Dec 21, 2006

Traditional rewards programs losing steam, due to redemption hassles (survey)

The other day, I posted a TV ad by a bank that wanted to show customers how easy it is to redeem points at the point of sale using the bank’s new generation credit card. Now a GMAC Mortgage consumer survey confirms the power of that advertising angle. The survey suggests that if you make it easier to redeem rewards, people will value your card more.

Other results of the survey:

Over 50 percent of respondents reported having at least one or two rewards credit cards.

41 percent of these reward cardholders either rarely or never even bother to use their rewards.

Only 13 percent of all respondents in the survey ranked airline miles as valuable.

Something the survey doesn't mention, but which has been raised in other studies, is that customers are jaded and bored of traditional loyalty programs that give back only a tiny fraction of a percentage of their spending. A couple of our bank customers have done surveys which show that customers do indeed like points or cash back programs, but they want to get 5% or more back on all transactions, which is of course economically impossible.

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