Using Rewards to Drive Increased Credit Card Spend

Early 2014 performance indicators are encouraging for credit card issuers, as customer satisfaction is on track to reach its highest level since the inception of the J.D. Power Credit Card Satisfaction StudySM in 2007. And while the Target data breach may have impacted consumer willingness to make electronic purchases, data finds that issuers can use ‘attractive’ rewards offerings to drive higher levels of personal credit card spend.


As expected, customer perceptions of reward attractiveness vary based on their preferences, which are driven by customer demographics and psychographics. For example, comparing two airline co-branded credit cards may show significantly different demographic profiles. One of the cards may frequently attract customers that are younger, less affluent, and less educated, while the other tends to attract older customers that have multiple children living in their household.

Understanding these segmentation differences (i.e., life style, life stage, hobbies/interests, spending habits, etc.) can help issuers design more appealing reward programs. If an issuer determines that a specific airline credit card attracts customers who frequently travel internationally, the issuer could add rewards associated with foreign travel or potentially partner with a hotel chain to allow additional earning opportunities. Another example is a bank-branded card that attracts sports enthusiasts, in which case a credit card issuer could add access to sporting events as a redemption option or partner with leading online ticket retailers to allow customers to pay for tickets using rewards.

Lastly, educating customers on the details of rewards programs is critical in order to maximize the impact on spend. And while it is important to inform customers about all program terms (as indicated in the chart below), lack of awareness regarding the types of rewards available has the greatest individual impact.


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1 comment to Using Rewards to Drive Increased Credit Card Spend

  • Understanding segmentation differences in your market is extremely important for many reasons, one of which is discussed in this article. Developing meaningful rewards that actually appeal to the market you are trying to reach will make a huge difference in whether or not there is a spending effect on consumers. Lately, it seems as though Big Data will answer all questions your organization might have – including segmentation questions. This isn’t entirely true. Instead of collecting all the data you can find, it is much more efficient to seek actionable data. This is a new concept which says that data is only worth collecting if you can take action it. I often write about how actionable data helps with credit risk management, but we see here that it also can be applied to your marketing strategy. It is much more efficient for a card company to consider which data will help answer their segmentation questions before attempting to integrate Big Data into all decisions.

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