Banking on Loyalty Programs

By Jonathan Price

New study shows consumers’ incentive preferences.

The financial services industry is no stranger to loyalty programs. In fact, credit card points-earning programs are one of the most active sectors in the reward and incentive space. According to, 35% of consumers cite reward points/cash back as the credit card benefits they love most. And a substantial majority of banks (81% according to Forrester) report using loyalty programs for customer retention. At a time when consumers have more options than ever before, the right incentive program can drive consumers to your brand, make them feel like valuable customers, and convert them into loyalists.

A recent Virtual Incentives study found some other interesting statistics about loyalty and reward programs. These findings may help banks and other financial companies determine the best reward program for their constituents.

The new study, The Impact of Incentives on Consumer Behavior, found that rewards and incentives can influence behavior as well as change brand perception. The research included several hundred U.S.-based consumers who had participated in some kind of loyalty, incentive, or reward program. We found that 50% of respondents reported that these programs drive their purchasing behavior.

One area that we explored at length was personalization. We found that the right kind of personalization can help make an emotional connection, and even offer an opportunity for complementary marketing.

According to earlier findings by the NGDATA Consumer Banking Survey, bank customers—especially the sought-after millennials—want their banks to understand them. And they want customized offers.

Our study found that personalized incentives make a company stand out as smart (according to 42% of respondents), ambitious (35%), and unique (35%) as well as exciting (31%), caring (30%) and informative (30%). Fifty-six percent of respondents said that receiving a personalized incentive would improve their consideration of the brand.

The impact of income.

While one study from the Collinson Group found that participation in credit card and bank loyalty programs by the “affluent middle class” has dropped significantly in recent years, our study found that higher income consumers are more likely to respond positively to the right loyalty or rewards program. We looked at consumers with greater than and less than $50,000 per year household income. What we found was that 62% of respondents with a household income over $50,000 said that being offered an incentive would improve their opinion of the brand. Also, those with a higher income  think companies that offer personalized incentives are “cool” and “smart.” But brands that design these programs should do it thoughtfully: the more affluent consumers also have a slightly elevated sensitivity to privacy (8% above their counterparts with an under $50K per year household income).

The gender gap.

We also explored gender in our new study. Women are becoming more and more involved in financial decisions, and it’s widely recognized that they continue to be in charge of most consumer purchases. So when banks are looking at loyalty programs, it is important to keep women in mind. Our study showed that women are using incentives programs more than men, and incentives are a bigger factor in their decision making processes. Personalized incentives can help your brand make an impact on customer loyalty, especially among women. The majority of women taking our survey (91%) had participated in—either currently or in the past—a points program where they accumulated points to get rewards on specific goods and services . But the percentage of women who actually preferred this type of reward was low—only 20%—compared to their preferred incentive, which was a virtual card that could be used anywhere, such as Visa or MasterCard (37%).

One thing is certain: consumer perception of brands will improve when the right rewards and incentives are offered. For banks and financial institutions, where loyalty programs often take center stage, it is important to stay up-to-date on preferences as they apply to target audiences in order to increase customer loyalty and satisfaction.

Jonathan Price is CEO of Virtual Incentives, an incentive platform that enables businesses to reward in a way that is simple, cost-effective, secure, reliable, green and, most importantly, instant. Twitter. LinkedIn.