The purpose of a loyalty program is to…well, build customer loyalty. In today’s financial services marketplace, however, traditional bank-funded loyalty programs are rapidly losing their perceived benefit among participants. As the value assigned to the points decreases, participants are looking elsewhere for better deals. This defeats the purpose of the program. As a result, more and more Financial Institutions (FIs) are moving away from self (bank) funded loyalty programs and toward merchant funded loyalty programs to offer more to participants. But the initial success of these programs will be difficult to repeat unless marketing managers return to the fundamentals of direct response marketing.
Merchant funded loyalty programs are a growing loyalty strategy, enabling FIs to share the financial burden of loyalty program costs with merchants. In essence, the merchant agrees to fund the points, cash back or discounts in exchange for marketing exposure to the loyalty program’s participants. As a result, the FI is able to provide a highly attractive loyalty-building program, offering greater value to participants, while the merchant gains valuable marketing opportunities.
These new programs are being adopted rapidly throughout the financial industry, and soon the impact of greater rewards will be lost as consumers are overwhelmed with competing offers from multiple vendors leveraging this new tactic. Merchant funded loyalty programs help cultivate mutually beneficial relationships between FIs and merchants. However, to preserve their value with consumers, the programs need to be executed with emphasis on the fundamentals.
Merchant funded rewards programs must be implemented with strong messaging tied to the brands and the consumer’s interests. Precise targeting and relentless A/B testing will ensure that the right message reaches the right audience at the right time. This creates the greatest value for FIs and merchants – as well as consumers who appreciate and are most likely to respond to offers with maximum relevance and personalization.
Before consumer fatigue sets in, this powerful marketing tactic needs strong execution to see immediate results. At Trellist Marketing and Technology, we have been working with merchant funded rewards programs for years. Our experience has shown that the application of direct response fundamentals, strong creative execution, and relentless testing still have the greatest impact on program success.