From interest rates to grocery prices, the ripple effects of a shaky economy and rising costs have left many feeling the pinch of inflation. As wallets tighten, consumers are hunting for ways to stretch their dollars further. Personalized card offers—including cash back, in-store points, and other loyalty programs—are one way for shoppers to maximize their spending power. But are customers actually willing to change their shopping patterns to reap the potential rewards?
In this article, we delve into the psyche of the cost-conscious consumer to explore how personalized card offers impact customer behaviour. You’ll discover how your business can tap into the power of rewards programs to attract and retain loyal shoppers. We’ll cover:
Let’s dive in.
Personalized card offers and loyalty programs are tailored marketing strategies designed to reward customers for their frequent business. These programs can vary greatly, but generally involve earning points, cash back, or other benefits that can be redeemed for discounts, products, or services. The personalization aspect comes into play as businesses use data analytics to tailor offers based on individual spending habits and preferences, making the rewards more relevant and enticing to the consumer.
As often seen with grocery chains and department stores, many retailers have adopted the strategy of tying these rewards programs to store or co-branded credit cards. While 54% of card users own a store and/or co-branded debit or credit card according to this PYMENTS study, whether customers are actually using these store-linked cards is another question.
Recent studies show that 65% of consumers are turning to loyalty programs to save money amid economic pressures. Perhaps even more interesting is that 63% actually pay for access to at least one loyalty program, indicating that rewards can have a considerable influence on consumer behaviour. These rewards can come in various forms, such as loyalty points, bundled discounts, and cash-back offers, each designed to foster customer loyalty and encourage repeat business.
Store-linked cards, specifically, are tailored by retailers to encourage direct spending and build customer loyalty. These cards often come with exclusive benefits such as special discounts, early access to sales, or even free shipping, and they often entice people to sign up with special first-time-use offers.
However, although over half of card users say they own a store-owned credit or debit card, a mere 12% have used their card in the last 30 days. The likely culprit of these low usage rates? Just 44% find the perks they receive to be relevant to their needs. This begs the question: what do consumers really want from their rewards programs, and how can your business structure your personalized card offers to meet those needs?
During a cost-of-living crisis, it’s unsurprising that cash-back offers are the most popular incentive programs a business can offer. In fact, 65% of all card-owning consumers find cash-back programs attractive when choosing how to pay for purchases. This incentive makes customers feel like they’re getting something in return and that they’re deriving additional value when they purchase from you.
Cashback rewards can be set up through an affiliate model, managed by a company that organizes and licenses these offers or by apportioning a percentage of interchange revenue received directly from your card processing partner. For customers, the process is straightforward. Depending on how you configure it, they can typically view their accumulated rewards through your app or a dedicated microsite, and use them to purchase products, services, or upgrades—however you’d like it to work.
Imagine you receive a promotional email from a department store you love, and they’re marketing deep discounts on camping supplies—but you’ve never been camping a day in your life. Delete. It’s this kind of offer irrelevance that lowers the usage rates of store-linked cards. Because they want their dollars to go to good use, 27% of cardholders say they’re inclined to switch to a retailer whose rewards are personalized based on their recent buying history.
Take a young family for example. If a new mom recently bought baby diapers, presenting a card-linked offer for related baby products could be useful to her and increase her spending. Moreover, cash-back programs targeted at specific products are the most favoured type of store card-linked offers. Nearly one-third of cardholders would consider switching to merchants that offer these customized rewards and discounts based on their purchase patterns.
Following cash-back programs, 56% of store cardholders agree that direct discounts, bundle offers, and coupons are the next best thing. This is likely because simplicity and convenience drive decision making. Consumers want easy-to-understand and accessible offers that provide immediate relief, rather than convoluted card programs that can take years to see value from.
For example, a store that complicates its rewards by requiring customers to track points across multiple purchases for an incremental discount might deter customers. Instead, offering immediate, easy-to-understand deals, like a straightforward percentage off on the next purchase, can be more effective in maintaining customer loyalty and satisfaction.
As we navigate the challenges of an inflationary economy, leveraging personalized card offers can be a strategic move for businesses looking to attract and retain cost-conscious consumers.
If you’re interested in exploring your own, we offer prepaid card programs to Canadian businesses by managing their custom-branded Visa®, Mastercard®, and Interac® cards, including everything from card issuing to sponsorship, processing, and payment capabilities.
With an in-house development team, optional white-label customer support, and a project manager assigned to each program, you can offer a personalized experience to your customers while avoiding wasted time and money on outsourcing. If you’re ready to learn more, click here.