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The Next Stage of the Digital Revolution in Banking A Unified Approach to Cardholder Engagement
TIBCO Loyalty Lab
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Table of Contents 3 |窶オntroduction 4 |窶サhe Value of Card Offer/Loyalty Program Integration 6 |窶サhe Solution: An Agnostic Integration Platform 7 |窶イonclusion
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The Next Stage of the Digital Revolution in Banking A Unified Approach to Cardholder Engagement Introduction According to the Federal Reserve1, the average American has 3.5 credit cards in her wallet across multiple financial institutions. She has signed up for an average of 18 loyalty programs, but only 8 are in active use2. Each card and loyalty program represents a different marketing team vying to create a long and meaningful relationship with her. It’s a competitive world. Banks are wrestling for consumers’ attention, and so is everybody else. How can banks avoid fragmented marketing and advertising, so they get the right message to the right customer at the right time? The challenge lies in linking what the customer cares about—miles, banking, offers—all of which she finds valuable, in an integrated, multi-channel program. A strong emphasis on a consistent experience is logical, but few of us experience that today. Let’s take a look at the perception of a digitally-engaged customer, Amy. An affluent customer with a 10-year relationship with her bank, Amy has 4 credit cards, 2 checking accounts, a savings account, and is an active traveler with status on multiple airline and hotel loyalty programs. Amy receives an email communication weekly from each of her banks, and gets offers at the bottom of her monthly statements, many of which contain high value discounts or opportunities to earn points toward various programs for which she has registered. But, how many of these does Amy see or engage with if she doesn’t open the email, log into online banking, or read her statements? More importantly, how many does Amy care about or find invaluable? The chances are few for the first question, and fewer still to the second. Amy is missing out, and so are her banks—by offering value added services that go unnoticed. Why is this happening? Financial institutions offer cash back, loyalty and rewards programs on payment devices–debit, credit, prepaid as well as merchant discounts and incentives–but they often exist in silos. Much time and investment has gone into these programs, but they are often not optimized and under deliver on expectations. A lack of integration and ever-evolving channels such as mobile, digital wallets and social media, make them invisible, cluttered, or quickly forgotten to customers like Amy.
1 Federal Reserve Bank of Boston, “The Survey of Consumer Payment Choice,” January 2010. 2 Colloquy, “The Billion Member March: The 2011 COLLOQUY Loyalty Census,” April 2011.
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The absence of integration across card reward programs and merchant-funded discounts and incentives highlights what customers are experiencing (or not experiencing in many cases) and affects the perception of the banking relationship. As customers increasingly rely on smart phones to access information and move funds3, the mobile banking experience is more likely to increase a consumer’s advocacy of the bank to others than any other channel. This missing piece of digital customer engagement management is crucial in delighting the digital consumer and foundational as mobile commerce and mobile wallets continue to gain consumer confidence and usage. The Liminal study conducted by Razorfish and TIBCO Loyalty Lab4 states that more effective and linked digital CEM can greatly impact the: • Consistency of the experience • Relevance of messaging, offers, voice and status • Ability to provide consumers more control • Delivery of higher levels of value These factors directly tie to the cultivation of more loyal and valuable customers. This next phase of integration has the power to unify a bank’s perception by consumers– giving consumers a truly comprehensive view of their banking relationship as well as engaging rewards for their brand loyalty.
The Value of Card Offer/Loyalty Program Integration Today’s data-driven consumer portrait is unlike anything previously possible. When multiple sources of data come together, banks and merchants are able to harness consumer insights to create programs that consistently “wow” customers in a number of ways. The power of linking loyalty and reward programs with merchant-funded cardlinked offers delivers value and promises higher redemptions for many reasons: 1 Relevancy: By using multiple sources of information, card-linked offers can be highly relevant. The more relevant, the higher the redemption, which can result in new revenue streams. And, whether redeemed or not, the simple exposure results in a better perception of the bank by its customers. For example, our customer, Amy, enjoys a tall chai latte Monday through Thursday each week. But, what happens on Fridays? Perhaps Amy is making her coffee at home with whatever is available in the pantry, but she would prefer making her coffee shop’s chai latte mix if she knew it existed. An opportunity for a unique offer—the shop’s mix—could only be brought together with a bank and merchant working as partners around Amy’s brand loyalties and transaction data. The issuer wins by presenting Amy an offer relevant to her daily routine, the coffee chain wins via an opportunity to cross-sell a new product line to an existing customer, and finally, Amy, a loyal cardholder, wins as the recipient of a valuable, relevant, surprise-and-delight reward. Targeted offers driven by transaction data and behavioral analysis enable issuers to offer real value to cardholders through offers that customers are actually interested in redeeming.
3 Customer Loyalty in Retail Banking - Global edition 2012, Bain and Company, 2012. 4 Razorfish and TIBCO Loyalty Lab, “Liminal: Customer Engagement in Transition,” 2011.
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2 Cost-effective Program Management: In the past, if a bank wanted a loyalty program, it had to build one itself or utilize a platform that offered little off-theshelf differentiation. It was a costly exercise to start from scratch, and in addition to the investment of creating an engaging loyalty structure, there was also the added responsibility of managing the program. The most common dollar-per-point structures, for example, involve tracking various offers and point values. They also involve the cost of redemption, whether in the form of cash-back discounts, merchant gift cards or specialty products. Today’s merchant-funded offer providers deliver cost-effective programs that alleviate the stresses of loyalty program management by matchmaking issuers and merchants, tracking rewards progress, and managing as well as encouraging redemption. 3 A New Revenue Stream: Finding partner merchants, on-boarding them and developing new and exciting offerings is a challenging job. However, merchant-funded offer providers are in a unique position to play matchmaker and help banks develop new revenue streams in exchange for the wealth of knowledge locked in customer data. Today with the expanding intelligence exposed by big data, merchants and banks are increasingly brought together by the value of consumer transaction insights. Loyalty program integration with merchant-funded incentives offer a cost-effective and lowmaintenance way to reward consumers for longstanding relationships by offering easyto-manage offers from partners who offer products or services that are in-line with the needs and wants of consumers. 4 Be Where Your Consumer Wants You to Be: Integration makes seeing and redeeming offers seamless whenever, wherever. Location data, opt-in, integration with mobile apps and past purchase triggers create a targeted touch-point communication strategy tailored to each consumer, making it easy for consumers to redeem rewards on-the-go, rather than waiting until they have access to a computer. Across the industry, banks and merchants are seeing strong ROI through rewards partnerships. Banks, which had typically been spending $100-200 annually per customer in rewards, are covering these costs through merchant partners, who in turn are seeing 1 in 3 participating customers become repeat customers.5 Imagine what an integrated program could do to both the performance metrics and the cost to execute. Whether your customers access their card relationship account balances via card website, e-mailed statements, or mobile app, linking card offers and rewards result in empowering consumers with awareness of point balances, which translates into redemption, and in turn, more frequent use of customers’ cards.
5 Thomas, Dan, “Merchant-Funded Rewards Programs: Rewards 2.0: Turning a money pit into a profit center,” Mindful Insights LLC, February 27, 2011.
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The Solution: An Agnostic Integration Platform By linking together loyalty programs and card data, customers enjoy a unified view of their relationship and points of interaction—with the assurance of keeping their data secure and private. Bringing all of these programs together empowers marketers and product managers to develop relevant targeted programs with greater awareness and provides the best opportunity to be highly successful and drive loyalty. This is achieved through analysis of recent transaction history to target offers, predictive data, and purchase analysis to arrive at a complete and (always current) view of each profile. Financial services are best equipped to use this model to provide real-time, complete profiles for each customer to bring about a rich, tailored experience in a way that increases perceived benefits for the customer: • Differentiation/Customization: An agnostic integration platform offers a behindthe-scenes foundation that gives flexibility in functionality as well as look and feel, allowing banks to tailor the user experience to their brand and customer base. By allowing banks to pick and choose features and 3rd party vendors, the result is a branded environment unlike anyone else on the market (even if competitors are using a similar management platform). • Omnichannel: Bringing together the patchwork of relationships and card memberships into one seamless ecosystem creates the omnichannel experience. Integration takes these disparate experiences (both virtual and physical) and merges them into a seamless, customized user interaction. In our customer Amy’s life, this is seen as an effortless way to earn, redeem and pay for all of her products from her single bank. Citibank and American Express have each been at the forefront of the omnichannel practice, bringing each of their products together under single log-in accessible umbrellas via web and mobile, enhanced by targeted offers, easy access and redemption of membership rewards and point totals. By 2015, the Internet will be accessed via mobile by 50% of users6, and industry leaders such as Citibank and American Express are well-poised to strengthen their position as more users jump onboard. • The Future of M-Commerce: In Forrester’s State of Retailing Online Report7, 91% of merchants surveyed reported having a mobile commerce strategy. In 2012, over 25% of purchases on Black Friday were made on smartphones or tablets8. In 2013, m-commerce is still gaining daily transaction momentum. In addition to simply shopping via smartphone, there are enhancements such as geo-location via mobile apps with geofences that know when customers are nearby. Mobile technology transactions married with discounts and rewards at POS will create simple redemption experiences that will one day become the norm. Customers have already come to expect real-time interactions, flash sales, and predictive cross-selling via e-commerce.
6 IDC Market Research Firm, “Smartphone Forecast,” 2011. 7 Mulpuru, Sucharita with Douglas Roberge, “The State of Retailing Online,” Forrester, 2013. 8 IBM Smarter Commerce Initiative, The IBM Digital Analytics Benchmark, 2012.
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Conclusion As customers continue to adopt and empower themselves with new technology, banks have the opportunity to engage with consumers as a true omnichannel partner. With customer experiences still heavily siloed across the industry, and agnostic integration platforms now able to deliver on highly relevant and cost-effective rewards programs, it has never been easier to grow loyalty through relevance and customer perception. While cardholder preferences and needs evolve over time, new innovations are giving banks the tools to adapt quickly and consistently improve customer engagement. However, the first step is connecting the dots via a loyalty platform that increases awareness and delivers a seamless experience rather than a collection of product offerings. For more information, head to www.loyaltylab.com, email firstname.lastname@example.org or call us at +1.415.633.1400.
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