Report: Better Segmentation Could Make Rewards Efficient

Rewards are important to about a third of credit card customers, while more than half appear unlikely to participate actively in rewards schemes. That suggests many issuers are blanketing the wrong customers with rewards marketing offers, according to a new report by Boston-based Aite Group. In "Segmenting Rewards Program Members," Aite Group said card issuers could get better results from segmenting customers and sending rewards offers only to those most likely to respond. Aite Group surveyed 500 U.S. consumers online in January, and when asked to name the most important reasons for selecting their most recent credit card, consumers cited no annual fee (64%), a lower interest rate than their previous card (39%), rewards (35%), a 0% balance-transfer offer (33%), credit card company reputation (23%), clearly explained policies (15%), and dissatisfaction with a previous card company's customer service (11%). Rewards are most important to customers with the most cards in their wallets. Among survey respondents with six or more credit cards, 53% said rewards are the most important factor in selecting a new credit card. "Many issuers are wasting resources by pursuing customers who are unlikely to ever participate in rewards programs," Ron Shevlin, senior analyst for Aite Group, tells CardLine. He suggests issuers gauge potential participation in rewards offers by asking cardholders how many loyalty cards they already have; measuring customers' use of online account access, redemption activity and marketing response and segmenting their customer base annually to determine loyalty program participation status. As card issuers seek efficiency, they should craft rewards offers to engage the customers most likely to respond and then leverage those groups to improve their merchant-partnership efforts, Shevlin says.