By Richard Goldman, CEO, Competiscan
With major travel limitations over the past year due to the pandemic, many consumers have seen their credit card reward balances grow, but have yet to redeem them. That’s why we’re seeing card issuers offering enhanced flexibility to encourage consumers to redeem those points now, rather than later.
Credit card issuers want their cardholders to cash in on their points more steadily throughout the fiscal year; even small changes in redemption behavior can create significant financial risk due to liability contingencies associated with loyalty programs. Offering consumers different ways to redeem points for both travel and non-travel benefits helps issuers prevent an all-at-once redemption situation later in 2021, when the impact of the pandemic is expected to ease up. Still, there’s a likely timestamp on these offers; consumers who hold off until late summer or the fall to fly or book travel using mileage might miss out on more attractive offers.
Many consumers, however, already have begun to redirect their spend from categories like travel and entertainment towards pandemic-friendly categories including e-commerce, restaurant takeout/delivery, streaming and more. Though mileage redemption for travel purposes remains the primary focus, our forecasts show that alternative redemption behaviors are likely to continue, at least in the short term. Here’s a look at some of the innovative offers Competiscan has tracked that encourage cardholders to redeem ASAP.
Flexible travel redemption. As the rollout of the COVID-19 vaccine continues to progress, some consumers are already eyeing their next vacation. Many issuers are offering extensions on travel-related perks like annual free night stays and companion fares, giving consumers more time to take advantage of these benefits. This strategy is a win-win for both consumers and issuers since travel rewards generally enjoy the best value conversion, dollar per dollar, when redeemed for miles.
Retail and e-commerce redemption. For more conservative consumers, e-commerce is a safe bet for a redemption opportunity. Although the opportunity to redeem miles on Amazon has been around for some time, becoming almost standard for the majority of issuers, we’re starting to see the list of partners expand to include the likes of PayPal, Apple, and more. Notably, in the past year, both U.S. Bank and Capital One launched the ability for consumers to redeem their rewards at PayPal. By offering more ways to offload their points, issuers are attempting to keep customers happy and loyal, and not have them move their card to the dreaded back of their wallet.
Statement credit offers. Once considered a lesser value, even “boring,” reward option, statement credit redemption offers are gaining in popularity, especially during this economically challenging time. This type of offer is particularly attractive to audiences looking for relief on their credit card bill because it allows them to reduce the monthly balance and/or put the savings toward other expenses. Even this age-old redemption option has seen more innovation as of late. For example, Competiscan recently observed Chase promoting a “Pay Yourself Back” campaign, a redemption campaign offering 25% more for those who redeem for statement credits after using their card on eligible everyday purchases. Again, this approach is a win-win—it consumers can pay down the bills easier, and the issuer gets to offload more points.
Redemption for charitable causes and other unique promotions. Some credit card issuers are allowing reward redemption for charitable donations, especially as consumers look to support others in need during the COVID-19 crisis. Our tracking found that Citibank, during its February redemption campaign, encouraged consumers to redeem points for a charitable donation at organizations like the American Red Cross, No Kid Hungry, and more. Meanwhile, throughout the holiday season, American Express encouraged the redemption of Membership Rewards points at small businesses as part of its Shop Small® campaign.
As the pandemic continues to alter our way of life, recent direct and digital marketing activity indicates that credit card issuers will continue to expand opportunities for reward redemption in an effort to keep cardholders engaged with credit cards that might otherwise be collecting dust.
Media: please click here to learn more or obtain samples of the direct mail campaigns discussed above.