How Businesses Can Rethink Their Rewards Programs in the Age of Inflation

Henry Ford once said, “Stopping advertising to save money is like stopping your watch to save time.” Investing your precious advertising funds wisely is key.

Savvy shoppers yearn for next-level loyalty

With the wealth of data now available to retailers, restaurateurs and credit card companies, coupled with advancements in the digitalization of financial services, now is the time to rethink loyalty. These tools make it easier than ever for business owners and managers to create highly specific, targeted and customized rewards programs, which capitalize on a new, uber-savvy class of consumers. 

Where classic incentives, like a fifth cup of coffee for free, can still work, there’s an opportunity to reimagine programs that surprise and delight customers who were already going to buy a fifth, sixth or 100th cup. For example, by creating a rotating list of different engagements throughout the week, the rewards can stay fresh and surprising to new customers and loyal patrons alike. By creating a constant feedback loop for customers to engage and promote their experience with brands using different social media and marketing tactics, brands can create a community of followers that can strongly influence brand awareness. 

For card issuers, innovation in loyalty programs will mean using transaction data more effectively to understand consumer behaviors and create specific offers for customers to meet their financial needs. For financial institutions, successful loyalty programs can build trust and long-term customer relationships by providing “payment holidays” for loyal customers to help them manage a significant financial burden that may arise. This natural evolution of loyalty will generate more personalized rewards based on meaningful customer data insights. 

Focusing on holistic customer relationships with emphasis on emotional versus transactional loyalty is the new frontier for organizations, especially financial institutions as they navigate the rise of competition from fin-tech firms and increased deposit outflow.

Technology continues to reshape loyalty 

Through the use of advanced apps on their smartphones, today’s consumer has a new level of consciousness about their spending—how much, where and when. With this savviness, loyalty programs must meet their expectations, or they will never be used. 

While cash back and points are always fan favorites, breakthrough innovations in embedded finance technology have given customers new ways to use and spend reward points. Embedded finance is when consumers have unique, tailored financial service experiences delivered to them at the point of need by non-financial companies.

Most commonly, consumers encounter these new financial service experiences in the form of in-app payments, like on social media platforms where a purchase is completed without leaving the platform. Through embedded finance technology, consumers can now donate loyalty points to a charitable cause at the point of sale, invest them in stocks and shares, or even use them to buy cryptocurrency. 

The recent emergence of generative AI also brings a new set of tools and technologies with the potential to usher in a new wave of growth and savings, as well as some risk along the way.

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