Ask the Expert: how have attitudes toward credit card rewards shifted in the current environment?

Brands are becoming more customer-centric and focused on personalized engagement.

We sat down with our former CPO of Loyalty and Rewards, Nancy Gordon, to learn more about the ways in which customer perspectives on loyalty have shifted post-pandemic and considering the current environment.

Loyalty is all about customer relationships. With any relationship, there are friction points and ups and downs.

After more than two years of grappling with the COVID-19 pandemic, and now faced with rising inflation and macroeconomic challenges, the environment is changing consumers’ loyalty program preferences and businesses need to be more creative to earn the same level of affinity from their customers.

Credit Card Rewards are Gaining Value

Inflation, rising interest rates and post-pandemic re-openings have created a trifecta of macroeconomic factors that are challenging consumers to reimagine rewards utility.

According to recent research conducted by Bakkt, consumers are placing renewed focus and value on their credit card rewards program and what it has to offer. Nearly 60% of respondents said inflation has made their credit card rewards more valuable¹.

In this environment, 70% of consumers² said cash back features were selected as the top redemption reward, followed by gift cards (51%) and then spending points at third party merchants such as Apple and Amazon.

From these findings, we can see clearly that consumers are looking to use their everyday spending to earn rewards and then use those rewards to lessen their costs. This data illustrates consumer preference for spending on credit cards with strong rewards programs over spending through cash or a direct debit card that doesn’t provide added benefits. While the environment is challenging, this is the moment to shine for your loyalty program.

Card Loyalty is Transient

Rewards offers and promotions are getting customers’ attention more than ever and they may be forgoing existing loyalty to a particular card as they face rising costs of living. Consumers are looking to maximize their rewards, so they are showing a tendency to be more easily swayed by offers and promotions from competing credit card brands.

Our research found that customers are being more thoughtful about which credit cards they use for each purchase to make sure they are maximizing rewards and getting the most from their loyalty. This could mean frequenting specific merchants that enable cash back or shopping across cards for special offers that align more directly to essential purchases.

Travel Reward Redemptions are Up

Despite significant economic headwinds, inflation and rewards devaluation by some leading travel companies, consumers are still saying travel remains a top priority.

84% of Americans³ have cut back on discretionary spending due to inflation, but, travel remains a priority with fewer consumers reducing travel costs compared to other areas.

In the same report⁴, 72% said they plan to spend more money on domestic travel than in previous years and 62% agree that they plan on taking two to four trips in 2022.

The fact that consumers are prioritizing travel even while costs have increased, might be an indication that the past two years of staying home have weighed on consumers and they are planning for travel regardless.

What Does this Mean for Loyalty Programs?

As the environment continues to evolve, it’s important to understand customer behaviors and thoughtfully plan for how your loyalty program can stand out against the competition. Identifying customer specific pain points and working to address them can drive meaningful brand loyalty.

• Inflation is creating less purchasing power which is driving higher redemption rates and fierce competition for offers leading to less brand loyalty

  • Your program could consider:

    • Helping customers understand how to optimize rewards to offset cost of items that are more expensive today
    • Continuously engage high-value customers with referrals, gamification and new experiential rewards to retain and drive repeat usage and create more affinity

• With higher interest rates, revolving credit is getting more expensive so consumers will work to lower volume on credit cards.

  • Your program could consider:

    • Potential to integrate split-tender redemption capabilities (e.g., points + card) as well as installment lending capabilities.

• As the economy continues to re-open, we have seen a shift in consumer spending from strictly goods to more services and experiences.

  • Your program could offer:

    • Increased focus of offers toward most demanded services and experiences - Travel and/or EDS gift cards

Overall, there are several strategies that loyalty program leaders can utilize to proactively address the current environment and show cardholders that they're in tune to their needs to earn affinity and preference.