As consumers continue to spend more frugally, issuers are stepping up the competition for loyalty programs, where there is still room to develop niches, according to Mintel Comperemedia, which tracks card mailings.
The landscape for credit cards has changed because of the economy and consumer behavior, Andrew Davidson, Mintel senior vice president, said during a recent Web seminar on loyalty marketing. As such, competition is fierce among issuers, and building relationships after they are acquired is a key necessity for them to maintain a strong market presence, he said.
“It’s not all about rewards–that’s mainly an acquisition strategy,” he said of the mailings. “But issuers do need to seek ways to leverage programs and have loyal customers post-acquisition.”
Indeed, mailed card offers have rebounded significantly. Issuers mailed 1.2 billion offers during the third quarter ended Sept. 30, up a whopping 207% from 391 million during the same period last year, Mintel reports. “The growth was really fueled by rewards programs,” said Davidson, who noted that about 80% of card offers are for rewards cards. Rewards offers represented only about 60% of offers two years ago.
The landscape for cards has shifted because the recession has made consumers more frugal, so they are focusing more on saving on items they already buy, including gas and groceries, Davidson said (see chart).
In response, issuers are keying in on those trends with their offers, according to Mintel. In 2010, 54% of mailings included a mention of gas, while 45% mentioned groceries. Comparatively, in 2008 44% of mailings mentioned gas and only 20% mentioned groceries, Mintel says.
“Most issuers have at least one product that mentions getting rewards on everyday items,” Davidson said.
Cash-back offers continue to dominate the rewards market, according to Mintel. Forty-one percent of programs feature cash back as their main marketing point, Davidson said.
And consumers are comparing rewards programs. “Consumers are quite ruthless when looking for the best rewards rate or highest return,” said Davidson.
For example, 30% of 2,000 consumers in households earning $75,000 to $150,000 Mintel surveyed online earlier this year said they compare the card offers they get in the mail. To compete, issuers such as JPMorgan Chase and Discover Financial Services are going head to-head with their 5% cash-back offers, and Citi also has launched a Dividends card that offers 5% cash back, Davidson cited as examples.
Issuers must get creative to catch consumers’ attention, he said.
“Whenever a segment gets too big or generic, then there is room for subsets,” said Davidson. “So far, we’re not seeing niche or segmented marketing in the cash-back space, but it is a growth area.”
Issuers also are competing more with “double” offers of miles or rewards points, Davidson said, citing as an example Capital One Financial Corp.’s Venture card, which offers double airline miles.
“‘Double’ is pretty catchy in mailings right now,” as consumers continue to respond to deals that give them more for their loyal card use, he said.
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