The banking industry lives and dies by relationships. Establishing a mutually beneficial customer-bank relationship is fundamental to everything banks do, so it’s no surprise that so many financial institutions have turned to loyalty programs to help them deepen customer relationships.
Americans have embraced loyalty programs, establishing 3.3 billion memberships in 2015, according to Colloquy. A third of bank customers participate in at least one financial institution loyalty program, research by Accenture indicates. However, multiple studies indicate many financial institution loyalty programs aren’t working optimally — for banks or customers.
While a majority of financial institution loyalty program members say good deals inspire them to join, just slightly more than half of all FI rewards programs are successful at retaining customers, Accenture says. Just 13 percent of loyalty program administrators are completely satisfied with their programs, and 15 percent are either somewhat or completely unsatisfied, according to a Forrester Research poll.
Is it time for a change?
When a loyalty program isn’t working for customers or the financial institution, it’s in everyone’s best interest to fix what’s broken. However, change is rarely easy. It can be difficult to know how much or how little to revise.
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Sudden, sweeping changes can alienate even the most engaged customers — witness what Starbucks went through earlier this year when it changed its rewards program. Too little change can mean continuing to fall short of program goals.
Before making any decisions to alter a loyalty program, financial institutions must answer these questions:
Is the program working at all? If so, what’s working and what’s not?
Do current results fall short of justifying current investment?
Is additional investment likely to improve things?
Does the program align with the financial institution’s brand identity and objectives?
What are the key performance indicators by which you measure ROI of your loyalty program? Do they need to change, too?
What is the budget for changes/revisions?
Could this program be saved/revived with minor changes, or does it need a complete overhaul?
Mandatory first steps
Assessing program performance against KPIs is mandatory. Clearly defined objectives help marketing departments assess ROI, and illustrate to key decision-makers the program’s vision. However, if your program is failing to meet KPIs, the program itself might not be the only thing that needs revision. You should also assess how realistic your objectives actually are.
For example, acquiring new customers is a key objective for 66 percent of bank loyalty program managers, Forrester’s research tells us. Yet experience consistently shows that quality loyalty programs are far more valuable as a tool to deepen engagement and elevate customer satisfaction. Exciting initial offers may bring in customers, but relevant rewards are what keep them engaged. If your KPIs overlook this important aspect of a loyalty program, they’re undercutting the program’s ROI from the start.
Before deciding on any changes, review your KPIs and program objectives. Make necessary changes to those areas first, and then allow your new vision to inform actual alterations to your program.
Potential pitfalls to avoid
Revising a loyalty program can be as challenging and frustrating as sifting through political campaign rhetoric. Wrong moves can also make the process as inflammatory as a hard-fought presidential campaign!
As you weigh what needs to be done, be aware of common pitfalls:
Failing to find out what customers want. If you make changes to your program without knowing what customers are thinking, you risk further undermining the program’s effectiveness. Polling current and potential members on what they want from your program, what they like about it and what turns them off is a wise investment of time and money.
Failing to communicate. Communication is key to every aspect of the bank-customer relationship, and loyalty programs are no exception. Alerting customers well in advance of coming changes gives them time to prepare, achieve understanding of the new order, and even give you feedback that may affect your implementation of changes.
Failing to justify. No one likes change for the sake of change, but if you fail to communicate to members why you feel revision is necessary they’ll have no way of understanding what you’re doing and why. Clearly communicate why you’re making changes and enumerate the concrete benefits members will reap from the updates.
Failing to prepare for complaints. You can’t please everyone all the time, no matter how well you do at communicating what’s coming. Empower your customer service staff with scenarios and scripts for dealing with unhappy program members.
Little changes mean a lot
As noted earlier, it’s not always necessary to make significant changes. Sometimes a loyalty program can be vastly improved by making a few minor tweaks. Here are a few small tactics that can deliver big rewards for financial institution loyalty programs:
Introduce extras to drive specific behaviors. This can be as simple as offering double points to members who take a featured action, such as enrolling in online bill pay or signing up for automated overdraft alerts.
Simplify apps and dashboards to make it as easy as possible for members to enroll, track and redeem rewards no matter what device they’re using.
Increase the number of ways in which members can earn rewards.
Increase the ways in which members can redeem/claim rewards.
Boost the rate of interaction and offer-making. More frequent contacts can encourage greater engagement, as long as offers are relevant, compelling and delivered through the customer’s preferred channels.
Big changes often come with significant costs, both in initial investment to create the change and potential loss of business if the implementation is slipshod or customers react badly. Tweaking your loyalty program may be a better way to create effective, engagement-building change while minimizing potential costs.
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