posted by Eric Schurr on Thursday, October 19, 2017
Can a credit union “buy” a member’s love and loyalty? Perhaps not, but if they want to try, card rewards are the single biggest currency the cooperative has at its disposal.
This is particularly true for credit unions chasing the affection of the digital shopper. Because online purchasers are often value seekers, they are big-time fans of cash-back rewards. These individuals want very much to extend the value of the money they are spending, and they often view cash back as a way to do precisely that. This is why e-commerce giants like Amazon and PayPal are upping the ante on the amount of cash coming back to their credit cardholders.
Amazon Prime Store Card offers 5% back on all purchases (on or off Amazon). With the PayPal Cashback Mastercard, cardholders earn 2% cash back.
An accepted truth in the credit card game is that a rewards program is only as effective as its redemption rate. Simply put, if a cardmember isn’t using her rewards, they certainly aren’t that motivating. And according to Bankrate.com, 31 percent of credit cardholders in the U.S have never redeemed their credit card rewards.
If migrating from points to cash or upping up the percentage on an existing cash-based rewards program sounds too rich for your blood, you may want to give the concept further consideration. It’s less expensive than you may think.
The key to affording cash-back programs on par with the big dogs is segmentation. Take, for example, a spend campaign that provides double cash back to members for all Amazon.com purchases with their credit union credit card. Offering that perk to the segment of cardmembers already spending on the site doesn’t make a whole lot of sense, right? Offering that perk to cardmembers who never shop online doesn’t either. When you’re smart about segmentation, your spend campaign can generate a much more exciting return on investment.
Today’s digital shopper is a profitable cardmember, which means a lot of competitors are vying for their affection. To earn their love, credit unions may have to give their own loyalty a second look.
To hear more about this and other ways to incent digital shoppers, take a listen to my conversation with Adam Mertz at the 2017 CFO Council.
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