For today’s consumer, nothing says thank you like a great rewards program. And while the rewards industry has traditionally been shaped by the interests of global financial institutions, new merchant-funded solutions are hitting the market, making it easier than ever for credit unions to inspire member loyalty and keep their payment cards top of wallet.
“The demand for card-based rewards programs continues to grow throughout the financial industry,” said Andrew Gates, CEO for Azigo, Inc. and Member Rewards by CO-OP consultant for CO-OP Financial Services. “Within this space, merchant-funded rewards are by far the fastest growing segment, especially for credit unions. Today, even the smallest credit unions can offer members rewards from tens of thousands of top retailers, while also including exclusive offers from small, local merchants.”
Leveraging Your Local Cachet
According to Gates, a merchant-funded rewards program founded on the trend of “local love” plays squarely into a credit union’s strengths. “As a credit union, you are universally viewed as community-based and community serving,” he said. “And local merchant-funded rewards bring together amazing synergies across your community. In addition to strengthening your ties to local members and merchants, these rewards help your partnering businesses showcase their products and services, all while rewarding members for something they are already doing: shopping Main Street.”
Merchant-funded rewards programs are quickly gaining momentum, in part because they have become very cost effective for credit unions to introduce, manage and customize. “Because these programs are financially backed by local merchants, they tend to pay for themselves very quickly,” said Gates. “Credit unions may wish to augment a merchant-funded program with their own exclusive offers, however, this is entirely optional today. We have seen many cases where an exclusively merchant-funded model serves the credit union and its members well.”
And, signing up new merchants has never been easier. “With today’s advanced technology, a credit union employee can simply e-mail a registration link to a local business owner and, within minutes that business can begin posting offers,” said Gates.
Easy Navigation Defines the User Experience
New, more intuitive rewards solutions are also easier for members, credit unions and local merchants to use. “There is no longer any need for members to navigate maps or clip coupons, or for extensive training of either credit union or merchant employees,” said Gates. “Technology has eliminated these hassles, making earning, tracking, processing and redeeming points effortless for everyone involved.”
To redeem rewards online, some programs feature apps that members can quickly download to automatically trigger rewards as they shop. “There are no additional screens or portals to access, so the user experience is entirely seamless both online and on a smart phone,” said Gates.
For in-store reward redemption, Gates recommends adding points whenever members sign for debit purchases. “Rewards are a great tool to boost signature transactions, which generate more revenue for the credit union,” he said.
Plan for Long Term Success
For many credit unions, Gates says the biggest hurdle in getting started is keeping initial expectations in line. “To be successful, the program doesn’t have to be perfect from the onset,” he said. “It can take time to cultivate participation from members and merchants. A soft rollout of a few merchant rewards is enough to drive card usage up and attract attention within the community. This is very much a word-of-mouth proposition.”
To ensure success, Gates advises credit unions to actively market their rewards program. “Your members will respond with enthusiasm, as will local merchants,” he said. “There is an element of surprise about rewards that makes them attractive to consumers. And because rewards change frequently, they keep a fresh marketing message in front of your members. This dynamic ultimately drives card transactions and inspires member loyalty for the long term.”
To learn more about the local benefits and cost-effective advantages of merchant-funded loyalty programs, explore CO-OP’s Merchant Funded Rewards.