It is not exactly straightforward to run an effective marketing strategy for credit cards. This is especially true if you rely on long standing tactics such as cashback programs. But what is the way forward?
A changing environment
The way consumers pay for goods and services has seen dramatic changes over the last years. In 2015, alternative payments, the likes of eWallets such as Apple Pay, PayPal or Alipay, overtook card payments by accounting for 51% of the global eCommerce turnover.
This trend is likely to continue: projections say that by 2019, credit card transactions will account for only 23.8% of global eCommerce turnover. This will be a 6.5% decrease against 2014. On the other side, purchases paid for with eWallets are estimated to rise by 6.2% by 2019.
What does this tell us about our consumers? That usability, customer focus and convenience are king! Consumers want an easy and consumer friendly way to pay – todays customers are not willing to put up with unimaginative and inconvenient financial products that don’t truly put customers at the centre of their strategy.
Cashback has had its days
A very established way for banks to deal with this so far was to offer cashback programs. And the idea certainly sounds fantastic at first glance: on certain purchases, the customer receives some of that hard-earned money back when using the credit card as the form of payment. A win-win situation really.
So why does this not work anymore? Two reasons: because, firstly, cashback programs are often uninspiring and hold only little emotional value to consumers and, secondly, because rewards are often difficult to redeem, so the hard-earned points can be gone just as easily as this hard-earned cash.
Looking more closely, it becomes evident that many cashback programs that come with credit cards only offer actual cash returns on the surface. Instead, customers receive refunds in the form of retailer vouchers or other cash value perks.
All too often only a small misstep excludes the consumer from benefiting from any rewards: just one late payment can completely wipe away months of accrued cashback rewards.
If only it were easier
If we turn to what research shows us, we find that it supports our findings: a survey by GMAC Mortgage on the US American market found that while more than 50% of consumers hold at least one or two reward incentivised credit cards, the number of cardholders that either never or rarely used their rewards amounts to a total share of 41% amongst these cardholders.
Many customers simply find it too difficult to redeem their rewards, be it cashback or air miles. With regards to the latter, they often face blackout dates on which their air miles are not valid for redemption. Also, most consumers don’t travel alone and experience difficulties in being able to take along a travel companion at a competitive rate for air fares or hotel stays.
But it’s not all doom and gloom: the GMAC survey also found that if it were easier to redeem their rewards, nearly one in four reward cardholders would use their rewards more often. That’s a start.
A true win for the customer
What we can take away from this is that we need an incentive with a highly perceived emotional value, communicated to the customer as a promise and not a blunt bait. Instead of simply throwing cash at our customers, it is time we take their needs as individuals and modern-day citizens seriously and provide real added value with an emotionally relevant lifestyle incentive in the form of an ‘everybody-gets’ campaign. And as a final tip: travel incentives are perfect for this! Why? Because they resonate particularly well with your consumer’s lifestyle choices. Start to offer something special. It’s worth it!