A 2019 study by KPMG reported that when a customer is loyal to a brand, 86 percent are willing to recommend the brand to friends and family. Putting our reputation on the line to those in our circle of trust is something that most people do with great care, so people’s willingness to recommend to others comes from an emotional connection made with that brand.
But we know that there are times when even our favorite brands disappoint us. What happens after our long time bank or credit union makes a mistake on an account or transaction that causes us embarrassment or anxiety, or even just costs us time? Fortunately, the power of loyalty is strong in this case too, with 46 percent of those responding to the KPMG poll saying that they would remain loyal to a brand even after a bad experience. While there is some attrition, looking at the side of the coin where customers are retained presents powerful evidence.
As you reflect on the magnetic effect that customer loyalty can have on your business, you might want to pause and consider another finding in the KPMG study, that 96 percent of younger consumers, dare we label them as Millennials, express a desire that companies find new ways to reward customers. The saying goes that the first few waves of loyalty programs were “built by Boomers to serve Boomers” and it is clear that every brand needs to erase its white board and sketch out new ideas for their loyalty program design.
One of the levers that is available to financial institutions, large and mid-size banks as well as credit unions and community banks is to offer “real time rewards”. For most financial institutions, this means offering the ability for loyalty program members to exchange points earned in a program for cash equivalent or instant discounts at the point-of-purchase, whether online or in a store.
There is more than one definition of real time rewards floating around business circles and so we wanted to define exactly what the term means and how it works in practice.
We asked Mike Moss, Chief Operating Officer at ampliFI Loyalty Solutions, to provide an answer to the question. He explained it this way:
“for card issuing banks, real time loyalty generally has one of two formats. There's a POS integration where a customer is prompted to use the points they have available prior to settling the purchase. This is happening with Amazon and PayPal online as well as in fuel programs in the physical world. The second format is when a customer can redeem a reward that’s triggered by completing a purchase. In this case, how and when the customer is notified about the opportunity for redemption is the key to engagement and conversion.”
The direct conversion of points to a cash equivalent is highly motivating to customers and research supports this relationship. A 2018 Wharton study made in collaboration between professors from Cornell and University of Chicago concluded that immediate rewards increased intrinsic motivation for an activity and, interestingly, a larger reward did not increase intrinsic motivation as much as an earlier reward did.
We asked Mike about how he views the best ways to present real time rewards to customers:
“In that second scenario where a reward is triggered in the process of making a purchase, we found that notifying the customer as close to the purchase event as possible using SMS, in-app notifications, or email enables a more engaging redemption experience. Perfecting the timing and method of notification is extremely powerful as it reinforces the value of the loyalty program by providing immediacy, relevance, and ease of use to the redemption experience.”
Bringing the rewards experience into the process of making a purchase can be exciting and (pun intended) rewarding. Younger consumers, the group with the highest future potential for most brands, thrive on speed and convenience. Boomers have seen the concept of overnight delivery pioneered by FedEx, but for younger Millennials and Gen Z, Amazon’s 2-day shipping almost seems old hat. Now, products can be purchased and delivered the next day, if not the same day.
Especially during times of uncertainty, people tend to seek more avenues for immediate gratification. Why salt away points or miles for a reward that you may use years into the future? Wouldn’t that cup of coffee taste much better if it were “free” and wouldn’t the $5 off your purchase as result of swapping points for dollars make your day when your wallet is a few dollars short?
With younger consumers looking for change in loyalty programs, bringing the reward experience into daily transactions, is one of the most powerful ways to create change and spark satisfaction with the loyalty program. Mike shared his approach to making these changes happen:
“Our entire focus is on developing and enabling relevant promotional and redemption options to provide better engagement opportunities for our clients, and more value, relevancy, and ease of use for their customers. Our biggest challenge is to find solutions for practical approaches to deepen the relationship with customers. By the way, most of our FI clients measure “deepening relationships” by increasing the penetration of products and services per customer.”
One thing to remember about bringing real time rewards to life — it has to work. Customer experience is subject to network outages and POS miscues. We wanted to know if the technology and communication standards today are able to support near-flawless execution today. Mike shared these thoughts:
“We see large increases in engagement with cardholders with our real time rewards suite. It’s not a secret that the more cardholders redeem rewards, the more it secures their loyalty with the card. To have it happen in real time is even more impactful. It’s crucial to have the redemptions process and technology down to a science to ensure a seamless user experience to keep their loyalty and improve engagement. And since real time rewards can happen anytime, virtually anywhere, the technology and process need to be consistent and trustworthy.”
With the “need for speed” so top of mind with today’s consumers, virtually every card issuer is considering how to implement real time loyalty program offers and communications at or near the moment of purchase. The capacity to deliver rewards in real time, or close to it, with minimal technical glitches translates to delighting the consumers today who place a high value on immediacy, convenience, and transparency.
And that is how “real time” can become “big time” for your loyalty program.
