Most-Redeemed Loyalty Reward: Gift Certificates

Once again, research shows that what consumers want and what they say they want are two different things.

According to research conducted by Maritz Loyalty Marketing, consumers chose gift certificates over cash, merchandise, and travel rewards when trading in loyalty points built up on their bank-issued credit cards last year. But when signing up for credit-card loyalty programs, notes Maritz Loyalty market development director Gail Sneed, people said that they were more interested in cash-back rewards.

For that reason, Sneed suggests that banks set up two sets of rewards – one to encourage consumers to enroll in the program, the other for use in the bank’s redemption catalog.

“When consumers get a gift card as a reward, whether it’s to Home Depot, Best Buy, or a restaurant, it’s like a trophy they got compliments of their credit card,” Sneed says. “A $10 or a $20 bill doesn’t have that same connection.”

The percentage of consumers choosing gift cards as a loyalty reward rose 6% last year, to 57%, according to Maritz. One factor in their rising popularity is the regifting aspect, Sneed says. A rise in points redemption for gift cards comes with the holiday shopping season, and several banks discovered last year that they can easily deplete their gift card inventories.

Despite the popularity of gift certificates, Sneed still advises banks to continue to offer alternate rewards such as lower APRs, cash back, lower fees, travel, and merchandise as well, “to build loyal customers who will stick with their card for a long time, and to appeal to higher-income earners.”

Among the other findings from the Maritz Loyalty Marketing Almanac:

• In-kind rewards are redeemed by 37% of consumers, and include lower APRs, cash back, and lower fees..
• Consumers aren’t redeeming points. Among the nine major banks Maritz services, 60%-70% of points go unredeemed. And 46% of all loyalty program members have never redeemed points. “The banks have already taken the cost of rewards into consideration, and it’s in their best interest to have consumers redeem them,” Sneed says.
• iPods are a growing trend. Though merchandise rewards still cannot touch gift cards as a wanted item, just about everyone is offering Apple’s iPod or similar MP3 players. “The banks know they are a hot item, and it gets the attention of the consumers. The consumers may not know what rewards they want, but they want that as a choice,” Sneed says. “If a bank is using a lower-end iPod or MP3 player as a reward, it’s something that is requested and regifted.”

Also:

• 79% of redeemers say rewards influence their credit-card usage.
• Redeemers outspend nonredeemers 3:1.
• Redeemers show less attrition – 4.03% vs. 10.95%.
• 48% stopped participating in a loyalty program because it took too long to earn redeemable points. In response, some of Maritz’s clients are running “point burner” campaigns, offering certain items at lower point rates.