In today’s world, customer retention has become a crucial part of any successful business strategy. As the competition increases, it becomes more challenging to maintain brand loyalty. This is where customer incentive approaches come into play.
Loyalty programs have been around for centuries.
From copper coins to card-based programs, they have come a long way. Today, customers can accrue points on an app or platform to be used in a similar way to their predecessors. Who would say no to earning rewards for spending? The rise of digital technology has only accelerated this trend, and customers can now access good discounts and earn future rewards through digital devices.
This is where digital, personalized marketplaces come in.
They offer highly relevant and personalized propositions to customers, making the buying experience more comfortable, more rewarding, and giving them a reason to return.
In this scenario, banks, wallets, and payment platforms have the benefit of a unique positioning. They are strategically placed in the transaction ecosystem to create a confluence of both loyalty programs and marketplaces. But what do they stand to gain from this?
With the advent of neo-banks, digital wallets, and a plethora of benefits-laden credit cards, traditional banks have been struggling to retain customers. However, many banks have started to expand their card offers to explore digital marketplaces by leveraging merchant partnerships. This has proven to be very attractive to customers who are savvy about price hunting.
Why personalized marketplaces work
While a marketplace outside the bank’s ecosystem has a usage of 5-10%, usage triples to 30-35% when customer experiences are integrated into the bank’s digital assets. For maximum impact on customer engagement and experience, these marketplaces have a strong element of personalization. And for good reason. 71% of consumers expect personalization. Enterprises are working hard to keep up with the demand. Research shows that over 74% of companies already have a website personalization program in place.
From the customer’s perspective, a personalized marketplace shows them relevant content, products, and brands. It presents them with offers that match their lifestyle and life stage. This makes them feel that their bank understands their wants and needs. Happy and engaged repeat customers are great for the bank’s bottom line.
Why loyalty programs work
Enterprises receive similar benefits from loyalty programs. Repeat customers are 5x more likely to purchase again, and 57% of consumers spend more on brands they constantly turn to. Additionally, 59% of customers are more than willing to refer a brand to friends and family.
For customers, the benefits they receive from loyalty programs depend on card types, sign-ups, or opt-ins. The process also includes registration or usage through separate apps or platforms. On average, the usage of such programs ranges from 15-20% of the customer base.
However, with the rise of personalized experiences, things just haven’t been the same in the promised land of loyalty programs. The average customer is part of ~15 loyalty programs. The numbers show that only 18% engage with all the programs, 41% engage with less than 1/4 of the programs, and 65% engage with less than 1/2 of the programs.
The best of both worlds
Personalized loyalty campaigns grab customers’ attention, while generic loyalty programs can fall by the wayside as customers have developed banner blindness – a phenomenon where web users ignore content that looks like advertising banners. The best personalized programs leverage data and intelligence by virtue of having the same from both sides.
It’s no longer a question of which is better. We’re asking, “Why not the best of both worlds?” The future lies in a one-touch ecosystem: personalized marketplaces that offer rewards for loyalty. A combination of both loyalty programs and marketplaces can increase customer engagement and loyalty.
In conclusion, it is essential to remember that customer retention is not an easy feat to accomplish. A bank with
- a personalized digital storefront for every customer,
- with an element of loyalty, and
- a level playing field for merchants
creates a win-win-win opportunity for all three parties.