyalty currencies that they can spend where they want, when they want and on what they want.

The key business benefit behind loyalty programs is having customers uniquely tag themselves during transactions — for example, in a retailer's checkout line — so that the business can learn, understand and market to specific customers. Currency is typically awarded to retain and deepen current customer relationships, push spending into profitable categories and improve overall wallet share.

Financial services companies have an edge over the typical retailer due to their ability to deeply understand individual customers both statistically and, at times, personally. Because they cater to a wide range of customers and have accumulated massive amounts of consumer-related data, financial institutions are in a better position to understand and measure the success of their behavior-driven loyalty currency offers.

The key to a successful loyalty program is to constantly question why it is being offered in the first place. Scorecarding, dashboards and metrics can help financial services companies make sense of the consumer data generated by loyalty programs as well as understand the programs’ technical capabilities in relation to customer needs. These tools also can help organizations understand their loyalty program’s profitability and relevance and confirm what may need to be tweaked.

Other keys to building a successful loyalty currency program include evaluating market opportunities and forming strategic partnerships where appropriate; assessing a program’s performance against market-leading players; leveraging internal and external data to move key customer metrics; and examining emerging technologies that can increase customer engagement.

How is your company building a successful loyalty currency program? Join the discussion.

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