Banks and credit unions with holistic loyalty programs, including Real-Time Rewards, see increased purchase volume and consistent return on investment (ROI). This case study explores how shifting the rewards program redemption mix from cashback to Pay With Points can significantly impact and improve overall purchase volume, transaction levels, retention rates, and cardholder behavior.
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Loyalty Program Case Study Key Takeaways:
- Shifting the redemption mix to include Pay With Points increased purchase volume by 5%.
- Retention rates improved by almost 10%, from 89% to 97%.
- The redemption mix change reduced cashback redemptions from 89% to 35% and increased Pay With Points redemptions to 53%.
- Increased revenue, reduced cost per point (CPP), and improved retention outweighed a slight rise in redemption volumes.
Pay With Points: The Business Case
Cashback redemptions can be challenging for financial institutions due to low engagement and high costs. The automatic nature of cashback rewards means cardholders receive benefits without active participation, preventing a deeper connection with the institution. The nearly 100% redemption rate also strains financial resources, making balancing consumer satisfaction with cost sustainability difficult.
“Industry statistics show that cashback is a popular redemption option among cardholders, yet nearly 30%1 would choose an alternative redemption choice if given the opportunity,” says Mike Knoop, CEO of ampliFI Loyalty Solutions. “That’s a significant number of cardholders with whom financial institutions risk losing a deeper relationship. Introducing diverse redemption options shifts the intention from immediate gratification to enduring loyalty.”
Pay With Points is a Real-Time Rewards redemption option that enhances cardholder engagement through real-time notifications. Once enrolled, cardholders can redeem points immediately after making a purchase to receive a statement credit covering the transaction’s cost. Introducing cash-like redemption alternatives, like Pay With Points, is a powerful alternative to cashback that can increase purchase volume, enhance engagement, and provide a cost-friendly and sustainable approach.
Objective
The primary objective was to increase cardholder purchase volume by shifting the redemption mix, thereby driving higher engagement and retention among cardholders.
Method
The study focused on a group of cardholders whose redemption activities were tracked before and after the introduction of Pay With Points into their redemption mix. Key performance indicators included:
- Percentage shift in redemption types
- Changes in cardholder purchase volume
- Retention rates
- Cost per point (CPP)
Results
Redemption Mix Shift
- Before introducing Pay With Points, 88% of redemptions within the group were cashback.
- Post-Pay With Points implementation, the redemption mix shifted significantly:
- Cashback reduced to 35%
- Pay With Points increased to 53%
Enhanced Retention Rates
- Before the redemption mix adjustment, the average retention rate was 89%.
- After the redemption mix adjustment, the retention rate increased to 97%.
With over 25 years of experience, ampliFI loyalty experts have collaborated with banks and credit unions to design custom and engaging loyalty programs suited to their respective communities’ needs. As a partner, ampliFI has had the opportunity to serve and influence over 10 million cardholders, and we have observed that retention is significantly influenced by active participation in loyalty programs with Real-Time Rewards. Between redeemers and non-redeemers, we have found that redeemers 1) consistently drive 2.7x more purchase volume than non-redeemers and 2) exhibit higher retention rates than non-redeemers, demonstrating an average of 10% improvement in retention.
Increased Cardholder Purchase Volume
- This shift in redemption activity resulted in a 5% increase in household purchase volume across the group.
Cost Per Point (CPP) Impact
- Adjusting the redemption mix reduced the average CPP for the cohort by 1.5%, resulting in additional savings and further helping to control overall program costs.
Conclusion
A prominent finding in this case study is the ability to offer a lower value per point than traditional redemption offers. Financial institutions benefit from increased cardholder engagement, spending, and retention at a lower cost per point than traditional cashback redemptions.
Introducing Pay With Points into the redemption mix significantly positively impacted cardholder behavior. Shifting from cashback to Pay With Points increased cardholder purchase volume by 5% and significantly boosted retention rates by 8%. The clients in the analyzed group experienced a positive ROI as the revenue increase from higher purchase volumes, reduced CPP, and improved retention outweighed the slight rise in redemption volumes. This case study underscores that strategically adding Real-Time Rewards into the redemption mix can positively drive revenue.
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Interested in boosting cardholder engagement and purchase volume? Contact us at sales@amplifiloyalty.com to schedule a consultation with our experts and drive your success together.
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