How Personalized Rewards Increase Cardholder Loyalty and Grow Card Revenue in the Process

August 2023

When it comes to cards, rewards have always had an influence on which one a consumer or business chooses. In fact, TD Bank’s 2022 Consumer Spending Index concluded 82% of card holders own a card that delivers rewards, and 32% pointed to a good rewards program as the top reason for selecting a particular card.

But in today’s highly competitive environment, it takes more than a blanket rewards program to attract and retain users. According to Deloitte, “More than ever before, the foundation for a successful loyalty program lies in delivering a compelling member value proposition that supports the brand strategy, and the portfolio of benefits is often what differentiates a program from the rest.”

The Power of Personalization

These benefits now come in the form of personalization. With social media apps and large retailers targeting offers directly to individual preferences, cardholders have come to expect the same experience from their credit card. The good news? Consumers respond to such behavior: 56% indicate they will become repeat buyers after a personalized experience, according to The State of Personalization 2023 report.

And card issuers stand to further benefit from these trends. McKinsey research found that companies that excel at personalization generate 40% percent more revenue than their peers. In addition, business leaders report an average 38% increase in consumer spending when an experience is personalized.

Rewards programs that work best analyze customer behavior and create better experiences personalized to loyalty members. The more a rewards program knows about a customer’s preferences, the more they are able to personalize rewards.

Data: The Key to Understanding Cardholder Behaviors

But how can card issuers leverage this trend to better serve their cardholders and increase their bottom line in the process? The answer lies in one word: Data. 

For decades, card issuers have leveraged data in support of cardholder needs. For instance, anomaly detection and out-of-band verifications rely on data triggers to flag potential fraud. Multi-factor authentication threads various pieces of information together to confirm a person’s identity. These forms of protection leverage data to safeguard transactions. 

But when it comes to leveraging data for promotional potential, issuers have not always been proactive. Without technology to help sort through the mass of information available, card issuers were faced with highly manual, laborious processes to customize solutions. Yet with the increasing cost-effectiveness and availability of artificial intelligence (AI) and other key technologies, culling a significant dataset has become more approachable for even small issuers. 

Small card issuers can segment their customers based on demographics, spending habits, and transaction history to identify different customer groups, tailor rewards, and determine loyalty tiers. Monitoring card usage to identify trends and conducting customer surveys provides the data needed to build out targeted rewards to individuals or segmented groups.

What the data tells you

Data reporting and data analysis are two different concepts. You may have a wealth of information at your disposal but if you aren’t sure how to act on it, the data offers no true benefits. Card issuers need to align their business goals and objectives with the messaging they deliver for cardholders. 

If, for example, a goal is to increase monthly card spend, it makes sense to incent a cardholder who pays off their balance each month to purchase more, by making offers that speak to particular behaviors—like grocery purchases or monthly donations. Similarly, if a business objective is to lower outstanding balances for revolvers, creating rewards that speak to their buying behaviors can help achieve the aim—and surprise and delight the cardholder at the same time (see chart below).

By evaluating your data through the lens of business goals, you can narrow the scope of your personalization focus. From there, you can create strategic partnerships with third-party organizations to help in speaking directly to cardholder activities, offering them rewards based on their buying behavior.

Account-Level Personalization

To achieve this level of personalization, your company needs to have a partner and/or solution in place that provides account-level personalization options. As previously referenced, no matter how small your card program, individualized rewards can’t be manually administered and be efficient and effective; your organization will need to employ a form of technology that will streamline operational burdens and make recommendations first on what rewards to offer and seek, and then, on to whom they should apply. 

One example is the AMC Theatres new credit card program for their AMC Stubs rewards members. This card program offers rewards earnings at different levels when spending at the movies, for everyday purchases like dining, groceries and gas, and other purchases. The AMC Entertainment® Visa® Card offers personalized rewards based on the customer’s status, including a new customer bonus and premium reward members special redemption offers.

How to personalize

So, how do you get from where you are today to where you want to be? Three key ideas will set you on the right path:

  1. Engage the right partners to help. When looking to introduce a personalized rewards program, the devil’s in the details. Research the providers who can offer you a mobile-first experience, a singular platform to augment or launch a consumer or business card program, and the scalability to grow with your program. Above all, engage with the one that understands you, your cardholder base, and what you are trying to achieve. 
  1. Deploy advanced technologies. As referenced earlier, new technological solutions take a manual task and make it accessible. Perhaps that’s why more than 9 in 10 businesses (92%) are using AI-driven personalization to drive growth. AI and other advanced technologies help to automate data review and scale personalized rewards to individual cardholder needs. Ideally, your card provider will be able to offer solutions as part of your card package, simplifying the integration and implementation process. 

  1. Reinforce business objectives and speak to cardholder needs. Any personalized rewards program should align both with business priorities and cardholder needs. Consider strategic alliances with retailers that make sense for your cardholders and your organization. For example, if you’re a community-focused organization, create rewards that support local businesses. If you’re working to grow your younger clientele, choose rewards that align with their values—social responsibility, sense of purpose, and beyond. As Deloitte points out, “A sense of purpose is additionally important for today’s consumer. However, only 20% of programs provide an avenue for members to participate in or contribute to a mission.” With that in mind, structure your personalized rewards program to work for you and your cardholders simultaneously. 
Personalization considerations 

And in that spirit of cardholder connection, if you’re launching a new customized approach, consider its impact on your base. Advance planning will help to ensure your cardholders embrace these new options, so consider the following: 

  1. Not every cardholder will be comfortable with personalized solutions. For many, safety and security are paramount, and only 51% of consumers trust brands to keep their personal data secure and use it responsibly, according to The State of Personalization 2023 report.  Fortunately, historically, their data has been used to protect them from fraudulent transactions by flagging suspicious behavior. As you implement personalized rewards, consider reiterating the safety and security of their data, and remind your customers you are able to offer these custom opportunities as part of your ongoing monitoring efforts. In addition, you can provide the option for them to opt out of personalized rewards if they prefer. 
  1. Cardholders want VIP experiences. According to 2021 research from Deloitte, 42% of loyalty programs offer special moments of access for members versus nonmembers. In addition, the report points out that 50% of consumers want special treatment not available to other cardholders. As you structure your personalized rewards, explore ways to tailor a program to target your top-tier cardholders, all the while, building overall cardholder loyalty and connection. 
  1. A true card partner makes all the difference. There is no shortage of potential providers out there who will seek to support your organization in making a transition to a personalized rewards program. Find a provider who not only has the technical skills to implement, but also, the willingness to be a true partner in the process, ensuring a deeper understanding of your business and the ability to scale its platform with your needs. 

Next Steps

Personalized rewards are here to stay, so getting on board with these offerings sooner than later will enable your organization to be ahead of the curve and benefit from all that the program has to offer. 

As McKinsey sums up, “Organizations able to build and activate the capability at scale can put customer lifetime value on a new trajectory—driving double-digit revenue growth, superior retention, and richer, more nurturing long-term relationships.”

Now, that’s a value proposition worth pursuing. 

Learn more about how Deserve can meet your personalized rewards program needs by scheduling a demo.

Recent posts