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Offer loyalty drivers to take banks beyond the basics

Retail banks are racking their brains trying to work out how best to stand out when it comes to retaining customer loyalty. Traditional reward programmes with points and cashback are no longer considered to be pioneering schemes but essential elements of a card marketing programme.  

Banks who want to set themselves apart from the pack are now looking further ahead and trying to grasp what it is that puts their cards at the top of the customer’s wallet. Let’s look at four loyalty drivers that are coming to the fore in the market.

 1.       Influencing attitudes

While conventional marketing practices tend to measure consumer loyalty by behavioural traits such as the number and frequency of purchases made, the spread of social media means that a loyal customer attitude is becoming just as important to banks. Today’s customers are often prolific users of social networks and their brand preferences are easily transmitted via the likes of Twitter, Facebook or Pinterest. The next milestone for banks is to nurture these loyal attitudes to maximise the levels of social influence amongst connected consumers.

 2.       Offering personalised rewards

Modern consumers expect highly personalised services. When they shop online, they are presented with product recommendations based on past purchases. As a result, customers are now expecting bespoke rewards from their loyalty programmes. To maximise engagement, loyalty programmes must guide the consumer to redemption choices that are relevant to them or risk losing customer interest.

 3.       Differentiated rewards

Tiered loyalty programmes that provide differentiated rewards and privileges based on the level of commitment exhibited by consumers are now gradually appearing in mainstream sectors. Well-known brands such as Starbucks, Safeway and Timberland all have tiered loyalty programmes in at least one of their respective markets, and more brands are likely to follow in their footsteps in the not so distant future.

Higher-value consumers expect differentiated rewards and privileges from the masses; it is an essential component in delivering a loyalty programme that is attractive across the board. These consumers know how valuable they are and expect to be treated accordingly, and if not, they are likely to defect to someone who does recognise their value and commitment.

 4.       A blend of ‘hard’ and ‘soft’ rewards

Most loyalty programmes provide customers with ‘hard’ rewards, which are tangible items such as discounts or gift certificates. These types of rewards are an essential element of a loyalty scheme when given to the right customers at the right time. On the other hand, ‘soft’ rewards, such as priority lanes or VIP passes, are more likely to nurture and strengthen the emotional bond with the consumer. In all cases these rewards should be given selectively to emphasise to the consumer that their value has been recognised and, therefore, rewarded accordingly.


So the next time you are considering your loyalty programme, look beyond the obvious. Simple tweaks can differentiate between becoming another ‘me too’ programme versus standing out as an innovator.



Comments: (2)

A Finextra member
A Finextra member 09 October, 2012, 10:25Be the first to give this comment the thumbs up 0 likes

Customer loyalty does not need to be retained.. it needs to be sustained. There is a distinction between customers which are retained and customers which are loyal. The rewards and incentive programs usually are retention strategies for customers which may drift away to other banks which recognize their worth.

Loyal customers are those that stay with the bank inspite of having opportunities to switch. These customers are the real advocates of the bank . The loyalty is a result of customer satisfaction due to good products or service and in the case of a card, good features , benefits and customer service .

The customers decide to be loyal based on the total customer value they derive from their association with the bank or brand by holding on to its products/ services.

So retention strategies may help the bank retain the customer but the real challenge is to convert him into a loyal one.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 09 October, 2012, 14:59Be the first to give this comment the thumbs up 0 likes

With a spend that is over 10X of the average, I had to follow up today for the fourth consecutive month with my credit card issuer - a Top 5 Bank - to simply send me statements on time. So, pardon my cynicism when I say that card reward programs are meant to incent the cardholder to spend more, so that the bank earns more by way of interchange fees. It's said that switching banks is more painful than undergoing root canal treatment. I fully agree with that view and believe that it provides the strongest building block of retention / loyalty strategies of most banks. 

The question of which card a customer puts at the top of their wallet is obviously an important one but I suspect that it is relevant only for people who have multiple cards in the first place. Many, if not most, such people keep signing up for one card after the other only after they bust the credit limit on each of their existing cards. For that segment, low APR drives the top of the wallet choice of card more than any retention or loyalty building strategy.

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