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Blog: Turning Skepticism into Trust: 3 Ways to Improve Financial Services Loyalty Programs

hemsey_michaelBy Michael Hemsey, Kobie Marketing

Of any industry, the financial services sector might be the most contradictory when it comes to loyalty program effectiveness.

At its most basic level, loyalty is about trust—not about program specifics. But recent data show that Americans don’t trust their banks very much. Investors, too, have diminishing trust in the financial system, according to data compiled by the Securities and Exchange Commission. As for non-investors and everyday Americans, only 1 in 4 has faith in big banks. Bankrate.com (an aggregator of financial rate information) says that 76 percent of Americans remain risk-averse when it comes to stock investments.

Yet, considering the number and popularity of co-branded credit cards linked to customer rewards—co-branded cards make up nearly 50 percent of all credit card spending—many consumers are part of financial services loyalty programs (total membership is around 420 million, including multiple programs) even if they’re not actively engaged.

Bringing these challenges—skepticism of banks and a lack of clarity about loyalty program benefits and their differentiators—together, how can loyalty programs improve customer trust and preferences for a financial services brand? Here are three ideas:

1. Recognize and act on the importance of big data: It may come as a surprise but financial institutions aren’t as proficient as they should be when it comes to dealing with Big Data. Traditional consumer transaction data? No problem. Loyalty data? Less so. A recent Celent report  finds widespread financial services’ awareness of big data but uncertainty over what to do with the data collected. That’s despite the fact 60 percent of firms believe information is key to their competitive advantage.

2. Consider convergence: Financial services companies frequently keep customer relationship data and loyalty data in siloed collection centers. But convergence of these two data sets will help paint a more granular, accurate picture. A great example of a brand putting “two and two” together is Walgreens. The drugstore chain recently launched its own prepaid card, Balance Financial Prepaid MasterCard and linked it to its loyalty program, Balance Rewards. In this way Walgreens has a better understanding of what customers are buying and can easily send program enrollees rewards, discounts and product offerings that better speak to their needs, incentivizing additional purchases and loyalty. The fact that nearly 60 percent of banks offer GPR cards, underscores their growing popularity and linking these cards to financial services loyalty programs is a vital next step.

3. Build Trust through an omnichannel framework: As with loyalty programs in other industries, transparency in the financial services sector is critical.  Building that trust and transparency begins with engaging customer outreach across all marketing channels and consumer touch points. That’s what we call omnichannel loyalty—an enterprise-level initiative to drive, track, measure and reward incremental behavior throughout the enterprise and customer experience. The fact that there are 400 million American financial loyalty program memberships says nothing about the level of their engagement or activity. Too often, loyalty cards, digital or physical accumulate in consumers’ wallets and on their smartphones without ever being used.

Improving loyalty is an issue whether you’re in credit, debit or prepaid. Some small banks like Birmingham, Alabama-based Cadence Bank, (with branches across the Southeast) are finding success by implementing several of the above suggestions as part of their new debit card loyalty programs. Cadence builds trust by giving back to the local community through a “buy local initiative.” The new program, called Buzz Points, encourages local business owners to become Buzz Point Merchants, which, according to the company’s data, increases local spending by 35 percent. The study also found that 52 percent of the money spent with local merchants remains in the local economy, while only 14 percent goes to the big box stores. The campaign relies on a host of social media, email, Web and mobile outreach efforts—a clear nod to omnichannel engagement.

Despite post-recession skepticism, the reality is that consumers have a hard time living without financial services providers. But neither can financial services providers live without customers, so they must improve their loyalty-building strategies.

Loyalty programs that improve the customer experience, demonstrate transparency, engage across all channels and utilize Big Data in a way that drives enhanced consumer knowledge are the best ways financial services providers can improve long-term customer loyalty.

As president of Kobie Marketing, Michael Hemsey is responsible for leading all facets of the loyalty marketing organization, including business development, IT initiatives, client services, as well as the overall direction of the Kobie brand. For more than 20 years, Michael has cultivated a rich background in client services, product development, marketing, technology and operations through several key posts, including as executive vice president of TSYS Loyalty. He can be reached at info@kobie.com.


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