Commentary: The facts about card-linked incentives

By Jim Taschetta, CMO of FreeMonee

Consumers are making buying decisions under an unprecedented barrage of offers from brands — discounts, coupons, buy-one-get-ones, anything and everything that brands hope will drive purchases that wouldn’t otherwise be made. But the clutter of offers is causing consumers to tune out, instead of pulling out their wallet.

At the same time consumers are being bombarded with offers, their loyalty is wavering: according to our research, a retailer's most loyal customers, which means the ones who visit at least nine times a year, spend $1.44 with competitors for every $1.00 spent with them.

A new of class of marketing tools called card-linked incentives may help overcome the challenges of cluttered messages and shrinking loyalty. First off, they're simple to use, which encourages consumer acceptance — they're directly linked to shoppers' credit or debit cards, and money is sent directly to cardholder accounts. Card-linked incentives are smart, in that they use actual cardholder spend data to choose the best incentive for the customer. And finally, these incentives have great reach: they use existing and trusted bank distribution channels, like email and mobile apps, to deliver the incentives straight to consumers.

There are many different types of card-linked incentives, some more effective than others, and their creators may make claims about their value that may not pan out once deployed. To help you sort out the "mythology" from reality, and make better choices about the incentives that will build new revenue, here are five claims about card-linked incentives — and a reality check for each one.

Offer mall: Some vendors believe that presenting a flurry of offers to consumers will get them even more excited about spending money. (It's their way to compensate for low redemption numbers.) But ironically, too many incentives can deter consumers from taking advantage of the deals. They'll get confused by competing offers, and they won’t clearly see the benefits of your brand.

The better solution, and the one you should request from your vendor: an offer that comes off as special, and will surprise and delight your customers. After all, if it's not special, why would your customers respond any differently to this offer? You also want to ensure that your brand gets solo treatment — or at least, featured treatment — so that your messages don't get lost in the clutter.

Extended visit window: Vendors may claim that a long visit redemption window is better for customers because they get more time to redeem the offer. But the reality is that the longer your redemption window, the greater the chance you’ll be paying to get customers that would have shopped with you anyway. Why subsidize the behavior that would happen even if you don’t make the offer?

To make sure you're bringing in incremental sales and not paying for previously planned visits, keep offers to a seven-day window. If the shorter time frame does not motivate a change in behavior, then perhaps the incentive is not the right one.

Pre/post-testing: Card-linked incentive vendors may offer pre- and post-testing to demonstrate that a given group of consumers is responding positively to an offer. However, monitoring shoppers' behavior before they respond to an offer, and then after they receive that offer, introduces variables that can muddy the results. Unless everything in the pre vs. post groups are identical, seasonal effects or other marketing activity can alter outcomes. Some vendors use this faulty math because it hides the lack of incremental sales. Brands should insist that vendors use standard test and control methodology, which measures sales lift against two sets of customers during the same time period and compares results.

Business impact: Some vendors will promise the moon when it comes to the impact that card-linked incentives will have on your business. However, two factors matter more than others: the reach of the program (that is, the number of cardholders participating), and the response of consumers that are touched by the offer. It is the combination of these two elements that determines the overall impact of the campaign on your business. Make sure you work with your vendor to do the math to understand whether the campaign will bring you enough consumers to move the needle.

Average order value: The claim of some card-linked incentive providers is that minimum spend thresholds will increase average order value (AOV) across customers who make use of the incentive. The reality, however, is that minimum spend thresholds are self-selecting: they only appeal to consumers who would have made purchases over that threshold anyway, so they filter out potential shoppers who would spend below that amount (and don't do much to attract them to spend). They generally capture the spend of customers that were already spending above a certain level, and don't raise the overall average order value across the customer base. When considering such incentives, insist that vendors track true incremental visits and spend lift, which provide a more realistic picture of impact on sales.

The battle for consumer hearts and minds has never been so competitive. It is essential for brands to offer easy-to-understand, frictionless ways for consumers to connect with them. The new card-linked incentive programs have a lot of promise for brands as they work to connect and build loyal relationships with customers. Use the above guidelines to help sort out which programs are best for your business.

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