The financial services sector is emerging from the most seismic financial crisis in living memory. Now it faces the task of rebuilding in a significantly altered landscape. Among the key challenges facing the industry are reversing the substantial erosion of consumer confidence and the retention of their existing customer base.

All About Loyalty investigates the role of loyalty programmes in this and talks to three financial institutions who are ahead of the game.

As customers’ expectations rise, financial institutions that want to get ahead of the game are developing sophisticated cross-channel customer loyalty programmes that leverage web, custom content and reward strategies to engage with existing customers, build brand awareness and generate new business.

The link between customer advocacy and loyalty is well established and businesses that put a premium on achieving customer loyalty reap the rewards of customer retention, increased revenue and growth by extension, even in difficult market conditions.

The existing loyalty model of a virtual currency through the accumulation of points which customers can redeem with the core business and selected third party partners on their goods, services and offers are known as coalition programmes. These are finding a natural extension with the development of dedicated online stores, as shown in the First National Bank case study highlighted later in this article. For businesses, the coalition programme has added benefits of shared costs, cross-marketing opportunities and access to each other’s customer base and data.

The significance of fully-integrated loyalty programmes is highlighted by the recent acquisition of a loyalty coalition company by American Express. This leading marketing services company operates loyalty programmes, market analysis and operating platforms that develop business growth through customer loyalty. The acquisition will deepen American Express’ merchant relationships in select international markets, add more than 34 million consumers to the company’s international customer base and expand its range of rewards and loyalty marketing services.

Through the coalition programme, loyalty cards are distributed to millions of cardholders who can earn points and enjoy discounts and exclusive benefits at thousands of merchant partner locations. Merchants fund the consumer offers and the loyalty coalition partner earns revenue from operating the platform and providing marketing support through its network of relationship managers. “The loyalty coalition model is growing rapidly in many parts of the world,” said Ed Gilligan, American Express Vice Chairman. “Increasingly, consumer decisions about where to shop and how to pay are based on loyalty offerings, and our loyalty coalition partner is a premier player in this space.”

Smart businesses know that the science of gaining customer insight and intelligence is critical to the success of any loyalty programme. Good quality customer feedback is an excellent source of factual data that can be systematically analysed and used to build a detailed customer profile and drive a customer loyalty programme. It also provides the best baseline against which to measure ROI. This approach is guaranteed to improve customer loyalty significantly, even during a challenging economic period.

What’s interesting about the current developments in the loyalty sector is the varied channel mix being used to deliver the programmes. While points or virtual currency remain the standard reward mechanism, developments in technology and the prevalence of smart phones have opened up a whole new world of communication possibilities.

Social media is now over-ground and phone apps have become commonplace. Businesses can harness these platforms, reach more people at ever greater speeds and deliver fresh content with greater frequency. However, it would be a big mistake to ignore forms of communication such as direct marketing and custom publications, which create a unique and highly personalised user experience.

The benefits of developing custom content and custom magazines as part of your loyalty programme is well established. Research shows that the average amount of time customers spend reading magazines is 25 minutes. This level of undivided customer attention where you engage directly with your customer to communicate your message is virtually impossible to replicate using other media or platforms, making it one of the most effective and cost efficient elements of any loyalty strategy.

The following case studies exemplify how major international players in the financial services sector have developed and successfully deployed cross-channel loyalty strategies to build a solid foundation for future growth.

 

CASE STUDY:  AMERICAN EXPRESS (WORLDWIDE)

By turning to its customers, American Express found two ways to add more attainable rewards while simplifying redemptions.

The first was the launch of Everyday Charges, a feature that addresses customers’ demands for choice, flexibility and attainability by offering real-time point-of-sale redemption when they want it and how they want it, through points, cash or a combination of all three. Among its steps for getting there was a partnership with Amazon.com, which enables customers to use their points towards purchases on Amazon.

The results: Twelve months after launching Everyday Charges and four months after the Amazon.com partnership, both rank among American Express’s Top 10 rewards.

 

CASE STUDY:  BARCLAYCARD FREEDOM PROJECT (UK)

Freedom was simultaneously activated on more than eight million Barclaycards and made available in more than 30,000 retail outlets, all of which were mapped out in individualised consumer direct mails.

Members can earn and redeem Reward Money instantly on purchases (1% of purchase price) made with their Barclaycard, and the rewards are earned in pounds, not points, a transparency that resonates with customers and affords merchants richer customer data.

The results: Within the first year of launch, 1.3m customers were actively participating in the Freedom rewards programme”. Retail partners have seen a 15.2% lift in spending.

 

CASE STUDY: FIRST NATIONAL BANK – EBUCKS (SOUTH AFRICA)

FNB’s eBucks reports 26% growth in reward redemption. The South African coalition loyalty programme, eBucks, has announced that its members have spent €301 million worth of eBucks points out of €358 million allocated since the programme’s launch in October 2000, according to programme operator, First National Bank (FNB).

eBucks members spent 24% more of their eBucks, and earned 26% more than they did compared to previous years. According to eBucks CEO, Jolande Duvenage, this growth is an encouraging sign that the programme’s 2.3 million+ members are finding it both relevant and easy to use.

“We measure the success of the programme by the ‘spend to earn’ ratio, which compares the rate members earn points with the rate at which they redeem them,” explained Duvenage. “Currently, our members’ average spend to earn ratio exceeds 80%, which is significantly higher than the current international benchmark, which is between 60% and 70%.”

One of the trends that eBucks has noted recently is that members are becoming increasingly savvy about how they earn eBucks points, and that they have begun to change both their banking and their shopping behaviours to maximise rewards. In addition, most members have begun to use their loyalty rewards to extend their purchasing power.

“As members began to feel the effects of the recession, they became more skilled at maximising the number of eBucks they earned by swiping their FNB cheque and credit cards to pay for their purchases,” said Duvenage. “Many are also opting to use their eBucks to buy everyday essentials such as fuel, medicine, groceries and airtime, with nearly half of the total eBucks redeemed each month being spent on these ‘bare necessities’.”

Another contributing factor to the programme’s fast growth in redemption rate has been the addition of relevant redemption partners over the past few years, including Makro, Engen, Incredible Connection, Cape Union Mart, and most recently Dis-Chem pharmacies. Fuel purchases using points (at participating Engen garages) have also become popular since the partnership was announced in December 2009.

The programme has also been extended to corporate clients, allowing them to earn benefits for their businesses.

The most successful customer loyalty programmes focus on participation, engagement and building relationships with customers. This requires an excellent level of customer understanding and experience across the entire corporate interface. What’s starting to emerge is a customer-centred model where the real point of difference is the customer experience and how this becomes an identifiable facet of the brand. The customer is still king and the loyalty programme is their new crown.

LOYALTY CHANNEL MIX

AMERICAN EXPRESS (WORLDWIDE)
FIRST NATIONAL BANK – EBUCKS (SOUTH AFRICA)
BARCLAYCARD FREEDOM PROJECT (UK)
WEB
Fully integrated Rewards section on main AE website and online account management. High profile on FNB website. Option to spend or invest your eBucks. Dedicated microsite and web-based account management.
REWARD REDEMPTION WEBSITE/ESTORE
Extensive online redemption mechanism accessed on the AE website. Reward partners include travel, dining, gas stations, entertainment and retail options. eBucks website and online store with extensive product range and travel options. Developed in conjunction with Affiliate Window, this estore enables cardholders to earn points from online purchases.
EZINE
Alerts subscribed members to special partner offers. Direct electronic mailer to members. Special offers from partner retailers.
APP
Nothing to date. FBN have launched their Private Life publication as a Digital App. Partner with Vouchercloud app to find offers close to your location using GPS tracking.
SOCIAL MEDIA
The American Express main Facebook page is used to respond to member Everyday Charges questions. The FBN main Facebook page is used to respond to member eBucks questions. Barclaycard Freedom uses Barclays’ main Facebook page and twitter feed to keep members up-to-date on emerging offers.
CUSTOM MAGAZINE
American Express has one of the largest portfolios of custom and consumer titles across the spectrum from food and wine to travel and property. These titles engage their entire customer cohort in a targeted yet fresh and relevant way. eBucks loyalty programme information is included in FNB’s customer publication Private Life which is read by over 18,000 customers. Barclays has a number of custom publications across their portfolio of financial services that support their loyalty mission.
PARTNER RETAILERS
American Express has an extensive network of partner merchants across retail, travel, entertainment, gas stations, and radically they allow cardholders to offset points against utility and grocery payments made using their credit card. Wide selection of retail partners across travel, retail options, charity, entertainment etc, where you can earn or spend your eBucks and now includes core bare essential partners. 30,000 retail partners across travel, retail, dining, entertainment etc, where you can earn or spend your Reward Money. Accrued points are shown on receipts from partner retailers.

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