There’s a “say-do” gap in loyalty marketing that often crops up whenever consultants convene focus groups or conduct surveys to determine what type of rewards consumers want. Whenever you ask consumers, “Would you prefer a points-based reward program that allows you to earn points to redeem for rewards, or would you prefer cash-back rewards on your purchases?” they will invariably say, “Just give me the cash.” Consumer behavior, meanwhile, most often reveals that consumers are more motivated to engage in loyal behaviors – shopping more often, buying more, and telling their friends – by points programs than they are by cash-back programs. Consumers will gladly take your cash-back rewards, but they often don’t change their buying behavior. A new survey from US News, however, reveals that when choosing a rewards credit card, consumers back up their “say” with their “do.”
By Rick Ferguson
U.S. News surveyed around 1,270 rewards credit card holders about their credit card rewards preferences and redemption habits. The survey revealed that cash back is the most popular credit card reward, with the highest number of respondents (27%) said they signed up for their card to receive cash back, followed by travel rewards (21%) and to avoid an annual fee (17%). Other key findings from the survey:
- 45 percent of respondents redeemed cash-back rewards in the last year, followed by airline rewards (19%) and gift cards (16%).
- 97 percent of rewards card holders earned at least some rewards in the last year.
- 23 percent don't take advantage of all cardholder benefits.
- 20 percent report often carrying a balance from month to month.
- 66 percent of respondents report spending the same amount of money knowing they get rewards, while 14 percent report spending more.
- 46 percent of respondents did no research before applying for a reward credit card.
- (56 percent report shopping for a new rewards card less than once every three years.
It would be interesting to dig into the crosstabs to determine what percentage of those respondents who said they don’t spend more to earn rewards hold cash-back rewards cards versus points-based reward cards. Even that split might not tell the wholes story, as it’s difficult to design a self-reported survey that effectively reveals when and how consumers have changed their behavior as a result of a rewards card – for the precise reason that no one likes to admit that a rewards card can influence, or has influenced, their behavior.
Ultimately, behavioral data will tell the tale. If you’re struggling to choose behind cash-back and loyalty currency as a reward model, test both options to determine which one motivates a consumer to shop more and spend more. Cash has no perceived value – a dollar is worth a dollar to a consumer – while it’s possible to build perceived value into points-based reward redemptions that proves more motivating than getting one percent back on purchases. Some customers are indeed motivated by cash, which is why well-heeled companies like American Express offer both points-based and cash-back reward cards. Allowing consumers to self-select into preferred benefit buckets is always a good idea – if you can afford it.
The US News survey also evaluated 444 rewards credit cards to provide a list of the best-value reward credit cards in the market. Their top picks:
- Chase Freedom Credit Card
- Citi Double Cash Card
- Chase Sapphire Preferred Credit Card
- Chase Southwest Rapid Rewards Premier Card
- The Starwood Preferred Guest Credit Card from American Express
- Chase Marriott Rewards Premier Credit Card
- Blue Cash Preferred Card from American Express
- Chase Ink Business Preferred Credit Card
Read more about the survey and the results here.
Rick Ferguson is Editor in Chief of the Wise Marketer Group and is a Certified Loyalty Marketing Professional (CLMP).